Federal Acquisition Regulation: Individual Sureties, 3682-3687 [2020-29088]
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Federal Register / Vol. 86, No. 9 / Thursday, January 14, 2021 / Rules and Regulations
5. Amend section 15.101–2 by adding
paragraphs (c) and (d) to read as follows:
U.S.C. 3701 Note), contracting officers
shall avoid, to the maximum extent
practicable, using the lowest price
technically acceptable source selection
process in the case of a procurement
that is predominantly for the acquisition
of—
(1) Information technology services,
cybersecurity services, systems
engineering and technical assistance
services, advanced electronic testing,
audit or audit readiness services, health
care services and records,
telecommunications devices and
services, or other knowledge-based
professional services;
(2) Personal protective equipment; or
(3) Knowledge-based training or
logistics services in contingency
operations or other operations outside
the United States, including in
Afghanistan or Iraq.
15.101–2 Lowest price technically
acceptable source selection process.
PART 16—TYPES OF CONTRACTS
b. In paragraph (b)(3)(i), removing ‘‘;
or’’ and adding ‘‘;’’ in its place;
■ c. In paragraph (b)(3)(ii), removing
‘‘supplier.’’ and adding ‘‘supplier; and’’
■ d. Adding paragraph (b)(3)(iii).
The addition reads as follows:
■
13.106–3
Award and documentation.
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(b) * * *
(3) * * *
(iii) Except for DoD, when using
lowest price technically acceptable
source selection process, justifying the
use of such process.
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PART 15—CONTRACTING BY
NEGOTIATION
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(c) Except for DoD, in accordance
with section 880 of the John S. McCain
National Defense Authorization Act for
Fiscal Year 2019 (Pub. L. 115–232, 41
U.S.C. 3701 Note), the lowest price
technically acceptable source selection
process shall only be used when—
(1) The agency can comprehensively
and clearly describe the minimum
requirements in terms of performance
objectives, measures, and standards that
will be used to determine the
acceptability of offers;
(2) The agency would realize no, or
minimal, value from a proposal that
exceeds the minimum technical or
performance requirements;
(3) The agency believes the technical
proposals will require no, or minimal,
subjective judgment by the source
selection authority as to the desirability
of one offeror’s proposal versus a
competing proposal;
(4) The agency has a high degree of
confidence that reviewing the technical
proposals of all offerors would not
result in the identification of
characteristics that could provide value
or benefit to the agency;
(5) The agency determined that the
lowest price reflects the total cost,
including operation and support, of the
product(s) or service(s) being acquired;
and
(6) The contracting officer documents
the contract file describing the
circumstances that justify the use of the
lowest price technically acceptable
source selection process.
(d) Except for DoD, in accordance
with section 880 of the John S. McCain
National Defense Authorization Act for
Fiscal Year 2019 (Pub. L. 115–232, 41
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6. Amend section 16.505 by—
a. Removing from the end of
paragraph (b)(1)(ii) ‘‘must—’’ adding
‘‘shall—’’ in its place;
■ b. Removing from paragraph
(b)(1)(ii)(D) ‘‘contract; and’’ and adding
‘‘contract;’’ in its place;
■ c. Removing from paragraph
(b)(1)(ii)(E) ‘‘decision.’’ and adding
‘‘decision;’’ in its place;
■ d. Adding paragraphs (b)(1)(ii)(F) and
(b)(1)(ii)(G); and
■ e. Adding paragraph (b)(7)(iii).
The additions read as follows:
■
■
16.505
Ordering.
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(b) * * *
(1) * * *
(ii) * * *
(F) Except for DoD, ensure the criteria
at 15.101–2(c)(1)–(5) are met when
using the lowest price technically
acceptable source selection process; and
(G) Except for DoD, avoid using the
lowest price technically acceptable
source selection process to acquire
certain supplies and services in
accordance with 15.101–2(d).
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(7) * * *
(iii) Except for DoD, the contracting
officer shall document in the contract
file a justification for use of the lowest
price technically acceptable source
selection process, when applicable.
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PART 37—SERVICE CONTRACTING
7. Amend section 37.102 by adding
paragraph (j) to read as follows:
■
37.102
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Policy.
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(j) Except for DoD, see 15.101–2(d) for
limitations on the use of the lowest
price technically acceptable source
selection process to acquire certain
services.
[FR Doc. 2020–29087 Filed 1–13–21; 8:45 am]
BILLING CODE 6820–EP–P
DEPARTMENT OF DEFENSE
GENERAL SERVICES
ADMINISTRATION
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
48 CFR Parts 19, 28, 32, 52, and 53
[FAC 2021–03; FAR Case 2017–003; Item
III; Docket FAR–2017–0003, Sequence No.
1]
RIN 9000–AN39
Federal Acquisition Regulation:
Individual Sureties
Department of Defense (DoD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
ACTION: Final rule.
AGENCY:
DoD, GSA, and NASA are
issuing a final rule amending the
Federal Acquisition Regulation (FAR) to
implement a section of the National
Defense Authorization Act for Fiscal
Year 2016 to change the kinds of assets
that individual sureties must pledge as
security for their bonds.
DATES: Effective: February 16, 2021.
FOR FURTHER INFORMATION CONTACT: Ms.
Zenaida Delgado, Procurement Analyst,
at 202–969–7207 or zenaida.delgado@
gsa.gov for clarification of content. For
information pertaining to status or
publication schedules, contact the
Regulatory Secretariat Division at 202–
501–4755 or GSARegSec@gsa.gov.
Please cite FAC 2021–03, FAR Case
2017–003.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Background
DoD, GSA, and NASA published a
proposed rule at 85 FR 7910 on
February 12, 2020, to implement section
874 of the National Defense
Authorization Act for Fiscal Year 2016
(Pub. L. 114–92), codified at 31 U.S.C.
9310, Individual Sureties.
FAR subpart 28.2 requires agencies to
obtain adequate security for bonds when
bonds are used with a contract. A
corporate or individual surety is an
acceptable form of security for a bond.
Corporate sureties are vetted by the
Department of the Treasury to ensure
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they are sufficiently capitalized and are
listed on Department of the Treasury’s
Listing of Approved Sureties (Treasury
Department Circular 570). Individual
sureties are not listed on Treasury
Department Circular 570; currently
contracting officers determine if an
individual surety is acceptable.
Under 31 U.S.C. 9310, when Federal
law permits acceptance of a surety bond
from a surety not subject to 31 U.S.C.
9305 and 9306 (i.e., an individual surety
that is not a corporate surety), the
individual surety must pledge assets
that are eligible obligations. Eligible
obligations are public debt obligations
of the United States Government whose
principal and interest are
unconditionally guaranteed by the
United States Government. The
requirements of 31 U.S.C. 9310 are
intended to strengthen the assets
pledged by individual sureties, thereby
mitigating risk to the Government.
This rule requires individual sureties
to support their bond obligations with
stable U.S.-backed securities as
specified in 31 CFR part 225 and
requires the Department of the Treasury,
Bureau of the Fiscal Service to review
those assets to ensure they meet
established eligibility requirements.
This rule is expected to provide some
benefit to subcontractors (adequate
security in case of default), and
contracting officers (easier to determine
value of assets pledged), to the extent
that individual surety bonds are used,
but there was some concern as to
whether small businesses would have a
more difficult time obtaining surety
bonds if fewer individual sureties were
providing bonds. DoD, GSA, and NASA
requested public input, specifically
from subcontractors, prime contractors,
and individual sureties to more fully
understand the impact of this regulation
on affected parties. Individual sureties
and prime contractors (including small
businesses) did not provide input and
did not indicate any concerns with the
rule. One respondent representing
subcontractors and suppliers in the
construction industry had positive
comments about the rule (see section
II.B.1. of this preamble), confirming the
anticipated benefits. Several
respondents expressed the view that the
rule will not negatively impact the
availability of bonding for small
construction businesses, noting the
bonding assistance of the Small
Business Administration and that the
standard surety market has significantly
expanded in recent years, providing
many and varied avenues for small
businesses to obtain bonding.
