§ 10.103-3 Waiver of performance and payment bonds.

(a) The requirement of a performance and payment bond has been waived for all cost-reimbursement type construction contracts. In unusual circumstances, either or both bonds may be required of a prime contractor, subject to approval by the head of the procuring activity. Contracting officers shall, however, require a cost-reimbursement type prime contractor to obtain performance and payment bonds for any fixed-price construction subcontract exceeding $2,000 in accordance with § 10.104–1(b).

(b) A contracting officer may waive the requirement for performance and payment bonds for so much of the work under a contract as is to be performed in a foreign country, provided he finds that it is impracticable for the contractor to furnish such bonds.

[29 F.R. 6934, May 27, 1964, as amended at 33 F.R. 19922, Dec. 28, 1968]

§ 10.103-4 Furnishing information to subcontractors and suppliers.

(a) It is Department of Defense 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. [30 F.R. 12006, Sept. 21, 1965]

deemed to be the price payable for the specified minimum quantity. When such estimated or minimum quantities are exceeded, §§ 10.103-1(b) and 10.103-2(b) will be applied.

[36 F.R. 21153, Nov. 4, 1971]

§ 10.104

Performance and payment bonds for contracts other than construction contracts.

[29 F.R. 6934, May 27, 1964]

§ 10.104-1 General.

(a) Under section 270e of the Miller Act (40 U.S.C. 270e) the provisions of the Act have been waived for any supply contracts covered by sections a-d of the Act (40 U.S.C. 270a-d). Bonds required pursuant to this section are bonds required pursuant to 10 U.S.C. 2381 or other general contracting authority of the Department of Defense, and not pursuant to the Miller Act.

(b) Generally, performance and payment bonds shall not be required in connection with contracts other than construction contracts, other than as provided in §§ 10.104-2 and 10.104-3, except that for any fixed-price construction subcontract exceeding $2,000, a prime contractor who has not been required to furnish a payment bond shall be required to obtain a payment bond from his subcontractor, in favor of the prime contractor, in an amount sufficient to assure payment of suppliers of labor and materials. In such a case, a performance bond in an equal amount should also be obtained if available at no additional cost.

(c) Standard Form 25 (Performance Bond), Standard Form 35 (Annual Performance Bond) and 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.

(d) Subcontract bonds shall not be executed on Standard Forms 25 and 25-A or on DD Form 1673. The forms set forth in § 16.805 (h) and (i) of this chapter are authorized and may be adapted to fit specific cases.

(e) Performance and payment bonds shall not be required unless the solicitation requires such bonds, or the requirement of such bonds is in the interest of the Government, and not prejudicial to other bidders or offerors. Where the solicitation requires such bonds, they shall not be waived except in the case of

an otherwise acceptable bidder or offeror where such waiver will be favorable to the Government and the contract price will be reduced.

(f) When the requirement for performance and payment bonds is made by the terms of a contract, but the bonds are not furnished by the contractor within the time specified, the contracting officer shall notify the contractor that the contract will be terminated for default if the bonds are not furnished within the time specified in the contract clause providing for such termination (§ 8.707 of this chapter, clause paragraph (a) (ii) ).

(g) Where a bid guarantee is not required and a performance or payment bond is required as a condition precedent to the formation of the contract, but is not furnished within the time specified, the contracting officer shall, if the making of the award can be delayed without prejudice to other bidders, notify the bidder that if the bond is not furnished within 10 days (or such other period as the contracting officer may specify) after receipt of the notice, his bid will not be considered for award.

(h) When a contractor supports a contract with an annual performance bond, in a cumulative penal sum, the contracting officer shall notify the office to which the contractor has furnished such bond so that the amount of coverage required may be recorded against the penal sum of the bond.

(i) Requirements for additional bond or consent of surety in connection with contract modifications are prescribed in § 10.111.

[34 F.R. 13844, Aug. 29, 1969]

(a) Performance bonds shall not be used as a substitute for determinations of contractor responsibility as required by Subpart I, Part 1 of this chapter. Subject to this general policy, performance bonds may be required in individual procurements when, consistent with the following criteria, the contracting officer determines the need therefor. Justification for any such requirement must be fully documented.

(1) Where the terms of the contract provide for the contractor to have the use of Government material, property or funds and further provide for the handling thereof by the contractor in a specified manner, a performance bond shall be required if needed to protect the Government's interest's therein.

(2) Where the circumstances applicable to a particular procurement are such that for financial reasons a performance bond is necessary to protect the interests of the Government, a performance bond shall be required. (See for example, § 26.402(c) (3) of this chapter.)

(b) Subject to the general policy stated in paragraph (a) of this section, determinations that performance bonds will be required in specified classes of cases (e.g., for particular types of supplies or services) may be made (1) for the Army, by the Director and Deputy Director of Requirements and Procurement, Army Materiel Command, and by all heads of procuring activities not subordinate to that command; (2) for the Navy, by the Chief of Naval Material; (3) for the Air Force, by the Deputy Chief of Staff, Systems and Logistics; (4) for the Defense Supply Agency, by the Executive Director, Procurement and Production; and (5) for the Defense Atomic Support Agency, by the Director. A copy of each such determination covering a class of cases shall be forwarded to the Office of Assistant Secretary of Defense (Installations and Logistics) for information.

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

[29 F.R. 6935, May 27, 1964, as amended at 34 F.R. 13844, Aug. 29, 1969; 36 F.R. 7948, Apr. 28, 1971]

§ 10.105-3 Fidelity and forgery bonds.

