Overview
This section mandates that federal agencies obtain adequate security for all required bonds and defines the acceptable forms of security that contractors may provide to guarantee contract performance and payment.
Key Rules
- Mandatory Security: Agencies must secure all bonds—including coinsurance and reinsurance agreements—associated with contracts for supplies, services, and construction.
- Acceptable Forms: Security is limited to two primary categories:
- Corporate or individual sureties.
- Alternative types of security authorized under FAR 28.204 (such as cash, certified checks, or government obligations).
- Solicitation Requirements: Agencies are generally prohibited from restricting the type of surety or security an offeror chooses to use, provided the security is permitted under FAR Subpart 28.2.
Practical Implications
- Contractor Flexibility: Offerors have the right to utilize alternative assets (like cash or irrevocable letters of credit) if they cannot or choose not to obtain a traditional corporate surety bond.
- Compliance for Contracting Officers: Solicitation language must be carefully reviewed to ensure it does not illegally limit an offeror's bonding options, which encourages broader competition among small or non-traditional firms.