Therefore, based on public comments
received, DoD, GSA, and NASA have
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concluded that the initial assessment is
correct that there is very limited use of
individual sureties on Federal
construction contracts and the impact of
this rule is not significant, and any
impact is predominantly positive.
Six respondents submitted comments
on the proposed rule.
II. Discussion and Analysis
The Civilian Agency Acquisition
Council and the Defense Acquisition
Regulations Council (the Councils)
reviewed the public comments in the
development of the final rule.
A. Summary of Significant Changes
From the Proposed Rule
There are no significant changes made
to the rule as a result of the public
comments. One website reference has
been corrected.
B. Analysis of Public Comments
Of the six responses received, most
strongly supported the rule, and none
provided negative comments on the
rule. One respondent noted a
nonfunctioning link to a website, and
one provided comments of a political
nature that did not address the rule.
1. Strong support for the rule.
Comment: Many respondents strongly
supported the proposed rule. These
respondents noted positive factors
regarding this rule as follows:
• Protects the Government from
fraud.
• Eliminates the gamesmanship by
unlicensed persons acting as sureties.
• Ensures a level playing field for
small businesses.
• Ensures adequate and reliable
security is in place to guarantee
payment to subcontractors and
suppliers on Federal construction
projects and protect them against
default.
• Eliminates the burden on
contracting officers in determining the
true value of proposed assets,
streamlining the procurement process.
Several respondents noted that the
rule will not negatively impact the
availability of bonding for small
construction businesses, noting the
bonding assistance of the Small
Business Administration and that the
standard surety market has significantly
expanded in recent years, providing
many and varied avenues for small
businesses to obtain bonding. The rule
does not eliminate individual surety
bonds as an option; it just ensures that
the bonds will be backed by stable and
secure assets in the control of the
Federal Government.
Response: Noted.
2. Treasury website for list of
acceptable assets.
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Comment: One respondent stated that
the link to the website provided at FAR
28.203–1(a) for the Treasury list of
acceptable assets entitled ‘‘Acceptable
Collateral for 31 CFR part 225’’ does not
work.
Response: The directions for
accessing the website have been
amended as follows: ‘‘A list of
acceptable assets entitled ‘‘Acceptable
Collateral for 31 CFR part 225’’ may be
accessed by going to https://
www.treasurydirect.gov/instit/statreg/
collateral/collateral.htm and clicking on
‘‘Acceptable Collateral for 31 CFR part
225’’.
III. Applicability to Contracts at or
Below the Simplified Acquisition
Threshold (SAT) and for Commercial
Items, Including Commercially
Available Off-the-Shelf (COTS) Items
Although applicability of this rule to
acquisitions below the SAT will be rare,
DoD, GSA, and NASA do intend to
apply the requirements of this rule to
solicitations for contracts valued at or
below the SAT. FAR 28.102–1(b) gives
an example of when a bond could be
required for an acquisition under the
SAT. As noted in FAR 28.102–1(b), 40
U.S.C. 3132 requires the contracting
officer to select two or more payment
protections for construction contracts
greater than $35,000, but not greater
than $150,000, one of the possible
protections being a payment bond.
Individual sureties may provide security
for a payment bond in this situation.
The FAR Council has determined that it
is not in the best interest of the
Government to waive the applicability
of section 874 below the SAT, because
the new requirement will create greater
certainty of payment for subcontractors.
Applying the rule below the SAT will
continue the FAR uniformity in the type
of assets allowed to be pledged, whether
the acquisition is above or below the
SAT.
Although applicability of this rule to
acquisitions of commercial items will be
rare, DoD, GSA, and NASA do intend to
apply the requirements of this rule to
solicitations for the acquisition of
commercial items. FAR 28.103–1(a)
states that ‘‘Generally, agencies shall not
require performance and payment bonds
for other than construction contracts.’’
However, performance and payment
bonds may be used for other than
construction contracts as permitted in
FAR 28.103–2 and 28.103–3.
The FAR Council has determined that
it is not in the best interest of the
Government to waive the applicability
of section 874 to acquisitions of
commercial items because the new
requirement will create greater certainty
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of payment for subcontractors. Applying
the rule to the acquisition of commercial
items will continue the FAR uniformity
in the type of assets allowed to be
pledged, whether the acquisition is for
the acquisition of commercial or other
than commercial items.
IV. Executive Orders 12866 and 13563
Executive Orders (E.O.s) 12866 and
13563 direct agencies to assess all costs
and benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). E.O. 13563 emphasizes the
importance of quantifying both costs
and benefits, of reducing costs, of
harmonizing rules, and of promoting
flexibility. This rule is a not a
significant regulatory action and
therefore, this rule was not subject to
the review of the Office of Information
and Regulatory Affairs under section
6(b) of E.O. 12866. This rule is not a
major rule under 5 U.S.C. 804.
V. Executive Order 13771
This rule is not subject to E.O. 13771,
because this rule is not significant under
E.O. 12866.
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VI. Regulatory Flexibility Act
DoD, GSA, and NASA have prepared
a Final Regulatory Flexibility Analysis
(FRFA) consistent with the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq. The
FRFA is summarized as follows:
This FAR rule changes the kinds of assets
that individual sureties must pledge as
security for their individual surety bonds.
The objective of the FAR rule is to implement
section 874 of the National Defense
Authorization Act (NDAA) for Fiscal Year
2016 (FY 2016) (Pub. L. 114–92), which adds
31 U.S.C. 9310, Individual sureties, and
limits the security for an individual surety
bond to eligible obligations, i.e., cash and/or
Government obligations. This section was
intended to strengthen coverage for
individual sureties, thereby mitigating risk to
the Government.
There were no significant issues raised by
the public comments in response to the
initial regulatory flexibility analysis.
DoD, GSA, and NASA do not expect this
rule to have a significant economic impact on
a substantial number of small entities within
the meaning of the Regulatory Flexibility Act,
5 U.S.C. 601, et seq. The final rule applies
to all offerors and contractors who wish to
use an individual surety as security for bonds
required under a solicitation or contract for
supplies or services (including construction).
The number of solicitations and contracts
requiring the submission of bid guarantees,
performance bonds, or payment bonds,
correlates roughly to the number of contract
awards containing FAR clause 52.228–11,
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Pledge of Assets. Based on FY 2017 data
contained in the Electronic Document Access
system (DoD official contract file system),
8,603 DoD contract awards, containing FAR
clause 52.228–11 with an obligated amount
of over $35,000, were made to 1,990 unique
vendors; of these 1,672 were small business
entities. These contractors could be using
corporate sureties under 28.202, individual
sureties under 28.203, or pledging the
contractor’s own assets under 28.204; this
FAR case only covers individual sureties
under 28.203. Therefore, based on
contracting officers’ experience in the field
DoD, GSA, and NASA estimate that less than
0.1 percent of contractors are using
individual sureties to meet the required
bonding under contracts.
This final rule does not include additional
reporting or recordkeeping requirements.
Although the rule creates a new provision to
distinguish instructions to offerors from
instructions to a contractor by relocating the
‘‘offeror’’ language from the existing FAR
clause at 52.228–11, Pledge of Assets, the net
effect of projected reporting and
recordkeeping is unchanged. The use of
Standard Form (SF) 28, Affidavit of
Individual Surety, an existing reporting
requirement under 52.228–11, is covered
under the Office of Management and Budget
(OMB) Control No. 9000–0001. The SF 28 is
revised as a result of this rule. However, this
will have a negligible impact on offerors,
contractors, and respondents.
The effect on small business is that
individual sureties will no longer be able to
pledge real property, corporate stocks,
corporate bonds, or irrevocable letters of
credit. DoD, GSA, and NASA anticipate that
some individual sureties may not want to
transform their assets into the kind that
qualify under the new legislation, and so
there will be fewer individual sureties
available to meet the needs of small business
offerors and contractors. This may mean that
some small businesses that have been using
individual sureties will have their costs
change, as they go to a different individual
surety, or to a corporate surety.
There are no available alternatives to the
rule to accomplish the desired objective of
the statute.