(a) Fidelity and forgery bonds are not generally required in any procurement. However, in connection with cost-reimbursement contracts for supplies, construction, or for operation of Government-owned plants, such bonds may be required when necessary for the protection of the Government or the contractor, or when it is considered desirable to obtain the investigative and claims services of a surety company. Approval for requiring these bonds shall be obtained, (1) for the Army, by the Head of a Procuring Activity; (2) for the Navy, by the Chief of Naval Material (MAT-024); (3) for the Air Force, by the Air Force Logistics Command (MCPC); and (4) for the Defense Supply Agency, by the Head of a Procuring Activity.

(b) When a fidelity bond is required, a Primary Commercial Blanket Bond or a Blanket Position Bond in the penal sum of $10,000 will ordinarily be considered adequate. The Surety Association of America's standard bond form, or its equivalent, shall be used. When blanket fidelity insurance is purchased, carriers will be cautioned to apply all appropriate discounts.

The

(c) When a forgery bond or policy is required, a penal sum of $10,000 will ordinarily be considered sufficient. Surety Association of America's standard depositors form of forgery bond or policy, or its equivalent, shall be used.

(d) Unless included as part of the bond form, the following provisions shall be included as riders or endorsements to fidelity and to forgery bonds or policies:

(1) A pro rata refund of the premium will be made in the event of cancellation by the insureds due to completion of the work under the contract;

(2) The contracting officer will be given notice prior to cancelling or making any material change in the bond;

(3) After a loss has been sustained, the full amount of the bond shall be restored without additional premium charge to protect against undiscovered or future losses;

(4) The surety waives all rights to be subrogated, on payments of losses or otherwise, on any claim against the Government arising out of performance of a cost-reimbursement type contract; and

(5) In fidelity bonds only, the surety shall investigate all Class A employees as reported by the contractor and shall investigate all claims.

[30 F.R. 12006, Sept. 21, 1965, as amended at 82 F.R. 537, Jan. 18, 1967]

§ 10.105-4 Other types of bonds.

Other types of bonds may be required only when the contracting officer considers such bonds necessary in connection with the procurement of particular supplies or services and then only after approval is obtained, (a) for the Army, by the Head of the Procuring Activity, and (b) for the Navy, Air Force, and Defense Supply Agency, by the authority identified in § 10.105-3(a).

[30 F.R. 12007, Sept. 21, 1965]

§ 10.110 Substitution of surety bonds.

A new surety bond may be substituted for a bond previously approved covering part or all of the same obligation when approved, (a) for the Army, by The Judge Advocate General; (b) for the Navy, by the Chief of Naval Material (MAT-024); (c) for the Air Force, by the Air Force Logistics Command (MCJC); and (d) for the Defense Supply Agency, by the Head of a Procuring Activity. When so approved and authorized by the Army, Navy or Defense Supply Agency the principal and surety of the original bond will be notified that the original bond will not be considered as security for any default occurring after the date of acceptance of the new bond. When approved by the Air Force, authority to relieve an original surety of liability for default occurring subsequent to the date of approval of a substitute bond will be obtained from the Commander, Air Force Logistics Command, prior to giving such notification.

[30 F.R. 14897, Dec. 2, 1965, as amended at 32 F.R. 537, Jan. 18, 1967]

§ 10.111 Additional bond and increase of penalty.

[30 F.R. 12007, Sept. 21, 1965]

§ 10.111-1 Additional bond.

Requirements for additional bond resulting from changes or modifications to construction contracts are prescribed by §§ 10.103-1(b) and 10.103-2(b). If a contract, other than a construction contract, for which a performance or payment bond has been executed is increased in price or modified to cover new or additional work, the contracting officer shall decide whether additional bond should be required in order to protect the interest of the Government adequately (the criteria of §§ 10.104-1 and 10.104-2 may be used as a general guide for this purpose). The following form of Consent of Surety and Increase of Penalty is authorized for

The following consent of surety shall be obtained from the surety or sureties on existing bonds in connection with any amendment, modification or supplemental agreement if:

(a) Additional bond is obtained from other than the original surety;

(b) No additional bond is required and (1) the modification is for new or additional work beyond the scope of the contract, or (2) the modification does not enlarge or diminish the scope of the contract, but changes the contract price (upward or downward) by more than $25,000 or 10 percent of the contract price; or

(c) Consent of surety is required in connection with a novation agreement see § 26.402(b) (10) of this chapter).

If there is more than one surety on the bond or bonds, the cosureties may either execute a separate consent in the form here prescribed, or they may join in executing a single such consent using the words in brackets and adding additional executions of sureties similar to that set forth in the form.

bond form (Standard Form 25 or 25A, as appropriate).

[30 F.R. 12007, Sept. 21, 1965]

§ 10.112 Execution and administration of bonds and consents of surety.

(a) Execution. Several prescribed forms for bonds and related documents are listed in § 16.805 of this chapter. Bonds and related documents executed on such forms shall comply with the instructions accompanying each form. The IFB or RFP may provide for execution and submission of more than one copy if desired. When required by Instruction Number 2 of the standard bond forms, the evidence of authority of a principal's representatives shall be a duly executed power of attorney reciting that the individual executing the bond or consent of surety is authorized to do so. A corporation, in lieu of such power of attorney, may submit a "Certificate as to Corporate Principal" in the format prescribed in paragraph (c) of this section. (b) Administration. All bonds will be reviewed by the contracting officer to ascertain that the bond is in the penal sum required and, when appropriate, properly describes the contract. Additional review, approval, and distribution of bonds and consents of surety will be accomplished by each military department. When a contractor is performing his contract in such a manner as to lead to default, timely notification to the surety may result in action by the surety that will avoid a default. Therefore, on all such contracts, the surety shall be promptly notified of any failure by the contractor to perform (see § 8.602-4(a)).

(c) Certificate as to corporate principal. When a Certificate As To Corporate Principal is to be furnished, the following format shall be used.