PART 10 BONDS AND INSURANCE Subpart 1-Bonds 10.000 Scope of Part. This Part sets forth policies and procedures with respect to bonds and insurance in connection with NASA contracts. 10.100 Scope of Subpart. This Subpart deals, primarily, with the use of bonds. It deals also with the use of bid guarantees which while most frequently in bond form, may take other forms of security. 10.101 Definitions. As used in this Subpart, the following terms have the meanings set forth below. 10.101-1 Advance payment bond means a bond which secures the performance and the fulfillment of a contractual provision for the making of advance payments. 10.101-2 Annual bid bond means a single bond (in lieu of separate bid bonds for each contract), without limitation as to penal amount, which secures all bids (on other than construction contracts) requiring bonds submitted by a contractor during a specific fiscal year of the Government in response to formal advertising. 10.101-3 Annual performance bond means a single bond (in lieu of separate performance bonds for each contract) which secures the performance of contracts (other than construction contracts) which require bonds and are entered into by a contractor during a specific fiscal year of the Government. Such bonds may be in different forms, including the following three: the first providing for penal sums separately applicable to each covered contract, regardless of the total amount of covered contracts; the second providing a gross penal sum cumulatively applicable to the total amount of all covered contracts but without a separate limit applicable to each contract; and the third providing both, separate contract and cumulative limits. 10.101-4 Bid guarantee means a form of security accompanying a bid or proposal as assurance that the bidder (i) will not withdraw his bid within the period specified therein for acceptance, and (ii) will execute a written contract and furnish such bonds as may be required within the period specified in the bid (unless a longer period is allowed) after receipt of the specified forms. 10.101-5 Consent of surety means an acknowledgment by a surety that its bond given in connection with a contract continues to apply to the contract as modified. 10.101-6 Construction contract or subcontract means any contract or subcontract for the construction, alteration or repair of buildings, bridges, roads, or other kinds of real property. It does not include any contract or subcontract for the manufacturing, producing, furnishing, construction, alteration, repair, processing, or assembling of vessels, aircraft, or other kinds of personal property, regardless of the terms of any such contract or subcontract as to payment or title. 10.101-7 Fidelity bond means a bond which secures an employer up to an amount stated in the bond for losses caused by dishonesty on the part of an employee. A blanket fidelity bond covers all employees, except those expressly excluded by written endorsement on the bond. 10.101-8 Forgery bond or policy (Depositors Form) means a bond or policy which secures the person or persons named therein up to the amount stated for losses caused by the forging or altering of a check, draft, or similar instrument issued by or purporting to have been issued by any of the insureds, and for losses resulting from a check or draft having been obtained from the insureds through impersonation. 10.101-9 Patent infringement bond means a bond which secures the performance and fulfillment of the undertakings contained in a patent clause. 10.101-10 Payment bond means a bond which is executed in connection with a contract and which secures the payment of all persons supplying labor and material in the prosecution of the work provided for in the contract. 10.101-11 Penal sum or amount means the dollar amount shown in a bond and represents the maximum payment for which the surety is obligated. 10.101-12 Performance bond means a bond which is executed in connection with a contract and which secures the performance and fulfillment of all the undertakings, covenants, terms, conditions, and agreements contained in the contract. NASA PROCUREMENT REGULATION 10.101-12 BONDS ANI INSURANCE 10.102 Bid Guarantees. 10.102-1 Applicability. This paragraph 10.102 applies to both negotiated and formally advertised procurements. Where appropriate, the term “bid" includes “proposal." 10.102-2 Limitations. Bid guarantees shall not be required unless the solicitation specifies that the contract must be supported by a performance bond or performance and payment bonds. In connection with supply and services contracts, the bidder may furnish either an individual bid bond (Standard Form 24) or an annual bid bond (Standard Form 34). A bid guarantee will not be requested unless the bid exceeds $2,000 (see 10.102-4(a)(i)). In connection with construction contracts, only the individual bid bond will be accepted. 10.102-3 Amount Required. (a) Whenever a bid guarantee is deemed necessary, the contracting officer shall determine the percentage (or amount) which in his best judgment, when applied to the bid price, will produce a bid guarantee amount adequate to protect the Government from loss should the successful bidder fail to execute such further contractual documents and bonds as may be required. The percentage determined shall be not less than 20 percent of the bid price except that the maximum amount required shall be $3,000,000. (b) The penal sum of a bid bond may be expressed 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. 