DoD, GSA, and NASA do not expect this
rule to have a significant economic impact on
a substantial number of small entities
because this only applies to (1) offerors and
contractors who are using an individual
surety as security for bonds required under
a solicitation or contract for supplies or
services (including construction), and (2)
individual sureties, a small number of whom
may not want to transform their assets into
the kind that qualify under the new
legislation.
Interested parties may obtain a copy
of the FRFA from the Regulatory
Secretariat Division. The Regulatory
Secretariat Division has submitted a
copy of the FRFA to the Chief Counsel
for Advocacy of the Small Business
Administration.
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VII. Paperwork Reduction Act
The Paperwork Reduction Act (44
U.S.C. Chapter 35) does apply; however,
the changes to the FAR do not impose
additional information collection
requirements. This rule modifies the SF
28, which is used by all executive
agencies to obtain information from
individuals wishing to serve as sureties
to Government bonds. However, the
modification merely updates the
language in the form to be consistent
with the changes to the FAR text; it will
have no impact on offerors or
contractors.
The modification of the SF 28 does
not impose additional information
collection requirements to the
paperwork burden previously approved
under OMB Control Number 9000–0001,
Standard Form 28, Affidavit of
Individual Surety.
List of Subjects in 48 CFR Parts 19, 28,
32, 52, and 53
Government procurement.
William F. Clark,
Director, Office of Government-wide
Acquisition Policy, Office of Acquisition
Policy, Office of Government-wide Policy.
Therefore, DoD, GSA, and NASA
amend 48 CFR parts 19, 28, 32, 52, and
53 as set forth below:
■ 1. The authority citation for 48 CFR
parts 19, 28, 32, 52, and 53 continues to
read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C.
chapter 137; and 51 U.S.C. 20113.
PART 19—SMALL BUSINESS
PROGRAMS
19.602–1
[Amended]
2. Amend section 19.602–1 by
removing from paragraph (a) ‘‘and
28.203(c))’’ and adding ‘‘and 28.203–
1(e))’’ in its place.
■
PART 28—BONDS AND INSURANCE
28.102–2
[Amended]
3. Amend section 28.102–2 by
removing from paragraph (e) ‘‘of
28.203–5(c)’’ and adding ‘‘of 28.203–
3(c)’’ in its place.
■ 4. Amend section 28.106–1 by
removing paragraph (o); redesignating
paragraph (p) as paragraph (o); and
revising the new redesignated paragraph
(o) to read as follows.
■
28.106–1
Bonds and bond related forms.
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(o) OF 91, Release of Personal
Property from Escrow (see 28.203–3).
■ 5. Amend section 28.202 by—
■ a. Revising paragraph (a)(1);
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b. Revising the first sentence of
paragraph (a)(2);
■ c. Removing from paragraph (a)(3)
‘‘Department of the Treasury
regulations’’ and adding ‘‘Department of
the Treasury (Treasury) regulations’’ in
its place;
■ d. Removing from paragraph (a)(4)
‘‘Standard Form 273’’, ‘‘Standard Form
274’’ and ‘‘Standard Form 275’’ and
adding ‘‘Standard Form (SF) 273’’, ‘‘SF
274’’, and ‘‘SF 275’’ in their places,
respectively;
■ e. Revising the first sentence of
paragraph (c); and
■ f. Revising paragraph (d).
The revisions read as follows:
■
28.202
Acceptability of corporate sureties.
(a)(1) Corporate sureties offered for
bonds furnished with contracts
performed in the United States or its
outlying areas must appear on the list
contained in the Department of the
Treasury’s Listing of Approved Sureties
(Treasury Department Circular 570),
‘‘Companies Holding Certificates of
Authority as Acceptable Sureties on
Federal Bonds and as Acceptable
Reinsuring Companies.’’
(2) The penal amount of the bond
should not exceed the surety’s
underwriting limit stated in the
Treasury Department Circular 570.
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(c) Treasury issues supplements to
Treasury Department Circular 570,
notifying all Federal agencies of new
approved corporate surety companies
and the termination of the authority of
any specific corporate surety to qualify
as a surety on Federal bonds. * * *
(d) Treasury Department Circular 570
may be obtained from the U.S.
Department of the Treasury, Bureau of
the Fiscal Service, Surety Bond Branch,
3201 Pennsy Drive, Building E,
Landover, MD 20785 or at https://
www.fiscal.treasury.gov/fsreports/ref/
suretyBnd/c570.htm.
■ 6. Revise section 28.203 to read as
follows:
28.203
Individual sureties.
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28.203–1
sureties.
Acceptability of individual
(a) An individual surety is acceptable
for all types of bonds except position
schedule bonds. Assets pledged by an
individual surety shall meet the
eligibility requirements of Treasury’s
Bureau of the Fiscal Service. Per 31
U.S.C. 9310, individual sureties must
pledge eligible obligations, which
Treasury refers to as acceptable
collateral or eligible collateral. A list of
acceptable assets, entitled ‘‘Acceptable
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Collateral for 31 CFR part 225,’’ may be
accessed by going to https://
www.treasurydirect.gov/instit/statreg/
collateral/collateral.htm and clicking on
‘‘Acceptable Collateral for 31 CFR part
225’’.
(b)(1) An individual surety shall
execute the bond (e.g., bid bond (SF 24),
performance bond (SF 25), payment
bond (SF 25A)).
(2) The net adjusted value of
unencumbered assets is their market
value minus the margin. The margin
tables are available at
www.treasurydirect.gov. The net
adjusted value of unencumbered assets
pledged by the individual surety must
equal or exceed the penal amount (i.e.,
face value) of each bond.
(3) The individual surety shall
execute the SF 28, Affidavit of
Individual Surety, and provide a
security interest. One individual surety
is adequate support for a bond, provided
the net adjusted value of unencumbered
assets pledged by that individual surety
equals or exceeds the amount of the
bond.
(4) An offeror or contractor may
submit up to three individual sureties
for each bond, in which case the net
adjusted value of the pledged
unencumbered assets, when combined,
must equal or exceed the penal amount
of the bond. Each individual surety is
jointly and severally liable to the extent
of the penal amount of the bond.
(c) Using the information from the SF
28 submitted by the offeror or
contractor, the contracting officer shall
notify the Treasury’s collateral
operations support team by email at
BMT@fiscal.treasury.gov or by phone at
888–568–7343, of the individual surety,
the assets to be pledged, and the amount
necessary to cover the individual surety
bond, i.e., the required amount to be
collateralized. Treasury will advise the
contracting officer whether the assets
are eligible to be pledged, consistent
with 28.203–1(a), and of the valuation of
the assets offered to be pledged,
consistent with the valuation standards
in 28.203–1(b)(2). If after 3 business
days the contracting officer has not
received a response from Treasury, the
contracting officer may seek assistance
from the Director, Bank Policy and
Oversight, at 202–504–3502. The
contracting officer shall determine
whether the individual surety bond is
acceptable as to the amount necessary to
cover the individual surety bond based
on the asset eligibility and valuation
assessment from Treasury. The
contracting officer shall notify both the
offeror or contractor and the individual
surety of this determination.
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(d) If the contracting officer
determines the individual surety is
acceptable, the contracting officer shall
request the Treasury’s collateral
operations support team set up the
necessary individual surety pledged
asset collateral account.
(e) If the contracting officer
determines that no individual surety in
support of a bid guarantee is acceptable,
the offeror utilizing the individual
surety shall be rejected as
nonresponsible, except as provided in
28.101–4. A finding of nonresponsibility
based on unacceptability of an
individual surety, need not be referred
to the Small Business Administration
for a Certificate of Competency. (See
19.602–1(a) and 61 Comp. Gen. 456
(1982).)
(f) If a contractor submits an
unacceptable individual surety, or one
that Treasury could not assess the asset
eligibility and valuation within a
reasonable time, then the contracting
officer may permit the contractor to
substitute an acceptable surety within a
reasonable time.
(g) Evidence of possible criminal or
fraudulent activities by an individual
surety shall be referred to the
appropriate agency official in
accordance with agency procedures.
28.203–2
Substitution of assets.
