1-10.500 1-10.501 1-10.502 1-10.502-1 1-10.502-2 1-10.502-3 1-10.502-4 1-10.502-5 1-10.503 1-10.504 Scope of subpart. Types of insurance. Workmen's compensation and Vessel collision liability and Government property AUTHORITY: The provisions of this Part 110 issued under sec. 205(c), 63 Stat. 390; 40 U.S.C. 486 (c). SOURCE: The provisions of this Part 1-10 appear at 29 F.R. 10247, July 24, 1964, unless otherwise noted. § 1-10.000 Scope of part. This part prescribes policies cedures with respect to the This subpart deals, primarily, with the use of bonds. It deals also, however, with the use of bid guarantees which, while most frequently in bond form, may take other forms. § 1-10.101 Applicability. This Subpart 1-10.1 is applicable both to negotiated and formally advertised 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. 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 docuents as may be required, if any, and pond(s) within the time specified he forms are presented to him. 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 amount" means 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)). "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 (b) Annual bid bonds are not acceptable in connection with bids for construction contracts. § 1-10.103-2 Amount required. ders to bid guar 2) T If appro graph ( Where guarantee the tir Cause for A bid g A com money ord mevocabl With Trea all bond Bild guara be return Och as pr (a) Whenever a bid guarantee is required, the contractor 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 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. Where such penal sum is expressed as a percentage, a maximum dollar limitation may be stated. § 1-10.103-3 sions. Invitation for bids provi the amoun shall be erence. (b) Th graph (a) Be as 22 Instru Contract) ратастары s furnish Form 22 (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 containin details as are necessary to € ders 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 Arm 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 al fied to refer to "services," etc be modi>plies," § 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 reIceived 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. (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). Title 41-Public Contracts, Property Managemen (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 pay ments 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 deter mined 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 modifica tion). (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 cir cumstances 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 addtional contracts. § 1-10.105 Payment bonds. (a) Pursuant to the Miller Act, as amended (40 U.S.C. 270a-270e), a payment 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) 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 requirements 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 he 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 administration of bonds. The forms and provisions of bonds, and their preparation, execution and ad |