FAR 28.203-3—Release of security interest.
Plain-English Summary
FAR 28.203-3 explains when and how a contracting officer may release the Government’s security interest in an individual surety’s pledged assets. It covers three main situations: full release after the required retention period, early release of assets supporting a bid guarantee when no award will result, and partial release of assets supporting a performance bond after substantial performance. It also addresses special treatment for payment-bond collateral, including release to a subcontractor or supplier when the Government receives either a Federal district court judgment or a sworn claim plus notarized surety authorization. The section distinguishes among contracts subject to the Miller Act bonds statute, contracts using alternative payment protection, and other contracts not covered by the bonds statute, because the retention period differs in each case. In practice, this rule protects the Government and unpaid claimants while preventing collateral from being held longer than necessary. It also requires the contracting officer to consult legal counsel before releasing the security interest, which helps ensure the release is legally sound and consistent with the bond obligations and any outstanding claims.
Key Rules
Consult legal counsel first
Before releasing any security interest, the contracting officer must consult legal counsel. This is a mandatory safeguard because the release affects pledged assets and may implicate unresolved bond claims or other legal rights.
Use the proper release form
The contracting officer must release the security interest using Optional Form 91, Release of Personal Property from Escrow, or a similar release. The release should occur as soon as possible, but only after the applicable retention conditions are satisfied.
Miller Act contracts retain longer
For contracts subject to the bonds statute, the security interest must be kept until the later of: one year after final payment, completion of any warranty period for performance bonds, or resolution of all payment-bond claims filed during the one-year post-final-payment period.
Alternative payment protection has fixed retention
For contracts using alternative payment protection, the security interest must remain in place for the full contract performance period plus one additional year. This creates a longer, fixed retention period tied to performance rather than final payment alone.
Other contracts have shorter retention
For contracts not subject to the bonds statute, the security interest must be maintained for 90 days after final payment or until completion of any warranty period for performance bonds, whichever is later. This is the default rule when the special bonds statute does not apply.
Payment-bond collateral may be released to claimants
Assets pledged for a payment bond may be released to a subcontractor or supplier only when the Government receives either a Federal district court judgment or a sworn statement from the claimant plus a notarized authorization from the surety approving the release.
Bid-guarantee collateral may be released early
If the individual surety supported a bid guarantee, the contracting officer may release the security interest upon written request when there is evidence that the offer will not result in contract award. This prevents unnecessary retention when the bid no longer has a path to award.
Partial release requires substantial performance
The contracting officer may partially release collateral supporting a performance bond when the contractor has substantially performed. The officer must determine that the remaining unreleased security is enough to cover unfinished obligations, including subcontractor payments and other liabilities, and the surety must sign an affidavit confirming that the partial release does not reduce its bond obligations.
Responsibilities
Contracting Officer
Consult legal counsel before any release; determine which retention period applies; use Optional Form 91 or a similar release; release collateral as soon as allowed; evaluate written requests for early or partial release; verify that remaining security is sufficient; and ensure payment-bond releases to claimants meet the required judgment or sworn-statement-and-authorization conditions.
Individual Surety
Provide pledged assets to secure the bid guarantee or bond; submit written requests for early or partial release when appropriate; and, for partial release, furnish an affidavit stating that the release does not relieve the surety of its bond obligations.
Subcontractor or Supplier
If seeking release of payment-bond collateral, provide the Government with a Federal district court judgment or a sworn statement that the claim is correct, along with the required notarized authorization from the surety approving the release.
Legal Counsel
Advise the contracting officer before release of the security interest to help ensure the release is legally proper and that any outstanding claims, warranty obligations, or bond rights are addressed.
Agency/Government
Maintain the security interest for the applicable statutory or regulatory period, protect claimant rights, and ensure collateral is not released prematurely or without the required documentation.
Practical Implications
This section is mainly about timing and documentation: releasing collateral too early can leave the Government exposed to unpaid claims, warranty issues, or bond disputes.
Contracting officers need to identify the correct contract category first, because the retention period differs for Miller Act contracts, alternative payment protection, and other contracts.
Payment-bond collateral is the most sensitive area; a contractor or surety cannot simply ask for release to a subcontractor or supplier without the specific court judgment or sworn-statement-plus-authorization package.
For partial releases, the key question is whether the remaining collateral still adequately covers unfinished work and potential liabilities; if not, the release should not be granted.
Individual sureties should expect to provide written requests and supporting affidavits, and they should understand that a partial release does not end their bond liability.
Official Regulatory Text
(a) After consultation with legal counsel, the contracting officer shall release the security interest on the individual surety's assets using the Optional Form 91, Release of Personal Property from Escrow, or a similar release as soon as possible consistent with the conditions in subparagraphs (a)(1) and (2) of this section. A surety's assets pledged in support of a payment bond may be released to a subcontractor or supplier upon Government receipt of a Federal district court judgment, or a sworn statement by the subcontractor or supplier that the claim is correct along with a notarized authorization of the release by the surety stating that it approves of such release. (1) Contracts subject to the Bonds statute. See section 1.110 and section 28.102-1 , paragraph (a). The security interest shall be maintained for the later of— (i) 1 year following final payment; (ii) Until completion of any warranty period (applicable only to performance bonds); or (iii) Pending resolution of all claims filed against the payment bond during the 1 year period following final payment. (2) Contracts subject to alternative payment protection. See section 28.102-1 , paragraph (b)(1). The security interest shall be maintained for the full contract performance period plus 1 year. (3) Other contracts not subject to the Bonds statute. The security interest shall be maintained for 90 days following final payment or until completion of any warranty period (applicable only to performance bonds), whichever is later. (b) Upon written request by the individual surety, the contracting officer may release the security interest on the individual surety's assets in support of a bid guarantee based upon evidence that the offer supported by the individual surety will not result in contract award. (c) Upon written request by the individual surety, the contracting officer may release a portion of the security interest on the individual surety's assets based upon substantial performance of the contractor's obligations under its performance bond. Release of the security interest in support of a payment bond must comply with the subparagraphs (a)(1) through (3) of this section. In making this determination, the contracting officer will give consideration as to whether the unreleased portion of the security is sufficient to cover the remaining contract obligations, including payments to subcontractors and other potential liabilities. The individual surety shall, as a condition of the partial release, furnish an affidavit agreeing that the release of such assets does not relieve the individual surety of its obligations under the bond(s).