An individual surety may request the
Government to accept a substitute asset
for that currently pledged by submitting
a written request, including a revised SF
28, to the responsible contracting
officer. Following the requirements set
forth in 28.203–1, the contracting officer
may agree to the substitution of assets
upon determining that the substitute
assets to be pledged are adequate to
protect the outstanding bond or
guarantee obligations.
28.203–3
Release of security interest.
(a) After consultation with legal
counsel, the contracting officer shall
release the security interest on the
individual surety’s assets using the
Optional Form 91, Release of Personal
Property from Escrow, or a similar
release as soon as possible consistent
with the conditions in subparagraphs
(a)(1) and (2) of this section. A surety’s
assets pledged in support of a payment
bond may be released to a subcontractor
or supplier upon Government receipt of
a Federal district court judgment, or a
sworn statement by the subcontractor or
supplier that the claim is correct along
with a notarized authorization of the
release by the surety stating that it
approves of such release.
(1) Contracts subject to the Bonds
statute. See section 1.110 and section
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28.102–1, paragraph (a). The security
interest shall be maintained for the later
of—
(i) 1 year following final payment;
(ii) Until completion of any warranty
period (applicable only to performance
bonds); or
(iii) Pending resolution of all claims
filed against the payment bond during
the 1 year period following final
payment.
(2) Contracts subject to alternative
payment protection. See section 28.102–
1, paragraph (b)(1). The security interest
shall be maintained for the full contract
performance period plus 1 year.
(3) Other contracts not subject to the
Bonds statute. The security interest
shall be maintained for 90 days
following final payment or until
completion of any warranty period
(applicable only to performance bonds),
whichever is later.
(b) Upon written request by the
individual surety, the contracting officer
may release the security interest on the
individual surety’s assets in support of
a bid guarantee based upon evidence
that the offer supported by the
individual surety will not result in
contract award.
(c) Upon written request by the
individual surety, the contracting officer
may release a portion of the security
interest on the individual surety’s assets
based upon substantial performance of
the contractor’s obligations under its
performance bond. Release of the
security interest in support of a payment
bond must comply with the
subparagraphs (a)(1) through (3) of this
section. In making this determination,
the contracting officer will give
consideration as to whether the
unreleased portion of the security is
sufficient to cover the remaining
contract obligations, including
payments to subcontractors and other
potential liabilities. The individual
surety shall, as a condition of the partial
release, furnish an affidavit agreeing
that the release of such assets does not
relieve the individual surety of its
obligations under the bond(s).
28.203–5
28.203–4 Solicitation provision and
contract clause.
PART 32—CONTRACT FINANCING
(a) Insert the provision at 52.228–17,
Individual Surety—Pledge of Assets
(Bid Guarantee), in solicitations that
require the submission of a bid
guarantee.
(b) Insert the clause at 52.228–11,
Individual Surety—Pledge of Assets, in
solicitations and contracts that require
the submission of performance or
payment bonds.
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Exclusion of individual sureties.
(a) An individual may be excluded
from acting as a surety on bonds
submitted by offerors on procurement
by the executive branch of the Federal
Government, by the acquiring agency’s
head or designee utilizing the
procedures in subpart 9.4. The
exclusion shall be for the purpose of
protecting the Government.
(b) An individual may be excluded for
any of the following causes:
(1) Failure to fulfill the obligations
under any bond.
(2) Failure to disclose all bond
obligations.
(3) Misrepresentation of the value of
available assets or outstanding
liabilities.
(4) Any false or misleading statement,
signature or representation on a bond or
affidavit of individual suretyship.
(5) Any other cause affecting
responsibility as a surety of such serious
and compelling nature as may be
determined to warrant exclusion.
(c) An individual surety excluded
pursuant to this section shall be entered
as an exclusion in the System for Award
Management (see 9.404).
(d) Contracting officers shall not
accept the bonds of individual sureties
whose names appear in an active
exclusion record in the System for
Award Management (see 9.404) unless
the acquiring agency’s head or a
designee states in writing the
compelling reasons justifying
acceptance.
(e) An exclusion of an individual
surety under this section will also
preclude such party from acting as a
contractor in accordance with subpart
9.4.
28.204
[Amended]
7. Amend section 28.404 by removing
from paragraph (b) ‘‘lien in 28.203–5(c)’’
and adding ‘‘security in 28.203–3(c)’’ in
its place.
■
28.204–1
[Amended]
8. Amend section 28.204–1 by
removing from the first sentence of the
text ‘‘dated July 1, 1978’’.
■
32.202–4
[Amended]
9. Amend section 32.202–4 by
removing from paragraph (c) ‘‘28.203–2,
28.203–3, and’’ and adding ‘‘28.203
and’’ in its place.
■
PART 52—SOLICITATION PROVISIONS
AND CONTRACT CLAUSES
10. Revise section 52.228–11 to read
as follows:
■
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52.228–11 Individual Surety—Pledge of
Assets.
As prescribed in 28.203–4(b), insert the
following clause:
Individual Surety—Pledge of Assets (Feb
2021)
(a) The Contractor shall obtain from each
person acting as an individual surety on a
performance bond or a payment bond—
(1) A pledge of assets that meets the
eligibility, valuation, and security
requirements described in the Federal
Acquisition Regulation (FAR) 28.203–1; and
(2) Standard Form 28, Affidavit of
Individual Surety.
(b) The Contracting Officer may release a
portion of the security interest on the
individual surety’s assets based upon
substantial performance of the Contractor’s
obligations under its performance bond. The
security interest in support of a performance
bond shall be maintained—
(1) Contracts for the construction,
alteration, or repair of any public building or
public work of the Federal Government
exceeding $150,000 (40 U.S.C. 3131). Until
completion of any warranty period, or for 1
year following final payment, whichever is
later.
(2) Contracts subject to alternative
payment protection (see FAR 28.102–1(b)(1)).
For the full contract performance period plus
1 year.
(3) Other contracts not subject to the
requirements of paragraph (b)(1) of this
clause. Until completion of any warranty
period, or for 90 days following final
payment, whichever is later.
(c) A surety’s assets pledged in support of
a payment bond may be released to a
subcontractor or supplier upon Government
receipt of a Federal district court judgment,
or a sworn statement by the subcontractor or
supplier that the claim is correct along with
a notarized authorization of the release by the
surety stating that it approves of such release.
The security interest on the individual
surety’s assets in support of a payment bond
shall be maintained—
(1) Contracts for the construction,
alteration, or repair of any public building or
public work of the Federal Government
exceeding $150,000 which require
performance and payment bonds (40 U.S.C.
3131). For 1 year following final payment, or
until resolution of all pending claims filed
against the payment bond during the 1-year
period following final payment, whichever is
later.
(2) Contracts subject to alternative
payment protection (see FAR 28.102–1(b)(1)).
For the full contract performance period plus
1 year.
(3) Other contracts not subject to the
requirements of paragraph (c)(1) of this
clause. For 90 days following final payment.
(d) The Contracting Officer may allow the
Contractor to substitute an individual surety,
for a performance or payment bond, after
contract award. The Contractor shall comply
with the requirements of paragraph (a) of this
clause within the timeframe established by
the Contracting Officer.
(End of clause)
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11. Add section 52.228–17 to read as
follows:
■
52.228–17 Individual Surety—Pledge of
Assets (Bid Guarantee).
15.209 Solicitation provisions and
contract clauses.
GENERAL SERVICES
ADMINISTRATION
*
As prescribed in 28.203–4(a), insert
the following provision:
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
Individual Surety—Pledge of Assets
(Bid Guarantee) (Feb 2021)
48 CFR Parts 2, 15, 17, 37 and 52
(a) Offerors shall obtain from each person
acting as an individual surety on a bid
guarantee—
(1) A pledge of assets that meets the
eligibility, valuation, and security
requirements described in the Federal
Acquisition Regulation (FAR) 28.203–1; and
(2) Standard Form 28, Affidavit of
Individual Surety.
(b) The Offeror shall include with its offer
the information required at paragraph (a) of
this provision within the timeframe specified
in the provision at FAR 52.228–1, Bid
Guarantee, or as otherwise established by the
Contracting Officer.
