procurements. In its application to negotiated procurements, the terms "bid" and "invitations for bids" used in this subpart shall be construed to include their counterparts, i.e., "proposal" and "request for proposals", and the substitution of the latter terms whenever appropriate is authorized.

§ 1-10.102 Definitions.

As used in this subpart, the following terms have the meanings set forth in this § 1-10.102.

§ 1-10.102-1 Bond.

"Bond" means a written instrument executed by a bidder or contractor, identified in the instrument as the "principal", together with a third party, identified in the instrument as the "surety", to secure fulfillment by the bidder or contractor of his obligations as set out in the bond and, in the event of his failure so to do, to assure payment of any loss sustained by the party for whose protection the bond was furnished, to the extent provided in the bond.

§ 1-10.102-2 Bid guarantee.

"Bid guarantee" means a firm commitment, such as a bid bond, postal money order, certified check, cashier's check, irrevocable letter of credit, or certain bonds or notes of the United States, accompanying a bid as assurance that the bidder will, upon acceptance of his bid, execute such contractual documents as may be required, if any, and give bond(s) within the time specified after the forms are presented to him. § 1-10.102-3 Performance bond.

"Performance bond" means a bond executed in connection with a contract to secure fulfillment of all the contractor's obligations under such contract. § 1-10.102-4 Payment bond.

"Payment bond" means a bond executed in connection with a contract to assure payment as required by law of all persons supplying labor and material in the prosecution of the work provided for in the contract.

§ 1-10.102-5 Advance payment bond. "Advance payment bond" means a bond executed in connection with a contract to secure fulfillment of the contractor's obligations under an advance payments provision.

ance with his best judgment shall determine the amount, or percentage which when applied to the bid price will produce an amount, that will provide a bid guarantee which is adequate to protect the Government from loss in the event of termination of the contract for default as provided in § 1-10.103-3 (a) (2). The amount of the bid guarantee shall be not less than 20 percent of the bid price but shall not exceed $3,000,000.

(b) The penal sum of a bid bond may be expresed as a specified percentage of the bid price. In this fashion, the bid bond may be written by the surety before the bidder's final determination of his bid price. Where such penal sum is expressed as a percentage, a maximum dollar limitation may be stated.

§ 1-10.103-3 Invitation for bids provisions.

(a) Where a bid guarantee is required, the invitation for bids shall contain:

(1) A statement requiring that a bid guarantee be submitted with any bid in excess of $2,000 and containing such details as are necessary to enable bidders to determine the proper amount of bid guarantee to be submitted; and

(2) The following provision (modified, if appropriate, in accordance with paragraph (b) of this § 1-10.103-13.

BID GUARANTEE

Where a bid guarantee is required by the invitation for bids, failure to furnish a bid guarantee in the proper form and amount, by the time set for opening of bids, may be cause for rejection of the bid.

A bid guarantee shall be in the form of a firm commitment, such as a bid bond, postal money order, certified check, cashier's check, irrevocable letter of credit or, in accordance with Treasury Department regulations, certain bonds or notes of the United States. Bid guarantees, other than bid bonds, will be returned (a) to unsuccessful bidders as soon as practicable after the opening of bids, and (b) to the successful bidder upon execution of such further contractual documents and bonds as may be required by the bid as accepted.

If the successful bidder, upon acceptance of his bid by the Government within the period specified therein for acceptance (sixty days if no period is specified) fails to execute such further contractual documents, if any, and give such bond(s) as may be required by the terms of the bid as accepted within the time specified (ten days if no period is specified) after receipt of the forms by him, his contract may be terminated for default. In such event he shall be liable for any cost of procuring the work which exceeds the amount of his bid, and the bid guarantee

shall be available toward offsetting such difference.

(b) The provision set forth in paragraph (a) (2) of this § 1-10.103-3 is the same as paragraph 4 of Standard Form 22, Instructions to Bidders (Construction Contract), and the requirement of said paragraph (a) (2) is met where that form is furnished to bidders. Where Standard Form 22 is not furnished, the provision must be otherwise incorporated in the invitation for bids except that it may be modified to include the statement required by paragraph (a)(1) of this § 1-10.103-3 and if so modified, the initial phrase of the first paragraph of the provision may be omitted. With respect to contracts for supplies or services, the phrase "any cost of procuring the work" in the third paragraph also may be modified to refer to the cost of "supplies," "services," etc.

§ 1-10.103-4 Failure to submit proper bid guarantee.

Where an invitation for bids requires that a bid be supported by a bid guarantee and noncompliance occurs, the bid shall be rejected, except in the following situations when the noncompliance shall be waived unless there are compelling reasons contrary:

(a) Where only a single bid is received. In such cases however, the Government may or may not require the furnishing of the bid guarantee before award.

(b) Where the amount of the bid guarantee submitted, though less than the amount required by the invitation for bids, is equal to or greater than the difference between the price stated in the bid and the price stated in the next higher acceptable bid.

(c) Where the bid guarantee is received late and the late receipt may be waived under the rules established in § 1-2.303 for consideration of late bids. (d) Where a bid guarantee ceases to meet the requirements of paragraph (b) of this § 1-10.103-4 as a result of the correction of a mistake in bid under § 1-2.406.

