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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. § 1-10.1024 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.

$ 1-10.102–6 Patent infringement

bond. "Patent infringement bond” means a bond executed in connection with a contract to secure fulfillment of the contractor's obligation under a patent clause. § 1-10.102–7 Construction contract.

“Construction contract” means any contract for construction, alteration, or repair as provided in $ $ 1-12.402–1 and 1-18.101–1. [33 F.R. 14287, Sept. 21, 1968] $ 1-10.102–8 Annual bid bond.

“Annual bid bond” means a single bond furnished by a bidder, in lieu of separate bid bonds, to serve as his bid guarantee in connection with bids submitted during a specific fiscal year of the Government. § 1-10.102–9 Annual performance

bond. "Annual performance bond” means a single bond furnished by a contractor, in lieu of separate performance bonds, to secure fulfillment of all of the contractor's obligations under contracts entered into during a specific fiscal year of the Government. § 1-10.102-10 Consent of surety.

“Consent of surety" means an acknowledgement by a surety that its bond given in connection with a contract continues to apply to the contract as modified. § 1-10.102-11 Penal sum or amount.

“Penal sum” or “penal amountmeans the amount specified in a bond (expressed in terms of dollars or, in the case of a bid bond, as a percentage of the bid price) as the maximum payment for which the surety is obligated. § 1-10.103 Bid guarantees. § 1-10.103–1 Policy on use.

(a) A bid guarantee may be required only when (1) the invitation for bids specifies that a contract must be supported by a performance bond or by performance and payment bonds, and (2) the bid exceeds $2,000 (see § 1-10.103–3 (a) (1)).

(b) Annual bid bonds are not acceptable in connection with bids for construction contracts. $ 1-10.103-2 Amount required.

(a) Whenever a bid guarantee is required, the contracting officer in accord

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 provi.

sions. (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. f 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. § 1-10.105–2 Other than construction

contracts. (a) Payment bonds generally shall not be required in connection with other than construction contracts and may be required only where the head of the procuring activity determines that such requirement is in the best interest of the Government. If a performance bond is required in connection with a contract,

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 Division of Deposits and Investments, tion of bonds.

Surety Bonds Branch, Washington, D.C. The forms and provisions of bonds,

20226. and their preparation, execution and ad § 1-10.203 Individual sureties. ministration, shall be in accordance with

(a) It is the responsibility of the couthe provisions of the Federal Procure

tracting officer to determine the accepment Regulations and with agency pro

tability of individuals proposed as surecedures (see $ $ 1-16.801 and 1-16.901 for

ties on bonds. At least two individual bonds forms).

sureties must execute the bond and the Subpart 1-10.2—Sureties on Bonds net worth of each individual must be not

less than the penal amount of the bond. § 1-10.201 General.

The number and amounts of other bonds Every bond furnished in connection upon which a proposed individual surety with the procurement of supplies or serv is bound, and the status of the contracts ices (including construction) shall be in connection with which such bonds supported by corporate or individual were furnished, must be considered in de. sureties or any of the types of security termining the acceptability of the indiauthorized to be deposited in lieu of vidual surety. (See also the instructions surety by $ 1-10.204. Invitations for bids on the reverse of Standard Form 28, or requests for proposals may not pre Affidavit of Individual Surety, FPR clude bidders from offering any of the

1-16.901-28.) types of surety or security authorized to

(b) Each individual surety must exbe furnished by this Subpart 1–10.2, un

ecute and Affidavit of Individual Surety, less otherwise authorized by law or regu

Standard Form 28. The information lation.

thus provided is helpful in determining § 1-10.202 Corporate sureties.

the net worth of proposed individual (a) In connection with contracts for sureties. supplies or services (including construc (c) In order to ascertain the continution) to be delivered or performed in the

ing acceptability of individual sureties, United States, Puerto Rico, and the Vir

the official executing the Certificate of gin Islands, any corporate surety offered

Sufficiency on the reverse of Standard for a bond furnished the Government

Form 28 may be required to execute must appear on the list contained in

further certificates, as contemplated hy Treasury Department Circular 570 and the amount of the bond must not be

Instruction 5 on that form, with such in excess of the underwriting limits frequency as the agency may decm necstated in that list.

essary and appropriate. Further cer(b) In connection with contracts to tificates indicating additional assets, or be performed in the Canal Zone, corpo a new surety, may be required to assure rate Panamanian surety companies protection of the Government's interest. which are acceptable on bonds required 129 F.R. 10247, July 24, 1964, as amended at by the Panama Canal Company may be 31 F.R. 15093, Dec. 1, 1966) accepted in addition to the corporate

§ 1-10.204 sureties appearing on the Treasury List.

Options in lieu of sureties. The acceptability of Panamanian sure Any one or more of the types of ties shall be subject to the conditions security listed in this § 1-10.204 may be and restrictions (including any require deposited by the contractor in lieu of ment for security deposits) imposed by

furnishing corporate or individual surethe Panama Canal Company.

ties on bonds. Where any such type of (c) For contracts to be performed out

security is deposited, a statement shall side the United States, Puerto Rico, the

be incorporated in the bond form pledgVirgin Islands, and the Canal Zone, sure

ing such security, and the bond form ties not appearing on Treasury Department Circular 570 may be accepted if shall be executed by the contractor as determined by the contracting officer to principal. Agencies shall establish such be in the best interest of the Govern safeguards as may be necessary to proment.

tect againt loss of the security and shall (d) Treasury Department Circular 570 return such security or its equivalent may be obtained from the U.S. Treas- when, by its terms, the obligation of the ury Department, Bureau of Accounts, bond has ceased.

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