(c) The Contracting Officer may release the
security interest on the individual surety’s
assets in support of a bid guarantee based
upon evidence that the offer supported by the
individual surety will not result in contract
award.
[FAC 2021–03; Item IV; Docket No. FAR–
2020–0052; Sequence No. 4]
(End of provision)
PART 53—FORMS
53.228
[Amended]
12. Amend section 53.228 by—
a. Removing from paragraph (e) ‘‘(Rev.
6/2003)’’ and ‘‘28.203(b).)’’ and adding
‘‘‘‘(Rev. Feb 2021)’’ and ‘‘28.203–
1(b)(3).)’’ in their places, respectively;
■ b. Removing paragraph (o);
■ c. Redesignating paragraph (p) as
paragraph (o); and
■ d. Removing from the newly
redesignated paragraph (o) ‘‘(See
28.106–1(p) and 28.203–5(a).)’’ and
adding ‘‘(See 28.106–1(o) and 28.203–
3(a).)’’ in its place.
■
■
53.300
Federal Acquisition Regulation;
Technical Amendments
Department of Defense (DoD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
ACTION: Final rule.
AGENCY:
This document makes
amendments to the Federal Acquisition
Regulation (FAR) in order to make
needed editorial changes.
DATES: Effective: February 16, 2021.
FOR FURTHER INFORMATION CONTACT: Ms.
Lois Mandell, Regulatory Secretariat
Division (MVCB), at 202–501–4755 or
GSARegSec@gsa.gov. Please cite FAC
2021–03, Technical Amendments.
SUPPLEMENTARY INFORMATION: In order to
update certain elements in 48 CFR parts
2, 15, 17, 37, and 52 this document
makes editorial changes to the FAR.
SUMMARY:
List of Subjects in 48 CFR Parts 2, 15,
17, 37 and 52
Government procurement.
William F. Clark,
Director, Office of Government-Wide
Acquisition Policy, Office of Acquisition
Policy, Office of Government-Wide Policy.
Therefore, DoD, GSA, and NASA
amend 48 CFR parts 2, 15, 17, 37, and
52 as set forth below:
■ 1. The authority citation for 48 CFR
parts 2, 15, 17, 37, and 52 continues to
read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C.
chapter 137; and 51 U.S.C. 20113.
[Amended]
13. Amend section 53.300 by
removing from the table 53–1 in
paragraph (a) ‘‘OF 90 Release of Lien on
Real Property.’’
■
[FR Doc. 2020–29088 Filed 1–13–21; 8:45 am]
BILLING CODE 6820–EP–P
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DEPARTMENT OF DEFENSE
PART 2—DEFINITIONS OF WORDS
AND TERMS
2.101
3. Amend section 15.209 by adding
paragraph (e) to read as follows:
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17.502
1 [Amended]
4. Amend section 17.502–1 by—
a. Removing from the sixth sentence
of paragraph (a)(1)(i) ‘‘Policy’’ and
‘‘l_acq/iacll’’ adding ‘‘Policy
(OFPP)’’ and ‘‘lacq/iacl’’ in their
place; respectively; and
■ b. Removing from paragraph (b)
introductory text ‘‘Office of Federal
Procurement Policy (OFPP)’’ and adding
‘‘OFPP’’ in its place.
■
■
PART 37—SERVICE CONTRACTING
37.103
[Amended]
5. Amend section 37.103 in paragraph
(d) by removing ‘‘42 U.S.C. 13041, as
amended,’’ and adding ‘‘34 U.S.C.
20351’’ in its place.
■
PART 52—SOLICITATION PROVISIONS
AND CONTRACT CLAUSES
6. Amend section 52.212–3 by—
a. Revising the date of the provision;
and
■ b. Revising paragraph (f)(2);
■ c. Revising the table in paragraph
(g)(1)(ii), and the undesignated tables in
(g)(1)(iii), (g)(2), and (g)(3);
■ d. Revising the tables in (g)(4) and
(g)(5)(ii); and
■ e. Revising the paragraph (i)(1).
The revisions read as follows:
■
■
52.212–3 Offeror Representations and
Certifications—Commercial Items.
*
*
*
*
*
Offeror Representations and
Certifications—Commercial Items (Feb
2021)
*
*
*
*
*
(f) * * *
(2) Foreign End Products:
Country of origin
2. Amend section 2.101, in paragraph
(b), in the definition ‘‘Ineligible’’ by
removing from paragraph (4) ‘‘$15,000’’
and adding ‘‘$10,000’’ in its place.
■
00:03 Jan 14, 2021
PART 17—SPECIAL CONTRACTING
METHODS
■
PART 15—CONTRACTING BY
NEGOTIATION
VerDate Sep<11>2014
*
*
*
*
(e) The contracting officer shall insert
the provision at 52.215–5, Facsimile
Proposals, in solicitations if facsimile
proposals are authorized (see 15.203(d)).
*
*
*
*
*
Line item No.
[Amended]
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[List as necessary]
*
*
*
*
(g)(1) * * *
(ii) * * *
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]]>Agencies
[Federal Register Volume 86, Number 9 (Thursday, January 14, 2021)]
[Rules and Regulations]
[Pages 3682-3687]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-29088]
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 19, 28, 32, 52, and 53
[FAC 2021-03; FAR Case 2017-003; Item III; Docket FAR-2017-0003,
Sequence No. 1]
RIN 9000-AN39
Federal Acquisition Regulation: Individual Sureties
AGENCY: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: DoD, GSA, and NASA are issuing a final rule amending the
Federal Acquisition Regulation (FAR) to implement a section of the
National Defense Authorization Act for Fiscal Year 2016 to change the
kinds of assets that individual sureties must pledge as security for
their bonds.
DATES: Effective: February 16, 2021.
FOR FURTHER INFORMATION CONTACT: Ms. Zenaida Delgado, Procurement
Analyst, at 202-969-7207 or [email protected] for clarification
of content. For information pertaining to status or publication
schedules, contact the Regulatory Secretariat Division at 202-501-4755
or [email protected]. Please cite FAC 2021-03, FAR Case 2017-003.
SUPPLEMENTARY INFORMATION:
I. Background
DoD, GSA, and NASA published a proposed rule at 85 FR 7910 on
February 12, 2020, to implement section 874 of the National Defense
Authorization Act for Fiscal Year 2016 (Pub. L. 114-92), codified at 31
U.S.C. 9310, Individual Sureties.
FAR subpart 28.2 requires agencies to obtain adequate security for
bonds when bonds are used with a contract. A corporate or individual
surety is an acceptable form of security for a bond. Corporate sureties
are vetted by the Department of the Treasury to ensure
[[Page 3683]]
they are sufficiently capitalized and are listed on Department of the
Treasury's Listing of Approved Sureties (Treasury Department Circular
570). Individual sureties are not listed on Treasury Department
Circular 570; currently contracting officers determine if an individual
surety is acceptable.
Under 31 U.S.C. 9310, when Federal law permits acceptance of a
surety bond from a surety not subject to 31 U.S.C. 9305 and 9306 (i.e.,
an individual surety that is not a corporate surety), the individual
surety must pledge assets that are eligible obligations. Eligible
obligations are public debt obligations of the United States Government
whose principal and interest are unconditionally guaranteed by the
United States Government. The requirements of 31 U.S.C. 9310 are
intended to strengthen the assets pledged by individual sureties,
thereby mitigating risk to the Government.
This rule requires individual sureties to support their bond
obligations with stable U.S.-backed securities as specified in 31 CFR
part 225 and requires the Department of the Treasury, Bureau of the
Fiscal Service to review those assets to ensure they meet established
eligibility requirements. This rule is expected to provide some benefit
to subcontractors (adequate security in case of default), and
contracting officers (easier to determine value of assets pledged), to
the extent that individual surety bonds are used, but there was some
concern as to whether small businesses would have a more difficult time
obtaining surety bonds if fewer individual sureties were providing
bonds. DoD, GSA, and NASA requested public input, specifically from
subcontractors, prime contractors, and individual sureties to more
fully understand the impact of this regulation on affected parties.