10.102-4 Solicitation Provisions. (a) Where a bid guarantee is determined to be necessary, the solicitation shall contain (i) 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 (ii) the following provision: BID GUARANTEE (JUNE 1972) 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 requirement for the provision in (a) (ii) above is met where Standard Form 22 (Instructions to Bidders (Construction Contracts)) is used in accordance with 16.401-1(vi) and 16.401-3. (c) The Provision required by (a) (ii) above may be appropriately modified in negotiated contracts. 10.102-5 Noncompliance With Bid Guarantee Requirements. Where a solicitation requires that bids be supported by a bid guarantee, noncompliance with such requirement will require rejection of the bid, except that rejection of the bid is not required in these situations: (i) where only a single bid is received (in such cases the procurement office may or may not require the furnishing of the bid guarantee before award); (ii) 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; (iii) where the amount of the bid guarantee submitted, though less than the amount required by the invitation for bids in relation to the bid price for the maximum quantity bid upon, is sufficient in relation to the bid price for a quantity for which the bidder is otherwise eligible for award (and in that event any award to him shall be limited to the quantity covered by the bid guarantee); 10.102 CFR TITLE 41 CHAPTER 18 BONDS (iv) where the bid guarantee is received late and the late receipt may be waived under the rules established in 2.303 for consideration of late bids; (v) where an otherwise adequate bid guarantee becomes inadequate as a result of the correction of a mistake in bid under 2.406 if the bidder will increase the amount of the bid guarantee in proportion to the authorized bid correction, and (vi) where a telegraphic modification of the bid is received without a corresponding modification of the bid guarantee, provided the bid modification expressly refers to the bid previously submitted in response to the invitation for bids and the bid guarantee satisfies the above criteria. 10.103 Performance and Payment Bonds for Construction Contracts. 10.103-1 Performance Bonds. (a) Pursuant to the Miller Act, as amended (40 U.S.C. 270a-270e), in connection with any construction contract exceeding $25,000 in amount except as provided in 10.103-3 below, a performance bond shall be required in a penal amount deemed adequate by the contracting officer for the protection of the Government. Generally, the penal amount of each performance bond shall be 100 percent of the contract price at the time of award. But where the contracting officer finds that to require a 100 percent performance bond would be disadvantageous to the Government, he may prescribe a lesser penal amount, which should normally be not less than 50% of the original contract price, and in all cases no less than the amount of the payment bond. The performance bond shall specifically provide coverage for taxes imposed by the United States which are collected, deducted, or withheld from wages paid by the contractor in carrying out the contract with respect to which such bond is furnished. (b) Additional performance bond protection shall be required in connection with any modification effecting an increase in price under any contract for which a bond is required pursuant to (a) above if: (i) the modification is for new or additional work which is beyond the scope of the existing contract; or (ii) the modification is pursuant to an existing provision of the contract and is expected to increase the contract price by $50,000 or 25 percent of the basic contract price, whichever is less. The penal amount of the bond protection should generally be increased so that the total performance bond protection is 100 percent of the contract price as revised by (i) the modification requiring such additional protection, and (ii) the aggregate of any previous modifications; provided, that lesser penal amounts may be authorized by the contracting officer as indicated in (a) above. The increased penal amount may be secured either by increasing the bond protection provided by the existing surety or sureties (the format set forth in 10.111-1 may be used when an additional bond is obtained from the original surety), or by obtaining an additional performance bond from a new surety; but see 10.111-2 with respect to requiring consent of surety. (c) In making allowance for bond premium in equitable adjustments or other price modifications affecting contracts, the allowance shall not be more than that calculated at the rate paid for the bonds furnished under the original contracts. 