FAR 28.203-1—Acceptability of individual sureties.
Plain-English Summary
FAR 28.203-1 explains when an individual surety may be used, what assets that surety may pledge, how those assets are valued, and how the contracting officer must verify acceptability before relying on the bond. It covers the types of bonds an individual surety can support, the requirement that pledged assets be eligible Treasury collateral, the need for the surety to execute the bond and submit SF 28 with a security interest, and the rule that the net adjusted value of pledged assets must meet or exceed the bond’s penal amount. It also addresses use of multiple individual sureties, Treasury review and valuation of pledged assets, the contracting officer’s acceptability determination, setup of the pledged asset collateral account, and the consequences if the surety is unacceptable. Finally, it covers substitution of a surety when Treasury cannot assess the assets in time and referral of suspected criminal or fraudulent activity. In practice, this section protects the Government by ensuring that an individual surety is financially credible, the pledged collateral is legally eligible and properly valued, and the bond can actually be enforced if the contractor defaults.
Key Rules
Eligible for most bonds
An individual surety may be used for all types of bonds except position schedule bonds. The pledged assets must satisfy Treasury’s eligibility rules for acceptable collateral under 31 U.S.C. 9310 and Treasury’s collateral program requirements.
Surety must execute bond
The individual surety must sign the bond itself, such as a bid bond, performance bond, or payment bond. The surety also must complete SF 28, Affidavit of Individual Surety, and provide a security interest in the pledged assets.
Asset value must cover bond
The net adjusted value of unencumbered assets is the market value minus the applicable margin. That net adjusted value must equal or exceed the penal amount of each bond supported by the surety.
Multiple sureties allowed
An offeror or contractor may use up to three individual sureties for one bond. When combined, the net adjusted value of all pledged unencumbered assets must meet or exceed the bond amount, and each surety is jointly and severally liable up to the full penal amount.
Treasury must assess collateral
The contracting officer must send the SF 28 information to Treasury’s collateral operations support team so Treasury can confirm asset eligibility and valuation. If Treasury does not respond within 3 business days, the contracting officer may seek help from the Director, Bank Policy and Oversight.
CO makes acceptability decision
The contracting officer decides whether the individual surety bond is acceptable based on Treasury’s eligibility and valuation assessment, and must notify both the offeror or contractor and the surety of the decision.
Collateral account setup
If the surety is acceptable, the contracting officer must request Treasury to establish the necessary pledged asset collateral account so the Government can control the collateral.
Unacceptable surety consequences
If no individual surety supporting a bid guarantee is acceptable, the offeror must be rejected as nonresponsible, except where FAR 28.101-4 applies. This nonresponsibility finding does not have to be referred to SBA for a Certificate of Competency.
Substitution may be allowed
If a contractor submits an unacceptable individual surety, or Treasury cannot assess the assets in a reasonable time, the contracting officer may allow substitution of an acceptable surety within a reasonable time.
Fraud referrals required
Any evidence suggesting criminal or fraudulent activity by an individual surety must be referred to the appropriate agency official under agency procedures.
Responsibilities
Contracting Officer
Review the SF 28 information, notify Treasury of the proposed surety and pledged assets, evaluate Treasury’s eligibility and valuation response, determine whether the surety is acceptable, notify the offeror or contractor and surety of the decision, request setup of the pledged asset collateral account if acceptable, and handle rejection or substitution when the surety is unacceptable or cannot be assessed in time.
Individual Surety
Execute the bond, complete SF 28, provide a security interest in pledged assets, and ensure the pledged assets are eligible collateral with sufficient net adjusted value to cover the bond amount. If multiple sureties are used, each surety remains jointly and severally liable up to the full penal amount.
Offeror or Contractor
Submit an acceptable individual surety or sureties, provide the required SF 28 information, ensure the pledged assets are sufficient, and, if necessary, substitute an acceptable surety within a reasonable time when the original surety is rejected or Treasury cannot timely assess the collateral.
Treasury's Collateral Operations Support Team
Review the proposed pledged assets for eligibility and valuation, advise the contracting officer whether the assets may be pledged and what their value is for collateral purposes, and establish the pledged asset collateral account when requested.
Director, Bank Policy and Oversight
Provide assistance when the contracting officer has not received a Treasury response after 3 business days and needs help moving the collateral review forward.