Individual sureties and prime contractors (including small businesses)
did not provide input and did not indicate any concerns with the rule.
One respondent representing subcontractors and suppliers in the
construction industry had positive comments about the rule (see section
II.B.1. of this preamble), confirming the anticipated benefits. Several
respondents expressed the view that the rule will not negatively impact
the availability of bonding for small construction businesses, noting
the bonding assistance of the Small Business Administration and that
the standard surety market has significantly expanded in recent years,
providing many and varied avenues for small businesses to obtain
bonding.
Therefore, based on public comments received, DoD, GSA, and NASA
have concluded that the initial assessment is correct that there is
very limited use of individual sureties on Federal construction
contracts and the impact of this rule is not significant, and any
impact is predominantly positive.
Six respondents submitted comments on the proposed rule.
II. Discussion and Analysis
The Civilian Agency Acquisition Council and the Defense Acquisition
Regulations Council (the Councils) reviewed the public comments in the
development of the final rule.
A. Summary of Significant Changes From the Proposed Rule
There are no significant changes made to the rule as a result of
the public comments. One website reference has been corrected.
B. Analysis of Public Comments
Of the six responses received, most strongly supported the rule,
and none provided negative comments on the rule. One respondent noted a
nonfunctioning link to a website, and one provided comments of a
political nature that did not address the rule.
1. Strong support for the rule.
Comment: Many respondents strongly supported the proposed rule.
These respondents noted positive factors regarding this rule as
follows:
Protects the Government from fraud.
Eliminates the gamesmanship by unlicensed persons acting
as sureties.
Ensures a level playing field for small businesses.
Ensures adequate and reliable security is in place to
guarantee payment to subcontractors and suppliers on Federal
construction projects and protect them against default.
Eliminates the burden on contracting officers in
determining the true value of proposed assets, streamlining the
procurement process.
Several respondents noted that the rule will not negatively impact
the availability of bonding for small construction businesses, noting
the bonding assistance of the Small Business Administration and that
the standard surety market has significantly expanded in recent years,
providing many and varied avenues for small businesses to obtain
bonding. The rule does not eliminate individual surety bonds as an
option; it just ensures that the bonds will be backed by stable and
secure assets in the control of the Federal Government.
Response: Noted.
2. Treasury website for list of acceptable assets.
Comment: One respondent stated that the link to the website
provided at FAR 28.203-1(a) for the Treasury list of acceptable assets
entitled ``Acceptable Collateral for 31 CFR part 225'' does not work.
Response: The directions for accessing the website have been
amended as follows: ``A list of acceptable assets entitled ``Acceptable
Collateral for 31 CFR part 225'' may be accessed by going to https://www.treasurydirect.gov/instit/statreg/collateral/collateral.htm and
clicking on ``Acceptable Collateral for 31 CFR part 225''.
III. Applicability to Contracts at or Below the Simplified Acquisition
Threshold (SAT) and for Commercial Items, Including Commercially
Available Off-the-Shelf (COTS) Items
Although applicability of this rule to acquisitions below the SAT
will be rare, DoD, GSA, and NASA do intend to apply the requirements of
this rule to solicitations for contracts valued at or below the SAT.
FAR 28.102-1(b) gives an example of when a bond could be required for
an acquisition under the SAT. As noted in FAR 28.102-1(b), 40 U.S.C.
3132 requires the contracting officer to select two or more payment
protections for construction contracts greater than $35,000, but not
greater than $150,000, one of the possible protections being a payment
bond. Individual sureties may provide security for a payment bond in
this situation. The FAR Council has determined that it is not in the
best interest of the Government to waive the applicability of section
874 below the SAT, because the new requirement will create greater
certainty of payment for subcontractors. Applying the rule below the
SAT will continue the FAR uniformity in the type of assets allowed to
be pledged, whether the acquisition is above or below the SAT.
Although applicability of this rule to acquisitions of commercial
items will be rare, DoD, GSA, and NASA do intend to apply the
requirements of this rule to solicitations for the acquisition of
commercial items. FAR 28.103-1(a) states that ``Generally, agencies
shall not require performance and payment bonds for other than
construction contracts.'' However, performance and payment bonds may be
used for other than construction contracts as permitted in FAR 28.103-2
and 28.103-3.
The FAR Council has determined that it is not in the best interest
of the Government to waive the applicability of section 874 to
acquisitions of commercial items because the new requirement will
create greater certainty
[[Page 3684]]
of payment for subcontractors. Applying the rule to the acquisition of
commercial items will continue the FAR uniformity in the type of assets
allowed to be pledged, whether the acquisition is for the acquisition
of commercial or other than commercial items.
IV. Executive Orders 12866 and 13563
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
This rule is a not a significant regulatory action and therefore, this
rule was not subject to the review of the Office of Information and
Regulatory Affairs under section 6(b) of E.O. 12866. This rule is not a
major rule under 5 U.S.C. 804.
V. Executive Order 13771
This rule is not subject to E.O. 13771, because this rule is not
significant under E.O. 12866.
VI. Regulatory Flexibility Act
DoD, GSA, and NASA have prepared a Final Regulatory Flexibility
Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5
U.S.C. 601, et seq. The FRFA is summarized as follows:
This FAR rule changes the kinds of assets that individual
sureties must pledge as security for their individual surety bonds.
The objective of the FAR rule is to implement section 874 of the
National Defense Authorization Act (NDAA) for Fiscal Year 2016 (FY
2016) (Pub. L. 114-92), which adds 31 U.S.C. 9310, Individual
sureties, and limits the security for an individual surety bond to
eligible obligations, i.e., cash and/or Government obligations. This
section was intended to strengthen coverage for individual sureties,
thereby mitigating risk to the Government.
There were no significant issues raised by the public comments
in response to the initial regulatory flexibility analysis.
DoD, GSA, and NASA do not expect this rule to have a significant
economic impact on a substantial number of small entities within the
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. The
final rule applies to all offerors and contractors who wish to use
an individual surety as security for bonds required under a
solicitation or contract for supplies or services (including
construction). The number of solicitations and contracts requiring
the submission of bid guarantees, performance bonds, or payment
bonds, correlates roughly to the number of contract awards
containing FAR clause 52.228-11, Pledge of Assets. Based on FY 2017
data contained in the Electronic Document Access system (DoD
official contract file system), 8,603 DoD contract awards,
containing FAR clause 52.228-11 with an obligated amount of over
$35,000, were made to 1,990 unique vendors; of these 1,672 were
small business entities. These contractors could be using corporate
sureties under 28.202, individual sureties under 28.203, or pledging
the contractor's own assets under 28.204; this FAR case only covers
individual sureties under 28.203. Therefore, based on contracting
officers' experience in the field DoD, GSA, and NASA estimate that
less than 0.1 percent of contractors are using individual sureties
to meet the required bonding under contracts.
This final rule does not include additional reporting or
recordkeeping requirements. Although the rule creates a new
provision to distinguish instructions to offerors from instructions
to a contractor by relocating the ``offeror'' language from the
existing FAR clause at 52.228-11, Pledge of Assets, the net effect
of projected reporting and recordkeeping is unchanged. The use of
Standard Form (SF) 28, Affidavit of Individual Surety, an existing
reporting requirement under 52.228-11, is covered under the Office
of Management and Budget (OMB) Control No. 9000-0001. The SF 28 is
revised as a result of this rule. However, this will have a
negligible impact on offerors, contractors, and respondents.
The effect on small business is that individual sureties will no
longer be able to pledge real property, corporate stocks, corporate
bonds, or irrevocable letters of credit. DoD, GSA, and NASA
anticipate that some individual sureties may not want to transform
their assets into the kind that qualify under the new legislation,
and so there will be fewer individual sureties available to meet the
needs of small business offerors and contractors. This may mean that
some small businesses that have been using individual sureties will
have their costs change, as they go to a different individual
surety, or to a corporate surety.
There are no available alternatives to the rule to accomplish
the desired objective of the statute.
