all contractual documents as may be required and has submitted as acceptable performance bond or performance and payment bonds, if required.

(c) When a performance or payment bond or acceptable alternate is not furnished within the period specified by the terms of the contract, the contract may be terminated for default. (See FAR Subpart 49.4.)

(d) A surety is legally liable in the event the contractor fails to fulfill contractual obligations. To avoid the possibility of releasing a surety from liability for a contractor's default, it is necessary to furnish the surety with a copy of any notice sent to the contractor in addition to the default letter. When the Government terminates a contract for default, it is entitled to recover the excess costs involved in having the work completed. The surety must be advised of the default; they may elect to fulfill their obligations by obtaining another contractor to perform the balance of the contract work or they may reimburse the Government for any excess costs the Government incurs.

(e) A performance or payment guarantee, other than corporate or individual sureties, shall be returned to the contractor upon completing the obligations for which the guarantee was submitted.

Subpart 528.2-Sureties

528.200 Scope of subpart.

This subpart supplements FAR Subpart 28.2, Sureties, and sets forth additional guidance on the requirements applicable to bonds furnished.

528.202 Acceptable sureties.

528.202-1 Corporate sureties.

(a) The current edition of Treasury Department Circular 570 shall be prominently displayed in bid opening rooms, in GSA Business Service Centers, and in all places where bid forms and information are regularly available. Copies should be made available to officials having a need to know.

(b) Corporate surety bonds must be manually signed by the Attorney-inFact or officer of the surety company. The corporate seal of the surety com

pany should be affixed. Failure of the surety to affix the seal may be waived as a minor informality. (See B-184120, July 2, 1975, 75-2 CPD 9.) Copies of the powers of attorney from the surety company authorizing the Attorney-in-Fact to excute bonds may be requested by the contracting officer.

(c) Where an invitation for bid requires a bid be supported by a bid guarantee and an unacceptable corporate surety is submitted in fulfillment of the requirement, the bid shall be rejected as nonresponsive. A bidder shall not be permitted to substitute an acceptable surety after bid opening. (See B-198687, May 23, 1980, 80-1 CPD 360.)

(d) A contractor submitting a performance or payment bond executed by an unacceptable corporate surety in satisfaction of a performance or payment bond requirement may be permitted to substitute an acceptable surety for a surety previously determined to be unacceptable.

(a) In addition to the requirements of FAR 28.202-2, the following criteria shall be considered when making determinations regarding the acceptability of individual sureties:

(1) If Standard Form 28, Affidavit of Individual Surety (SF 28) is not executed by each individual surety and submitted with the offer, the contracting officer must request a SF 28. The SF 28 shall be reviewed to ascertain the net worth of the proposed individual surety. (See Block 7, line g, of SF 28.) However, the contracting officer should consider all relevant information furnished by the surety on SF 28 and make an independent determination of the surety's net worth based upon the contracting officer's best judgment.

to arrive at a realistic net worth. Alternatively, the contracting officer may deduct nothing or only a portion of the amount entered in Block 10 based upon the degree of completion of the contracts on which the bonds were provided.

(b) If the contracting officer is unable to make a determination of net worth from the SF 28, the individual surety shall be required to furnish additional information. Generally, supplementary information shall not be required unless the SF 28 is incomplete or improperly filled out or unless the contracting officer has reason to believe the surety's statement on the SF 28 does not reflect the true net worth.

(c) If the contracting officer determines that either surety's net worth is not equal to the penal amount of the bond, the bid of the firm utilizing the sureties shall be rejected as non-responsible. A finding of bidder nonresponsibility pursuant to FAR 9.105-2, based on unacceptability of an individual surety need not be referred to the Small Business Administration for a competency review. (See 61 Comp. Gen. 456 (1982).)

(d) Under certain circumstances, such as when there is a record indicating a continuing pattern among certain individual sureties not to disclose outstanding bond obligations, the offeror's sureties may be rejected as unacceptable. (See 61 Comp. Gen. 592 (1982).)

(e) In a sealed bid procurement an offeror submitting a bid guarantee executed by an unacceptable surety may not substitute an acceptable individual surety after bid opening. This holds even though the surety's acceptability is a matter of bidder responsibility. (See 61 Comp. Gen. 456 (1982).) When a negotiated procurement is involved, such a deficiency may be remedied by the offeror in a revised proposal.

(f) Any individual surety executing a bond furnished GSA cannot have been excluded from acting as an individual surety by the Assistant Administrator for Acquisition Policy. (See 528.270.) Any bid submitted in response to an invitation for bid which is accompanied by a bid guarantee backed by an individual surety who has been ex

cluded shall be rejected as nonresponsive. When a negotiated procurement is involved, such a deficiency may be remedied by the offeror in a revised proposal.

(g) A contractor submitting an unac ceptable individual surety in satisfaction of a performance or payment bond requirement may be permitted to substitute an acceptable surety for a surety previously determined to be unacceptable.

[49 FR 10850, Mar. 22, 1984, as amended at 50 FR 10056, Mar. 13, 1985]

528.202-70 Acceptability of bonds and sureties.

(a) Every bond furnished in connection with a procurement must be supported by corporate or individual sureties or by other acceptable security such as postal money orders, certified check, cashiers's check or in accordance with Treasury Department regulations, certain bonds or notes of the United States. An irrevocable letter of credit may be accepted only in connection with a bid guarantee. Upon receipt of a required bond, the contracting officer shall ascertain the acceptability of the surety.

