FAR 28.204—Alternatives in lieu of corporate or individual sureties.
Plain-English Summary
FAR 28.204 explains when a contractor may use alternatives to a corporate or individual surety to satisfy a bond requirement, and how those alternatives are handled. It covers the types of security that may be deposited in lieu of a surety, the requirement to note that substitution in the bond form, the contractor’s role as principal on the bond, and the agency’s duty to safeguard and later return the security when the bond obligation ends. It also addresses partial release of deposited security when the conditions in FAR 28.203-3(c) are met, including the contractor’s obligation to provide an affidavit confirming that the release does not reduce bond liability. Finally, it allows combinations of security types and surety bonds, and permits substitution among approved security types or between security and additional surety bonds while the bond is still required. In practice, this section gives contractors flexibility in how they secure bond obligations, while requiring contracting officers and agencies to manage the security carefully to avoid loss, improper release, or misunderstanding about continuing bond liability.
Key Rules
Approved security may replace surety
A person required to furnish a bond may use the security types listed in FAR 28.204-1 through 28.204-3 instead of a corporate or individual surety. This is an alternative method of satisfying the bond requirement, not a waiver of the bond obligation.
Bond form must reflect pledged security
When security is deposited in lieu of surety, the bond form must include a statement pledging that security instead of execution by corporate or individual sureties. The contractor still signs the bond as the principal.
Agencies must protect deposited security
Agencies are required to establish safeguards to prevent loss of the deposited security. When the bond obligation ends, the agency must return the security or its equivalent to the contractor.
Partial release is limited
A contracting officer may release part of the security only when the conditions for partial release in FAR 28.203-3(c) are satisfied. The contractor must provide an affidavit stating that the release does not relieve the contractor of bond obligations.
Mixed security arrangements are allowed
A contractor may satisfy bond security requirements using a combination of approved security types, or a combination of those security types and additional surety bonds under FAR 28.202 or 28.203. This gives flexibility in structuring bond support.
Substitution is permitted during the bond period
While the bond-supported security is required, the contractor may substitute one approved security type for another, or replace security in whole or in part with additional surety bonds. Any substitution must still satisfy the underlying bond requirement.
Responsibilities
Contractor
Choose an approved form of security if using an alternative to corporate or individual surety; execute the bond as principal; provide any required affidavit for partial release; and ensure any substitution or combination still fully supports the bond obligation.
Contracting Officer
Accept alternative security when it complies with FAR 28.204 and related provisions; approve partial release only when the conditions in FAR 28.203-3(c) are met; and ensure the bond requirement remains adequately secured throughout performance.
Agency
Establish safeguards to protect deposited security from loss or misuse; maintain custody or control as required; and return the security or its equivalent when the bond obligation has ceased.
Government/Contracting Activity
Administer the bond and security arrangement so that substitutions, partial releases, and final return of security are properly documented and do not impair the Government’s protection.
Practical Implications
This section is mainly about flexibility: contractors can use approved securities instead of a surety bond, which may help when surety capacity is limited or expensive.
The paperwork matters. If the bond form does not clearly show that security is pledged in lieu of surety, the arrangement may be defective or hard to enforce.
Partial release is not automatic. The contracting officer must confirm the FAR 28.203-3(c) conditions are met, and the contractor must affirm that the bond obligation continues.
Agencies need strong controls over any deposited security because they are responsible for preventing loss and returning it when appropriate.
Substitutions can be useful during performance, but they should be documented carefully so the Government never has a gap in bond protection or confusion about what currently secures the obligation.
Official Regulatory Text
(a) Any person required to furnish a bond to the Government may furnish any of the types of security listed in 28.204-1 through 28.204-3 instead of a corporate or individual surety for the bond. When any of those types of security are deposited, a statement shall be incorporated in the bond form pledging the security in lieu of execution of the bond form by corporate or individual sureties. The contractor shall execute the bond forms as the principal. Agencies shall establish safeguards to protect against loss of the security and shall return the security or its equivalent to the contractor when the bond obligation has ceased. (b) Upon written request by any contractor securing a performance or payment bond by any of the types of security listed in 28.204-1 through 28.204-3 , the contracting officer may release a portion of the security only when the conditions allowing the partial release of security in 28.203-3 (c) are met. The contractor shall, as a condition of the partial release, furnish an affidavit agreeing that the release of such security does not relieve the contractor of its obligations under the bond(s). (c) The contractor may satisfy a requirement for bond security by furnishing a combination of the types of security listed in 28.204-1 through 28.204-3 or a combination of bonds supported by these types of security and additional surety bonds under 28.202 or 28.203 . During the period for which a bond supported by security is required, the contractor may substitute one type of security listed in 28.204-1 through 28.204-3 for another, or may substitute, in whole or combination, additional surety bonds under 28.202 or 28.203 .