DoD, GSA, and NASA do not expect this rule to have a significant
economic impact on a substantial number of small entities because
this only applies to (1) offerors and contractors who are using an
individual surety as security for bonds required under a
solicitation or contract for supplies or services (including
construction), and (2) individual sureties, a small number of whom
may not want to transform their assets into the kind that qualify
under the new legislation.
Interested parties may obtain a copy of the FRFA from the
Regulatory Secretariat Division. The Regulatory Secretariat Division
has submitted a copy of the FRFA to the Chief Counsel for Advocacy of
the Small Business Administration.
VII. Paperwork Reduction Act
The Paperwork Reduction Act (44 U.S.C. Chapter 35) does apply;
however, the changes to the FAR do not impose additional information
collection requirements. This rule modifies the SF 28, which is used by
all executive agencies to obtain information from individuals wishing
to serve as sureties to Government bonds. However, the modification
merely updates the language in the form to be consistent with the
changes to the FAR text; it will have no impact on offerors or
contractors.
The modification of the SF 28 does not impose additional
information collection requirements to the paperwork burden previously
approved under OMB Control Number 9000-0001, Standard Form 28,
Affidavit of Individual Surety.
List of Subjects in 48 CFR Parts 19, 28, 32, 52, and 53
Government procurement.
William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of
Acquisition Policy, Office of Government-wide Policy.
Therefore, DoD, GSA, and NASA amend 48 CFR parts 19, 28, 32, 52,
and 53 as set forth below:
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1. The authority citation for 48 CFR parts 19, 28, 32, 52, and 53
continues to read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51
U.S.C. 20113.
PART 19--SMALL BUSINESS PROGRAMS
19.602-1 [Amended]
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2. Amend section 19.602-1 by removing from paragraph (a) ``and
28.203(c))'' and adding ``and 28.203-1(e))'' in its place.
PART 28--BONDS AND INSURANCE
28.102-2 [Amended]
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3. Amend section 28.102-2 by removing from paragraph (e) ``of 28.203-
5(c)'' and adding ``of 28.203-3(c)'' in its place.
0
4. Amend section 28.106-1 by removing paragraph (o); redesignating
paragraph (p) as paragraph (o); and revising the new redesignated
paragraph (o) to read as follows.
28.106-1 Bonds and bond related forms.
* * * * *
(o) OF 91, Release of Personal Property from Escrow (see 28.203-3).
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5. Amend section 28.202 by--
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a. Revising paragraph (a)(1);
[[Page 3685]]
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b. Revising the first sentence of paragraph (a)(2);
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c. Removing from paragraph (a)(3) ``Department of the Treasury
regulations'' and adding ``Department of the Treasury (Treasury)
regulations'' in its place;
0
d. Removing from paragraph (a)(4) ``Standard Form 273'', ``Standard
Form 274'' and ``Standard Form 275'' and adding ``Standard Form (SF)
273'', ``SF 274'', and ``SF 275'' in their places, respectively;
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e. Revising the first sentence of paragraph (c); and
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f. Revising paragraph (d).
The revisions read as follows:
28.202 Acceptability of corporate sureties.
(a)(1) Corporate sureties offered for bonds furnished with
contracts performed in the United States or its outlying areas must
appear on the list contained in the Department of the Treasury's
Listing of Approved Sureties (Treasury Department Circular 570),
``Companies Holding Certificates of Authority as Acceptable Sureties on
Federal Bonds and as Acceptable Reinsuring Companies.''
(2) The penal amount of the bond should not exceed the surety's
underwriting limit stated in the Treasury Department Circular 570. * *
*
* * * * *
(c) Treasury issues supplements to Treasury Department Circular
570, notifying all Federal agencies of new approved corporate surety
companies and the termination of the authority of any specific
corporate surety to qualify as a surety on Federal bonds. * * *
(d) Treasury Department Circular 570 may be obtained from the U.S.
Department of the Treasury, Bureau of the Fiscal Service, Surety Bond
Branch, 3201 Pennsy Drive, Building E, Landover, MD 20785 or at https://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570.htm.
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6. Revise section 28.203 to read as follows:
28.203 Individual sureties.
28.203-1 Acceptability of individual sureties.
(a) An individual surety is acceptable for all types of bonds
except position schedule bonds. Assets pledged by an individual surety
shall meet the eligibility requirements of Treasury's Bureau of the
Fiscal Service. Per 31 U.S.C. 9310, individual sureties must pledge
eligible obligations, which Treasury refers to as acceptable collateral
or eligible collateral. A list of acceptable assets, entitled
``Acceptable Collateral for 31 CFR part 225,'' may be accessed by going
to https://www.treasurydirect.gov/instit/statreg/collateral/collateral.htm and clicking on ``Acceptable Collateral for 31 CFR part
225''.
(b)(1) An individual surety shall execute the bond (e.g., bid bond
(SF 24), performance bond (SF 25), payment bond (SF 25A)).
(2) The net adjusted value of unencumbered assets is their market
value minus the margin. The margin tables are available at
www.treasurydirect.gov. The net adjusted value of unencumbered assets
pledged by the individual surety must equal or exceed the penal amount
(i.e., face value) of each bond.
(3) The individual surety shall execute the SF 28, Affidavit of
Individual Surety, and provide a security interest. One individual
surety is adequate support for a bond, provided the net adjusted value
of unencumbered assets pledged by that individual surety equals or
exceeds the amount of the bond.
(4) An offeror or contractor may submit up to three individual
sureties for each bond, in which case the net adjusted value of the
pledged unencumbered assets, when combined, must equal or exceed the
penal amount of the bond. Each individual surety is jointly and
severally liable to the extent of the penal amount of the bond.
(c) Using the information from the SF 28 submitted by the offeror
or contractor, the contracting officer shall notify the Treasury's
collateral operations support team by email at [email protected]
or by phone at 888-568-7343, of the individual surety, the assets to be
pledged, and the amount necessary to cover the individual surety bond,
i.e., the required amount to be collateralized. Treasury will advise
the contracting officer whether the assets are eligible to be pledged,
consistent with 28.203-1(a), and of the valuation of the assets offered
to be pledged, consistent with the valuation standards in 28.203-
1(b)(2). If after 3 business days the contracting officer has not
received a response from Treasury, the contracting officer may seek
assistance from the Director, Bank Policy and Oversight, at 202-504-
3502. The contracting officer shall determine whether the individual
surety bond is acceptable as to the amount necessary to cover the
individual surety bond based on the asset eligibility and valuation
assessment from Treasury. The contracting officer shall notify both the
offeror or contractor and the individual surety of this determination.
(d) If the contracting officer determines the individual surety is
acceptable, the contracting officer shall request the Treasury's
collateral operations support team set up the necessary individual
surety pledged asset collateral account.
(e) If the contracting officer determines that no individual surety
in support of a bid guarantee is acceptable, the offeror utilizing the
individual surety shall be rejected as nonresponsible, except as
provided in 28.101-4. A finding of nonresponsibility based on
unacceptability of an individual surety, need not be referred to the
Small Business Administration for a Certificate of Competency. (See
19.602-1(a) and 61 Comp. Gen. 456 (1982).)
(f) If a contractor submits an unacceptable individual surety, or
one that Treasury could not assess the asset eligibility and valuation
within a reasonable time, then the contracting officer may permit the
contractor to substitute an acceptable surety within a reasonable time.
(g) Evidence of possible criminal or fraudulent activities by an
individual surety shall be referred to the appropriate agency official
in accordance with agency procedures.
28.203-2 Substitution of assets.
An individual surety may request the Government to accept a
substitute asset for that currently pledged by submitting a written
request, including a revised SF 28, to the responsible contracting
officer. Following the requirements set forth in 28.203-1, the
contracting officer may agree to the substitution of assets upon
determining that the substitute assets to be pledged are adequate to
protect the outstanding bond or guarantee obligations.
28.203-3 Release of security interest.
