FAR 28.204-2—Certified or cashier’s checks, bank drafts, money orders, or currency.
Plain-English Summary
FAR 28.204-2 addresses an alternative way to satisfy a bond requirement when a person is required to furnish a bond under a federal contract. Instead of obtaining surety or sureties, the person may provide a certified check, cashier’s check, bank draft, Post Office money order, or currency in an amount equal to the bond’s penal sum. The section also specifies how non-cash instruments must be made payable: checks, drafts, and money orders must be drawn to the order of the appropriate Federal agency. In practice, this gives contractors a cash-equivalent option for bonding when surety bonding is impractical, unavailable, or more costly, while still protecting the Government by ensuring the full penal amount is immediately available. The rule is narrow and mechanical, but important because it affects how bond obligations can be satisfied and how the Government receives and holds the funds.
Key Rules
Cash-equivalent option allowed
A person required to furnish a bond may choose to provide a certified or cashier’s check, bank draft, Post Office money order, or currency instead of a surety bond. This is an optional substitute, not a separate requirement, and it applies only when a bond is otherwise required.
Amount must equal penal sum
The alternative instrument or currency must be in an amount equal to the penal sum of the bond. The Government is not required to accept a lesser amount, because the substitute must fully cover the bond obligation.
Payable to the agency
Certified checks, cashier’s checks, bank drafts, and money orders must be drawn to the order of the appropriate Federal agency. This ensures the instrument is properly payable to the Government entity receiving the bond substitute.
Currency is permitted
The rule expressly allows currency as an alternative form of security. As with the other permitted forms, the amount must match the bond’s penal sum.
Responsibilities
Person required to furnish a bond
May elect to provide one of the permitted cash-equivalent forms instead of surety bonds, and must ensure the amount equals the bond’s penal sum. If using a check, draft, or money order, the person must make it payable to the appropriate Federal agency.
Contracting Officer / Appropriate Federal Agency
Must accept and process the permitted substitute only when it complies with the rule, including correct amount and proper payee designation. The agency must identify itself as the proper payee for non-cash instruments.
Practical Implications
This section gives contractors a fallback when surety bonding is difficult or expensive, but it ties up cash or cash-equivalent funds equal to the full bond amount.
A common mistake is submitting an instrument for less than the penal sum; the substitute must match the bond amount exactly.
Another frequent issue is naming the wrong payee or agency on the check, draft, or money order, which can delay acceptance.
Because currency is allowed, parties should still coordinate with the agency on delivery and receipt procedures to avoid loss, handling, or documentation problems.
Contractors should confirm the bond amount and the correct agency name before tendering the substitute, since this rule is strict and administrative errors can prevent compliance.
Official Regulatory Text
Any person required to furnish a bond has an option to furnish a certified or cashier’s check, bank draft, Post Office money order, or currency, in an amount equal to the penal sum of the bond, instead of furnishing surety or sureties on the bonds. Those furnishing checks, drafts, or money orders shall draw them to the order of the appropriate Federal agency.