FAR 28.102—Performance and payment bonds and alternative payment protections for construction contracts.

General.

FAR 28.102-1 explains when federal construction contracts must be protected by performance and payment bonds, and when the Government may use alternative payment protections instead of a traditional payment bond. It covers the general Miller Act rule for construction contracts over $150,000, the limited waiver authority for work performed in foreign countries or as otherwise allowed by statute, and the special bonding/payment-protection framework for construction contracts greater than $35,000 but not greater than $150,000. For that lower dollar range, the contracting officer must choose at least two payment protection methods and must give particular consideration to an irrevocable letter of credit as one of them. The section also identifies the available alternatives: payment bond, irrevocable letter of credit, tripartite escrow agreement, certificates of deposit, and certain deposits of security under FAR 28.204-1 and 28.204-2. Finally, it makes clear that the contractor must provide the required bond or alternative protection, including any needed reinsurance agreements, before the Government issues a notice to proceed or allows work to begin. In practice, this section is about protecting subcontractors, suppliers, and laborers while also giving the Government flexibility in smaller construction contracts and in limited foreign-work situations.

Amount required.

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.

Contract clauses.

FAR 28.102-3 tells contracting officers which payment-security clauses to include in construction solicitations and contracts, and when to use each one based on contract value and the type of payment protection required. It covers the clause at 52.228-15, Performance and Payment Bonds-Construction, for construction contracts expected to exceed $150,000 when performance and payment bonds are required, and the clause at 52.228-13, Alternative Payment Protections, for construction contracts with an estimated or actual value over $35,000 but not over $150,000. The section also explains that the contracting officer may lower the bond percentage in the 52.228-15 clause under 28.102-2(b) or lower the percentage in the 52.228-13 clause under 28.102-2(c). In addition, if the solicitation does not include the provision at 52.228-1, the contracting officer must set a deadline for return of executed bonds. In practice, this section ensures the Government selects the right payment-security mechanism for the size and risk of the construction acquisition and clearly tells offerors what protections must be provided and when.