FAR 52.228-2—Additional Bond Security.
Plain-English Summary
FAR 52.228-2, Additional Bond Security, tells the contractor when it must provide extra or replacement security to keep the Government and labor and material suppliers protected during contract performance. The clause covers four specific triggers: when a surety or other issuing financial institution becomes unacceptable to the Government, when a surety fails to provide required financial reports, when a contract price increase makes the existing bond penal sum too low in the Contracting Officer’s judgment, and when an irrevocable letter of credit (ILC) will expire before the required security period ends. It also gives the Contracting Officer a direct remedy for ILCs: if the contractor does not provide an acceptable extension, replacement, or substitute at least 30 days before expiration, the Government may immediately draw on the ILC. In practice, this clause is about maintaining continuous, adequate financial protection as the contract changes or as the financial condition of the security provider changes. It matters because bond or ILC deficiencies can expose the Government and subcontractors/suppliers to payment risk and can create performance and closeout problems if not corrected quickly.
Key Rules
Promptly furnish added security
The contractor must promptly provide additional security whenever one of the listed conditions occurs. The obligation is reactive and ongoing, so the contractor must monitor bond sufficiency and the acceptability of sureties or financial institutions throughout performance.
Unacceptable surety or institution
If any surety on a bond, or any financial institution issuing other security, becomes unacceptable to the Government, the contractor must replace or supplement that security. The Government controls acceptability, so a previously acceptable provider can later be rejected.
Required financial reports missing
If a surety does not submit financial condition reports required by the Government, that failure triggers the contractor’s duty to furnish additional security. The clause treats reporting failures as a risk indicator that can justify replacement or added protection.
Bond penal sum must stay adequate
If the contract price increases and the penal sum of a bond is no longer adequate in the Contracting Officer’s opinion, the contractor must increase the security. The adequacy determination is made by the Contracting Officer, not the contractor or surety.
ILC expiration must be managed
If an irrevocable letter of credit will expire before the required security period ends, the contractor must provide an extension, replacement ILC, or other acceptable substitute. The contractor must act early enough to avoid a lapse in coverage.
Government may draw on expiring ILC
If the contractor does not provide an acceptable extension, replacement, or substitute at least 30 days before the ILC’s scheduled expiration, the Contracting Officer may immediately draw on the ILC. This gives the Government a strong enforcement tool to prevent a gap in security.
Responsibilities
Contractor
Monitor the continuing adequacy and acceptability of all bond security and other security instruments. Promptly furnish additional, replacement, or substitute security when any trigger in the clause occurs, and ensure an ILC is extended or replaced at least 30 days before expiration if required.
Contracting Officer
Determine whether a surety or financial institution is acceptable and whether a bond’s penal sum remains adequate after a price increase. Require additional security when the clause is triggered and, for ILCs, draw on the letter of credit immediately if the contractor fails to provide acceptable continued security in time.
Surety
Remain acceptable to the Government and provide financial condition reports when required. If the surety’s status or reporting changes create a security deficiency, the contractor must address the issue by obtaining additional or replacement security.
Issuing financial institution
Provide and maintain other security instruments, such as ILCs, in a form and duration acceptable to the Government. If the institution or instrument becomes unacceptable or the ILC is nearing expiration, the contractor must secure a replacement or extension.
Government
Set and enforce the acceptability of sureties and other security, and protect its interests and those of laborers and material suppliers by requiring adequate security throughout the contract period.
Practical Implications
Contractors should track bond and ILC expiration dates well before they become urgent; waiting until the last minute can allow the Government to draw on an ILC or demand immediate replacement security.
A contract modification that increases price can create an automatic need to revisit bond sufficiency, so contractors should coordinate pricing changes with their surety or bank before the modification is finalized.
A surety’s financial reporting problems can become a contract administration issue even if performance is otherwise on track, so contractors should monitor surety compliance and Government communications closely.
Contracting Officers should document why a surety or financial institution is unacceptable and why a bond is inadequate, because those judgments drive the demand for additional security and may be reviewed later.
Failure to maintain continuous security can delay performance, complicate payment protection, and create avoidable disputes, especially when an ILC is involved and the Government exercises its right to draw funds.
Official Regulatory Text
As prescribed in 28.106-4 (a) , insert the following clause: Additional Bond Security (Oct 1997) The Contractor shall promptly furnish additional security required to protect the Government and persons supplying labor or materials under this contract if- (a) Any surety upon any bond, or issuing financial institution for other security, furnished with this contract becomes unacceptable to the Government; (b) Any surety fails to furnish reports on its financial condition as required by the Government; (c) The contract price is increased so that the penal sum of any bond becomes inadequate in the opinion of the Contracting Officer; or (d) An irrevocable letter of credit (ILC) used as security will expire before the end of the period of required security. If the Contractor does not furnish an acceptable extension or replacement ILC, or other acceptable substitute, at least 30 days before an ILC’s scheduled expiration, the Contracting officer has the right to immediately draw on the ILC. (End of clause)