§ 1-10.104 Performance bonds.

§ 1–10.104–1 Construction contracts.

(a) Pursuant to the Miller Act, as amended (40 U.S.C. 270a-270e), a performance bond shall be required in connection with any construction contract exceeding $2,000 in amount, except that this requirement may be waived (1) by

the contracting officer for so much of the work as is to be performed in a foreign country, if he finds that it is impracticable for the contractor to furnish such bond, and (2) as may be otherwise authorized by law.

(b) Generally, the penal amount of the performance bonds shall be equal to 100 percent of the contract price at the time of award. However, if the contracting officer finds that such a requirement would be disadvantageous to the Government, he may prescribe an amount which is less than 100 percent of the contract price (e.g., in a very large contract, available surety credit might be insufficient).

(c) Whenever the successful bidder is to furnish a performance bond, the invitation for bids shall so state and shall specify the penal amount required (in a fixed sum or in terms of a percent of the contract price).

(d) When a performance bond is not furnished within the period specified by the terms of the contract, the contract will be subject to termination for default when in the public interest (see §§ 1-10.103-3 (a) (2) and 1-8.603-3 (c)). (e) Whenever a contract is modified in a manner not provided for in any provision thereof, consent of surety shall be obtained (see § 1-10.205).

(f) In any case where a contract is modified, whether or not pursuant to a contractual provision, so as to increase the contract amount to such an extent that the penal sum of the existing bond becomes inadequate to protect the Government's interests, in the opinion of the contracting officer, additional performance bond protection shall be secured, either by increasing the penal sum of the existing bond or by obtaining an additional bond from a new surety.

§ 1-10.104-2 Other than construction

contracts.

(a) Except as provided in paragraphs (b) and (d) of this § 1-10.104-2, performance bonds shall not be required in connection with other than construction contracts.

(b) Performance bonds may be required where essential to the best interests of the Government. Determinations to require performance bonds shall be made by the contracting officer on individual procurements. Examples of situations which may warrant requiring a performance bond are:

(1) Where the terms of a proposed

contract provide for the contractor to have the use of Government property or funds for the performance of the contract or as partial compensation (as in retention of salvaged material).

(2) Where a Government contractor sells his assets to, or merges his business with, another firm and the Government determines to recognize the latter firm as the successor in interest to the contract, and desires assurance as to its financial capacity.

(3) Where substantial progress payments are made before delivery of end items commences.

(4) Where, in connection with a contract for dismantling, demolition, or removal of improvements, regardless of amount, a performance bond is determined necessary to ensure completion of the work and to protect the Government against damage to adjoining property during its performance.

(c) Where the contracting officer determines to require a performance bond, he shall determine the amount that will adequately protect the Government.

(d) Performance bonds shall not be required unless the invitation for bids requires such a bond, or the requirement of such a bond is in the interest of the Government (as in a contract modification).

(e) When a performance bond is not furnished within the period specified by the terms of the contract, the contract will be subject to termination for default when in the public interest (see §§ 1-10.103-3(a) (2) and 1-8.602-3(c)).

(f) Additional performance bond protection shall be required under the circumstances and in the manner set forth in § 1-10.104-1(f).

[29 F.R. 10247, July 24, 1964, as amended at 33 F.R. 14287, Sept. 21, 1968]

§ 1-10.104-3 Annual performance bonds.

Annual performance bonds may be used only in connection with contracts other than construction contracts. When such a bond is used and has been completely obligated in an amount equal to the penal sum thereof, an additional bond shall be obtained to cover additional contracts.

§ 1-10.105 Payment bonds.

§ 1-10.105-1 Construction contracts.

(a) Pursuant to the Miller Act, as amended (40 U.S.C. 270a-270e), a payment bond shall be required in connec

tion with any construction contract exceeding $2,000 in amount, except that this requirement may be waived (1) by the contracting officer for so much of the work as is to be performed in a foreign country, if he finds that it is impracticable for the contractor to furnish such bond, and (2) as may be otherwise authorized by law.

(b) The penal amount of the payment bond shall be as follows:

(1) When the contract price is not more than $1,000,000, the penal amount shall be 50 percent of the contract price;

(2) When the contract price is more than $1,000,000 but not more than $5,000,000, the penal amount shall be 40 percent of the contract price; and

(3) When the contract price is more than $5,000,000, the penal amount shall be $2,500,000.

(c) Whenever the successful bidder is to furnish a payment bond, the invitation for bids shall so state and shall specify the penal amount required (in a fixed sum or in terms of a percent of the contract price).

(d) When a payment bond is not furnished within the period specified by the terms of the contract, the contract will be subject to termination for default when in the public interest (see §§ 110.103-3 (a) (2) and 1-8.603-3).

(e) Whenever a contract is modified in a manner not provided for in any provision thereof, consent of surety shall be obtained (see § 1-10.205).