(a) After consultation with legal counsel, the contracting officer
shall release the security interest on the individual surety's assets
using the Optional Form 91, Release of Personal Property from Escrow,
or a similar release as soon as possible consistent with the conditions
in subparagraphs (a)(1) and (2) of this section. A surety's assets
pledged in support of a payment bond may be released to a subcontractor
or supplier upon Government receipt of a Federal district court
judgment, or a sworn statement by the subcontractor or supplier that
the claim is correct along with a notarized authorization of the
release by the surety stating that it approves of such release.
(1) Contracts subject to the Bonds statute. See section 1.110 and
section
[[Page 3686]]
28.102-1, paragraph (a). The security interest shall be maintained for
the later of--
(i) 1 year following final payment;
(ii) Until completion of any warranty period (applicable only to
performance bonds); or
(iii) Pending resolution of all claims filed against the payment
bond during the 1 year period following final payment.
(2) Contracts subject to alternative payment protection. See
section 28.102-1, paragraph (b)(1). The security interest shall be
maintained for the full contract performance period plus 1 year.
(3) Other contracts not subject to the Bonds statute. The security
interest shall be maintained for 90 days following final payment or
until completion of any warranty period (applicable only to performance
bonds), whichever is later.
(b) Upon written request by the individual surety, the contracting
officer may release the security interest on the individual surety's
assets in support of a bid guarantee based upon evidence that the offer
supported by the individual surety will not result in contract award.
(c) Upon written request by the individual surety, the contracting
officer may release a portion of the security interest on the
individual surety's assets based upon substantial performance of the
contractor's obligations under its performance bond. Release of the
security interest in support of a payment bond must comply with the
subparagraphs (a)(1) through (3) of this section. In making this
determination, the contracting officer will give consideration as to
whether the unreleased portion of the security is sufficient to cover
the remaining contract obligations, including payments to
subcontractors and other potential liabilities. The individual surety
shall, as a condition of the partial release, furnish an affidavit
agreeing that the release of such assets does not relieve the
individual surety of its obligations under the bond(s).
28.203-4 Solicitation provision and contract clause.
(a) Insert the provision at 52.228-17, Individual Surety--Pledge of
Assets (Bid Guarantee), in solicitations that require the submission of
a bid guarantee.
(b) Insert the clause at 52.228-11, Individual Surety--Pledge of
Assets, in solicitations and contracts that require the submission of
performance or payment bonds.
28.203-5 Exclusion of individual sureties.
(a) An individual may be excluded from acting as a surety on bonds
submitted by offerors on procurement by the executive branch of the
Federal Government, by the acquiring agency's head or designee
utilizing the procedures in subpart 9.4. The exclusion shall be for the
purpose of protecting the Government.
(b) An individual may be excluded for any of the following causes:
(1) Failure to fulfill the obligations under any bond.
(2) Failure to disclose all bond obligations.
(3) Misrepresentation of the value of available assets or
outstanding liabilities.
(4) Any false or misleading statement, signature or representation
on a bond or affidavit of individual suretyship.
(5) Any other cause affecting responsibility as a surety of such
serious and compelling nature as may be determined to warrant
exclusion.
(c) An individual surety excluded pursuant to this section shall be
entered as an exclusion in the System for Award Management (see 9.404).
(d) Contracting officers shall not accept the bonds of individual
sureties whose names appear in an active exclusion record in the System
for Award Management (see 9.404) unless the acquiring agency's head or
a designee states in writing the compelling reasons justifying
acceptance.
(e) An exclusion of an individual surety under this section will
also preclude such party from acting as a contractor in accordance with
subpart 9.4.
28.204 [Amended]
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7. Amend section 28.404 by removing from paragraph (b) ``lien in
28.203-5(c)'' and adding ``security in 28.203-3(c)'' in its place.
28.204-1 [Amended]
0
8. Amend section 28.204-1 by removing from the first sentence of the
text ``dated July 1, 1978''.
PART 32--CONTRACT FINANCING
32.202-4 [Amended]
0
9. Amend section 32.202-4 by removing from paragraph (c) ``28.203-2,
28.203-3, and'' and adding ``28.203 and'' in its place.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
0
10. Revise section 52.228-11 to read as follows:
52.228-11 Individual Surety--Pledge of Assets.
As prescribed in 28.203-4(b), insert the following clause:
Individual Surety--Pledge of Assets (Feb 2021)
(a) The Contractor shall obtain from each person acting as an
individual surety on a performance bond or a payment bond--
(1) A pledge of assets that meets the eligibility, valuation,
and security requirements described in the Federal Acquisition
Regulation (FAR) 28.203-1; and
(2) Standard Form 28, Affidavit of Individual Surety.
(b) The Contracting Officer may release a portion of the
security interest on the individual surety's assets based upon
substantial performance of the Contractor's obligations under its
performance bond. The security interest in support of a performance
bond shall be maintained--
(1) Contracts for the construction, alteration, or repair of any
public building or public work of the Federal Government exceeding
$150,000 (40 U.S.C. 3131). Until completion of any warranty period,
or for 1 year following final payment, whichever is later.
(2) Contracts subject to alternative payment protection (see FAR
28.102-1(b)(1)). For the full contract performance period plus 1
year.
(3) Other contracts not subject to the requirements of paragraph
(b)(1) of this clause. Until completion of any warranty period, or
for 90 days following final payment, whichever is later.
(c) A surety's assets pledged in support of a payment bond may
be released to a subcontractor or supplier upon Government receipt
of a Federal district court judgment, or a sworn statement by the
subcontractor or supplier that the claim is correct along with a
notarized authorization of the release by the surety stating that it
approves of such release. The security interest on the individual
surety's assets in support of a payment bond shall be maintained--
(1) Contracts for the construction, alteration, or repair of any
public building or public work of the Federal Government exceeding
$150,000 which require performance and payment bonds (40 U.S.C.
3131). For 1 year following final payment, or until resolution of
all pending claims filed against the payment bond during the 1-year
period following final payment, whichever is later.
(2) Contracts subject to alternative payment protection (see FAR
28.102-1(b)(1)). For the full contract performance period plus 1
year.
(3) Other contracts not subject to the requirements of paragraph
(c)(1) of this clause. For 90 days following final payment.
(d) The Contracting Officer may allow the Contractor to
substitute an individual surety, for a performance or payment bond,
after contract award. The Contractor shall comply with the
requirements of paragraph (a) of this clause within the timeframe
established by the Contracting Officer.
(End of clause)
[[Page 3687]]
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11. Add section 52.228-17 to read as follows:
52.228-17 Individual Surety--Pledge of Assets (Bid Guarantee).
As prescribed in 28.203-4(a), insert the following provision:
Individual Surety--Pledge of Assets (Bid Guarantee) (Feb 2021)
(a) Offerors shall obtain from each person acting as an
individual surety on a bid guarantee--
(1) A pledge of assets that meets the eligibility, valuation,
and security requirements described in the Federal Acquisition
Regulation (FAR) 28.203-1; and
(2) Standard Form 28, Affidavit of Individual Surety.
(b) The Offeror shall include with its offer the information
required at paragraph (a) of this provision within the timeframe
specified in the provision at FAR 52.228-1, Bid Guarantee, or as
otherwise established by the Contracting Officer.
(c) The Contracting Officer may release the security interest on
the individual surety's assets in support of a bid guarantee based
upon evidence that the offer supported by the individual surety will
not result in contract award.
(End of provision)
PART 53--FORMS
53.228 [Amended]
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12. Amend section 53.228 by--
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a. Removing from paragraph (e) ``(Rev. 6/2003)'' and ``28.203(b).)''
and adding ````(Rev. Feb 2021)'' and ``28.203-1(b)(3).)'' in their
places, respectively;
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b. Removing paragraph (o);
0
c. Redesignating paragraph (p) as paragraph (o); and
0
d. Removing from the newly redesignated paragraph (o) ``(See 28.106-
1(p) and 28.203-5(a).)'' and adding ``(See 28.106-1(o) and 28.203-
3(a).)'' in its place.
53.300 [Amended]
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13. Amend section 53.300 by removing from the table 53-1 in paragraph
(a) ``OF 90 Release of Lien on Real Property.''
[FR Doc. 2020-29088 Filed 1-13-21; 8:45 am]
BILLING CODE 6820-EP-P
