FAR 28.102-2—Amount required.
Plain-English Summary
FAR 28.102-2 explains how much performance and payment security the Government should require and maintain on covered contracts. It defines the term "original contract price" for bond purposes, then sets the default penal amounts for performance bonds and payment bonds on contracts exceeding $150,000, and for payment bonds or alternative payment protection on contracts exceeding $35,000 but not exceeding $150,000. It also addresses what happens when the contract price increases after award, requiring the Government to obtain additional protection so the bond coverage keeps pace with the higher price. Finally, it gives the contracting officer limited discretion to reduce required security when allowed by the referenced FAR provisions. In practice, this section is about making sure the Government is adequately protected against contractor default and nonpayment to subcontractors and suppliers, while allowing the contracting officer to tailor bond amounts when a lesser amount is justified or when specific regulatory conditions permit reduction.
Key Rules
Original contract price defined
For bond purposes, "original contract price" means the award price, or for requirements contracts the price payable for the estimated total quantity, or for indefinite-quantity contracts the price payable for the specified minimum quantity. It excludes option prices unless the options are exercised at award.
Performance bonds over $150,000
For contracts exceeding $150,000, the performance bond must generally equal 100 percent of the original contract price, plus 100 percent of any later increase in contract price. The contracting officer may require less if a lesser amount is adequate to protect the Government.
Payment bonds over $150,000
For contracts exceeding $150,000, the payment bond must generally equal 100 percent of the original contract price, plus 100 percent of any later increase in contract price. A written determination with specific findings is required if the contracting officer concludes that a payment bond in that amount is impractical.
Payment bond cannot be lower
The payment bond amount must be at least as large as the performance bond amount. This prevents the Government from having stronger protection against default than against subcontractor and supplier nonpayment.
Contracts over $35,000 to $150,000
For contracts in this range, the payment bond or alternative payment protection must generally equal 100 percent of the original contract price, plus 100 percent of any later increase. The contracting officer may approve a lesser amount if adequate for Government protection.
Additional protection after price increases
If the contract price increases, the Government must secure additional protection by directing the contractor to increase the existing bond, obtain an additional bond, or furnish additional alternative payment protection. The required protection must track the increased contract value.
Reducing required security
The contracting officer may reduce the amount of security supporting a bond, but only subject to the conditions in FAR 28.203-3(c) or 28.204(b). Any reduction must comply with those specific regulatory limits.
Responsibilities
Contracting Officer
Determine the required bond or alternative payment protection amount based on the contract type and price threshold; decide whether a lesser amount is adequate; make the required written determination with specific findings when a full payment bond is impractical; direct the contractor to provide additional protection when the contract price increases; and reduce security only when the referenced FAR conditions are satisfied.
Contractor
Provide performance bonds, payment bonds, or alternative payment protection in the required amount; increase the penal sum or furnish additional protection when the contract price rises; and comply with any direction to supplement existing security.
Government
Ensure the contract is protected at the required level throughout performance by monitoring price changes and obtaining additional security when needed.
Surety or Provider of Alternative Payment Protection
Issue or adjust the bond or alternative payment protection to match the required amount when the contractor is directed to increase coverage or obtain additional security.
Practical Implications
Bond amounts are tied to the original contract price, not the final price at award plus options that were not exercised, so getting the base amount right at the outset matters.
Any later contract price increase can trigger a duty to increase bond coverage; failing to do so can leave the Government underprotected.
For payment bonds over $150,000, the contracting officer cannot simply choose a lower amount without a written determination supported by specific findings that the full amount is impractical.
The payment bond must never be less than the performance bond, so contracting officers should check both amounts together rather than separately.
Contractors should watch for modifications that increase price, because those changes may require immediate bond adjustments or additional alternative payment protection.
Official Regulatory Text
(a) Definition . As used in this subsection- Original contract price means the award price of the contract; or, for requirements contracts, the price payable for the estimated total quantity; or, for indefinite-quantity contracts, the price payable for the specified minimum quantity. Original contract price does not include the price of any options, except those options exercised at the time of contract award. (b) Contracts exceeding $150,000- (1) Performance bonds . Unless the contracting officer determines that a lesser amount is adequate for the protection of the Government, the penal amount of performance bonds must equal- (i) 100 percent of the original contract price; and (ii) If the contract price increases, an additional amount equal to 100 percent of the increase. (2) Payment bonds. (i) Unless the contracting officer makes a written determination supported by specific findings that a payment bond in this amount is impractical, the amount of the payment bond must equal- (A) 100 percent of the original contract price; and (B) If the contract price increases, an additional amount equal to 100 percent of the increase. (ii) The amount of the payment bond must be no less than the amount of the performance bond. (c) Contracts exceeding $35,000 but not exceeding $150,000 . Unless the contracting officer determines that a lesser amount is adequate for the protection of the Government, the penal amount of the payment bond or the amount of alternative payment protection must equal- (1) 100 percent of the original contract price; and (2) If the contract price increases, an additional amount equal to 100 percent of the increase. (d) Securing additional payment protection . If the contract price increases, the Government must secure any needed additional protection by directing the contractor to- (1) Increase the penal sum of the existing bond; (2) Obtain an additional bond; or (3) Furnish additional alternative payment protection. (e) Reducing amounts . The contracting officer may reduce the amount of security to support a bond, subject to the conditions of 28.203-3 (c) or 28.204 (b).