(f) In any case where a contract is modified, whether or not pursuant to a contractual provision, so as to increase the contract amount to such an extent that the penal sum of the existing bond becomes inadequate to protect the interests of persons furnishing labor and material, in the opinion of the contracting officer, additional payment bond protection shall be secured, either by increasing the penal sum of the existing bond or by obtaining an additional bond from a new surety.

a payment bond can generally be obtained without the payment of an additional premium.

(b) Subject to paragraph (a) of this § 1-10.105-2, a payment bond shall not be required unless the invitation for bids requires such a bond.

(c) Whenever a payment bond is required, the penal sum thereof shall be in an amount deemed adequate by the contracting officer.

§ 1-10.105–3

Furnishing information to subcontractors and suppliers. Where a payment bond has been provided, the contracting officer may furnish the name and address of the surety or sureties thereon to persons who have furnished, or have been requested to furnish, labor and/or material for use in the prosecution of the work required by the contract in question. In addition, the contracting officer may furnish to persons who satisfy him that they have provided labor and/or material, and have not received payment, additional general information on such matters as the progress of the work, payments, and the estimated percentage of completion. § 1-10.106 Advance payment bonds.

An advance payment bond may be required only in connection with a contract containing an advance payments provision, and then only if a performance bond has not been furnished. Whenever an advance payment bond is required, the contracting officer shall determine the amount necessary adequately to protect the Government.

§ 1-10.107 Patent infringement bonds.

Patent infringement bonds may be required only in connection with contracts containing provisions for patent indemnity, and then only if a performance bond has not been furnished and if the financial responsibility of the contractor is unknown or doubtful. Whenever a patent infringement bond is required, the contracting officer shall determine the amount necessary adequately to protect the Government.

§ 1-10.108 Other types of bonds.

Other types of bonds may be used only when, in the opinion of the head of the procuring activity concerned, such bonds are necessary or desirable in connection with the procurement of particular supplies or services (including construction).

§ 1-10.109 Execution and administra

tion of bonds.

The forms and provisions of bonds, and their preparation, execution and administration, shall be in accordance with the provisions of the Federal Procurement Regulations and with agency procedures (see §§ 1-16.801 and 1-16.901 for bonds forms).

Subpart 1-10.2-Sureties on Bonds § 1-10.201 General.

Every bond furnished in connection with the procurement of supplies or services (including construction) shall be supported by corporate or individual sureties or any of the types of security authorized to be deposited in lieu of surety by § 1-10.204. Invitations for bids or requests for proposals may not preclude bidders from offering any of the types of surety or security authorized to be furnished by this Subpart 1-10.2, unless otherwise authorized by law or regulation.

(a) In connection with contracts for supplies or services (including construction) to be delivered or performed in the United States, Puerto Rico, and the Virgin Islands, any corporate surety offered for a bond furnished the Government must appear on the list contained in Treasury Department Circular 570 and the amount of the bond must not be in excess of the underwriting limits stated in that list.

(b) In connection with contracts to be performed in the Canal Zone, corporate Panamanian surety companies which are acceptable on bonds required by the Panama Canal Company may be accepted in addition to the corporate sureties appearing on the Treasury List. The acceptability of Panamanian sureties shall be subject to the conditions and restrictions (including any requirement for security deposits) imposed by the Panama Canal Company.

(c) For contracts to be performed outside the United States, Puerto Rico, the Virgin Islands, and the Canal Zone, sureties not appearing on Treasury Department Circular 570 may be accepted if determined by the contracting officer to be in the best interest of the Government.

(d) Treasury Department Circular 570 may be obtained from the U.S. Treasury Department, Bureau of Accounts,

(a) It is the responsibility of the coutracting officer to determine the acceptability of individuals proposed as sureties on bonds. At least two individual sureties must execute the bond and the net worth of each individual must be not less than the penal amount of the bond. The number and amounts of other bonds upon which a proposed individual surety is bound, and the status of the contracts in connection with which such bonds were furnished, must be considered in determining the acceptability of the individual surety. (See also the instructions on the reverse of Standard Form 28, Affidavit of Individual Surety, FPR 1-16.901-28.)

(b) Each individual surety must execute and Affidavit of Individual Surety, Standard Form 28. The information thus provided is helpful in determining the net worth of proposed individual sureties.

(c) In order to ascertain the continuing acceptability of individual sureties, the official executing the Certificate of Sufficiency on the reverse of Standard Form 28 may be required to execute further certificates, as contemplated hy Instruction 5 on that form, with such frequency as the agency may deem necessary and appropriate. Further certificates indicating additional assets, or a new surety, may be required to assure protection of the Government's interest. [29 F.R. 10247, July 24, 1964, as amended at 31 F.R. 15093, Dec. 1, 1966]

§ 1-10.204 Options in lieu of sureties.

Any one or more of the types of security listed in this § 1-10.204 may be deposited by the contractor in lieu of furnishing corporate or individual sureties on bonds. Where any such type of security is deposited, a statement shall be incorporated in the bond form pledging such security, and the bond form shall be executed by the contractor as principal. Agencies shall establish such safeguards as may be necessary to protect againt loss of the security and shall return such security or its equivalent when, by its terms, the obligation of the bond has ceased.