(b) When determining the acceptability of a bond, if there is a question of validity, the contracting officer shall seek the advice of legal counsel. The contracting officer shall check the current Treasury Department circular 570 to determine acceptability.

(c) When a contracting officer has verified the acceptability of the surety on a bond, he shall so certify by placing the words "Acceptability of Bond Verified," with his signature immediately thereunder, on the bond or on a properly identified attachment. The bond shall be retained with the original of the contract. The contracting officer shall notify the contractor that the bond(s) has been accepted.

(d) Any contracting officer who becomes aware of circumstances which may serve as the basis for exclusion of an individual from acting as an individual surety on bonds submitted by offerors on GSA procurements shall refer those circumstances to the Assistant Administrator for Acquisition Policy through appropriate channels

for consideration of exclusion action. (See 528.270.) However, circumstances that involve possible criminal or fraudulent activities shall first be reported to the Assistant Inspector General for Investigations in the Central Office or to the appropriate regional Inspector General for Investigations; the Office of Inspector General may conduct an investigation and when appropriate report such apparent or suspected violations to the Assistant Administrator. Referrals for consideration of exclusion action as a minimum should include:

(1) The basis for exclusion (see 528.270(b));

(2) A statement of facts;

(3) Copies of supporting documentary evidence;

(4) The individual's name and current or last known home and/or business addresses including zip codes;

(5) A statement of GSA's history with such individuals, if any; and

(6) A statement concerning any known active or potential criminal investigations or court proceedings.

[49 FR 10850, Mar. 22, 1984, as amended at 50 FR 10056, Mar. 13, 1985]

528.202-71 Assets pledged to support bonds.

(a) When bid guarantees, performance and/or payment bonds are required, the solicitation clauses at 552.228-70, 552.228-71, 552.228-72, and 552.228-73 may be expanded at the contracting officer's discretion to inIclude the clause at 552.228-74, Pledges of Assets, requiring offerors to obtain pledges of assets from individual sureties identified in their offers, e.g., a recordable Covenant Not To Encumber or Convey Real Estate and/or commercial or government securities placed in escrow accounts in accordance with 528.203.

(b) The following format or any document substantially the same, may be attached when a surety pledges real estate on Standard Form 28, Affidavit of Individual Surety.

COVENANT NOT TO ENCUMBER OR CONVEY
REAL ESTATE

I/we covenant and agree that so long as I/ we shall be obligated as an individual surety on solicitation/contract No. GS-- in the

528.203 Options in lieu of sureties.

Security deposited in lieu of corporate or individual sureties on bonds shall be placed in the custody of a bonded collection officer immediately after they are received except that United States bonds or notes received in the District of Columbia shall be deposited with the Treasurer of the United States as provided in FAR 28.230-1. The contracting officer shall arrange for the return of such security, or its equivalent, to the contractor when he has fulfilled all of the obligations secured by the bond in connection with which the security was deposited.

528.270 Exclusion of individual sureties.

(a) The Assistant Administrator for Acquisition Policy may exclude an individual from acting as an individual surety on bonds submitted by offerors on GSA procurements. This exclusion shall be for the purpose of protecting the Government.

(b) An individual may be excluded for any of the following causes:

(1) Failure to fulfill his/her obligation under a bond.

(2) Willful failure to disclose other bond obligations.

(3) Misrepresentation of available assets.

(4) Any other cause affecting responsibility as a surety of such serious and compelling nature as may be determined by the Assistant Administrator to warrant exclusion.

(c) Exclusion of an individual shall continue until revoked by the Assistant Administrator. An exclusion shall only be revoked upon the submission of an application, supported by documentary evidence of changed circumstances or of the elimination of the causes for which the exclusion was imposed.

(d) Prior to excluding an individual, the Assistant Administrator shall furnish the individual with a written notice stating the exclusion is being considered, setting forth the reasons for the proposed exclusion, and indicating that the individual may submit, within 30 calendar days, information in writing to explain why the exclusion should not be imposed.

(e) If the individual fails to respond to the notice of proposed exclusion within 30 calendar days of receipt of the notice, the exclusion shall be imposed. If a response is provided, the Assistant Administrator shall consider the information and issue a final decision on the matter.

(f) The Assistant Administrator shall establish and maintain a system for distributing information regarding excluded individual sureties to GSA contracting activities.

should be predicated on potential loss or damage (not necessarily on the value of the contract). When it is determined that insurance coverage should be required, the solicitation and resultant contract must contain the appropriate provisions prescribed in FAR 28.309, 28.310, or 28.311. The determination as to the type of insurance, amount, and any related insurance requirements must be made by the contracting officer with the advice of assigned legal counsel. All premiums or costs incurred to comply with an insurance requirement must be paid by the contractor.

(b) Submission of a current certificate of insurance indicating the amount and coverage to the contracting officer will serve as certification that the required insurance has been obtained.

[52 FR 6564, Mar. 4, 1987]

528.310 Contract clause for work on a Government installation.

(a) The contracting officer shall insert the clause at 552.228-75, Workmen's Compensation Laws, in solicitations and contracts when the contract amount is expected to exceed the small purchase limitation and the contract will require work to be performed on Government property.

(b) The contracting officer shall insert the clause at 552.228-76, Insurance, in solicitations and contracts when the clause prescribed in FAR 52.228-5 is included and the contract amount is expected to exceed the small purchase limitation.