10.103-2 Payment Bonds. (a) Pursuant to the Miller Act, as amended (40 U.S.C. 270a-270e), in connection with any construction contract exceeding $25,000 in amount, except as provided in 10.103-3, a payment bond shall be required in a penal amount as follows: (i) when the contract price is not more than $1,000,000, the penal sum shall be 50 percent of the contract price; (ii) when the contract price is more than $1,000,000 but not more than $5,000,000, the penal sum shall be 40 percent of the contract price; and (iii) when the contract price is more than $5,000,000, the penal sum shall be $2,500,000. (b) Additional payment bond protection shall be required in connection with any modification effecting an increase in price under any contract for which a bond is required pursuant to (a) above if (i) the modification is for new or additional work which is beyond the scope of the existing contract; or (ii) the modification is pursuant to an existing provision of the contract and is expected to increase the contract price by $50,000 or 25 percent of the basic contract price, whichever is less. NASA PROCUREMENT REGULATION 10.103-2 BONDS AND INSURANCE The penal amount of the additional bond protection should generally be such that the total payment bond protection is 50 percent of the contract price as revised by (i) the modification requiring such additional protection, and (ii) the aggregate of any previous modifications; provided, that when the contract price as so revised is more than $1,000,000 but not more than $5,000,000 the total payment bond protection shall be in a penal amount of 40 percent of the revised contract price; provided further, that when the contract price as so revised is more than $5,000,000, the total payment bond protection shall be in the penal amount of $2,500,000. The additional protection may be secured either by increasing the bond protection provided by the existing surety or sureties or by obtaining an additional payment bond from a new surety; but see 10.111-2 with respect to requiring consent of surety. (c) In making allowance for bond premium in equitable adjustments or other price modifications affecting any contract, the allowance shall not be more than that calculated at the rate paid for the bonds furnished under the original contract. 10.103-3 Waiver of Performance and Payment Bonds. The contracting officer may waive the requirement for a performance and payment bond for that work under the contract which is to be performed in a foreign country provided he finds it impracticable for the contractor to furnish such bonds. However, the authority available to the Military Departments pursuant to 40 U.S.C. 270e to waive performance and payment bonds under the Miller Act in cost-reimbursement type contracts is not available to NASA. 10.103–4 Furnishing Information to Subcontractors and Suppliers. (a) It is NASA policy to furnish subcontractors or suppliers only general information with respect to the status of work and of payments made to prime contractors. Accordingly, subcontractors and suppliers may be furnished general information on such matters as the progress of the work, the accomplishment of payments as of certain dates, and the estimated percentage of completion. (b) Where a payment bond has been required, a subcontractor or supplier, after satisfying the contracting officer that he is a bona fide subcontractor or supplier and stating that he has not been paid for work performed or supplies delivered, may be furnished the name and address of the surety furnishing the required bonds on the contract in question. The Government will not withhold contract payments due to the contractor or his assignee for the reason that subcontractors or suppliers have not been paid for work performed or supplies delivered. 10.103-5 Requirements and Indefinite Quantity Contracts. In requirements type contracts, for purpose of determination of the penal sum of bonds, the contract price will be deemed to be the price payable for the estimated quanity. In indefinite quantity contracts, the contract price will be deemed to be the price payable for the specified minimum quanity. When such estimated or minimum quantities are exceeded, 10.103–1(b) and 10.103–2(b) will be applied. 10.103-6 Construction Subcontracts. NASA prime contractors who in the course of their contract performance, will acquire by subcontract construction work determined by NASA to be public work subject to the Miller Act, but who are not required under 10.103 to furnish Miller Act bonds, shall be required to obtain such performance and payment bonds from their construction subcontractors. The bonds shall be provided on Standard Forms 25 and 25A (modified to name the NASA prime contractor as well as the United States of America as obligees), or on other forms acceptable to the NASA General Counsel. The penal amount of such bonds shall be established by the contracting officer in accordance with the provisions of 10.103. 10.104 Performance and Payment Bonds for Contracts Other Than Construction Contracts. 10.104-1 General. (a) Generally, performance and payment bonds shall not be required in connection with contracts other than construction contracts, except as provided in 10.104-2, 10.104-3 and 10.1036. (b) Standard Form 25 (Performance Bond), Standard Form 35 (Annual Performance Bond), and the NASA version of DD Form 1673 (Payment Bond for Other Than Construction Contracts) are authorized for use for other than construction contracts. Payment bonds for other than construction contracts shall not be executed on Standard Form 25-A. (c) With respect to performance and payment bonds required for construction subcontracts under prime contracts other than for construction, see 10.103-6. 10.103-3 CFR TITLE 41 CHAPTER 18 |