Agency Officials
Receive and process referrals of possible criminal or fraudulent activity involving an individual surety in accordance with agency procedures.
Practical Implications
Contracting officers cannot rely on an individual surety at face value; they must verify both asset eligibility and valuation through Treasury before accepting the bond.
The key financial test is not the gross value of the pledged assets but the net adjusted value after applying Treasury’s margin, which often reduces the usable collateral amount.
Using multiple sureties does not reduce liability exposure for the Government; each surety can be held jointly and severally liable for the full bond amount.
If a bid guarantee is backed only by an unacceptable individual surety, the offeror is treated as nonresponsible, and the usual SBA Certificate of Competency route does not apply.
Delays in Treasury review can affect award timing, so contracting officers should monitor the 3-business-day response window and be prepared to seek escalation or allow substitution when appropriate.
Any signs of fraud or false collateral should be treated seriously and referred promptly, because individual surety arrangements can present elevated risk of misrepresentation or worthless collateral.
Official Regulatory Text
(a) An individual surety is acceptable for all types of bonds except position schedule bonds. Assets pledged by an individual surety shall meet the eligibility requirements of Treasury's Bureau of the Fiscal Service. Per 31 U.S.C. 9310 , individual sureties must pledge eligible obligations, which Treasury refers to as acceptable collateral or eligible collateral. A list of acceptable assets, entitled “Acceptable Collateral for 31 CFR part 225,” may be accessed by going to https://www.treasurydirect.gov/files/laws-and-regulations/collateral-programs/2018-final-225-list-of-acceptable-collateral.pdf and clicking on “Acceptable Collateral for 31 CFR part 225”. (b) (1) An individual surety shall execute the bond ( e.g. , bid bond ( SF 24 ), performance bond ( SF 25 ), payment bond ( SF 25A )). (2) The net adjusted value of unencumbered assets is their market value minus the margin. The margin tables are available at www.treasurydirect.gov. The net adjusted value of unencumbered assets pledged by the individual surety must equal or exceed the penal amount ( i.e. , face value) of each bond. (3) The individual surety shall execute the SF 28 , Affidavit of Individual Surety, and provide a security interest. One individual surety is adequate support for a bond, provided the net adjusted value of unencumbered assets pledged by that individual surety equals or exceeds the amount of the bond. (4) An offeror or contractor may submit up to three individual sureties for each bond, in which case the net adjusted value of the pledged unencumbered assets, when combined, must equal or exceed the penal amount of the bond. Each individual surety is jointly and severally liable to the extent of the penal amount of the bond. (c) Using the information from the SF 28 submitted by the offeror or contractor, the contracting officer shall notify the Treasury's collateral operations support team by email at BMT@fiscal.treasury.gov or by phone at 888-568-7343, of the individual surety, the assets to be pledged, and the amount necessary to cover the individual surety bond, i.e. , the required amount to be collateralized. Treasury will advise the contracting officer whether the assets are eligible to be pledged, consistent with 28.203-1 (a), and of the valuation of the assets offered to be pledged, consistent with the valuation standards in 28.203-1 (b)(2). If after 3 business days the contracting officer has not received a response from Treasury, the contracting officer may seek assistance from the Director, Bank Policy and Oversight, at 202-504-3502. The contracting officer shall determine whether the individual surety bond is acceptable as to the amount necessary to cover the individual surety bond based on the asset eligibility and valuation assessment from Treasury. The contracting officer shall notify both the offeror or contractor and the individual surety of this determination. (d) If the contracting officer determines the individual surety is acceptable, the contracting officer shall request the Treasury's collateral operations support team set up the necessary individual surety pledged asset collateral account. (e) If the contracting officer determines that no individual surety in support of a bid guarantee is acceptable, the offeror utilizing the individual surety shall be rejected as nonresponsible, except as provided in 28.101-4 . A finding of nonresponsibility based on unacceptability of an individual surety, need not be referred to the Small Business Administration for a Certificate of Competency. (See 19.602-1 (a) and 61 Comp. Gen. 456 (1982).) (f) If a contractor submits an unacceptable individual surety, or one that Treasury could not assess the asset eligibility and valuation within a reasonable time, then the contracting officer may permit the contractor to substitute an acceptable surety within a reasonable time. (g) Evidence of possible criminal or fraudulent activities by an individual surety shall be referred to the appropriate agency official in accordance with agency procedures.