FAR 28.204-4—Contract clause.
Plain-English Summary
FAR 28.204-4 tells contracting officers when to include the contract clause at 52.228-14, Irrevocable Letter of Credit, in solicitations and resulting contracts. The section applies to three broad acquisition types—services, supplies, and construction—and ties the clause to situations where the Government requires a bid guarantee, performance bonds, or both performance and payment bonds. In practice, this means the clause is not optional when those security requirements are present; it must be inserted so offerors and contractors understand that an irrevocable letter of credit is an acceptable form of security under the clause. The rule supports the Government’s need to protect itself against default, ensure contract performance, and secure payment obligations, while also giving contractors a recognized alternative to traditional surety bonds in appropriate cases. For contracting officers, the section is a simple but important drafting instruction that affects solicitation preparation, contract formation, and enforcement of financial security requirements.
Key Rules
Insert the clause when security is required
If the solicitation or contract requires a bid guarantee, performance bonds, or performance and payment bonds, the contracting officer must include clause 52.228-14, Irrevocable Letter of Credit. The clause is required in both solicitations and contracts, not just one or the other.
Applies to services, supplies, and construction
The rule is not limited to construction contracts. It applies across services, supplies, and construction whenever the specified bond or guarantee requirements are imposed.
Triggered by bond or guarantee requirements
The clause is tied to the presence of a bid guarantee or bond requirement. If no bid guarantee, performance bond, or performance and payment bond is required, this section does not direct insertion of the clause.
Provides an acceptable security mechanism
The purpose of the clause is to allow the Government to rely on an irrevocable letter of credit as the security instrument addressed by the clause. This gives the parties a clear contractual basis for using that form of financial assurance.
Responsibilities
Contracting Officer
Determine whether the acquisition requires a bid guarantee, performance bonds, or performance and payment bonds, and insert clause 52.228-14 in the solicitation and contract when any of those requirements apply.
Offeror/Contractor
Review the solicitation and contract to identify whether the irrevocable letter of credit clause applies, and provide the required security in the form and manner required by the contract if using an irrevocable letter of credit.
Agency
Ensure acquisition templates, clause prescriptions, and contract review procedures support proper inclusion of clause 52.228-14 whenever the underlying security requirements are present.
Practical Implications
This is a drafting and compliance checkpoint for contracting officers: if a bond or bid guarantee is required, the clause must be included or the solicitation/contract may be incomplete.
Contractors should watch for the clause early, because it signals that financial security requirements are in play and may affect how they structure their bid or performance financing.
A common pitfall is assuming the clause applies only to construction; FAR 28.204-4 also covers services and supplies when the specified guarantees or bonds are required.
Another practical issue is consistency: the solicitation, award document, and any bond/letter-of-credit requirements should align so there is no mismatch between what the Government requires and what the contractor provides.
Because the rule is triggered by the presence of guarantee/bond requirements, contracting personnel should verify the underlying acquisition strategy before finalizing the clause set.
Official Regulatory Text
Insert the clause at 52.228-14 , Irrevocable Letter of Credit, in solicitations and contracts for services, supplies, or construction, when a bid guarantee, or performance bonds, or performance and payment bonds are required.