Secrets of Bonding #29: When Federal Contracts Are Not

In bonding, like insurance, we are always careful to review specifications and requirements when bonding a new contract.  The specs will state if a bond is required, the amount, and other relevant aspects such as acceptable credentials for the surety, and the bond form.

When it comes to contract documents, it is immediately evident if a project is federal. The solicitation or award letter will identify it as such, and an entity like the Army Corps of Engineers, will be named. It would be clear that the Federal Acquisition Regulations (FAR) apply and that you must have a 100% P&P bond on the federal bond form, issued by an acceptable T-Listed Corporate Surety.

So what are the bonding requirements on federally funded contracts? An example would be a local housing association project that has state and federal grant money. Is that a federal contract?  Do all the federal bonding requirements apply?

For the answer, we must review the solicitation or award and determine who is offering the work. A local housing association contract is just that – a local project, not federal. This is an important distinction because, at least partially, it answers the question about the bonding requirements.

  • True federal projects must follow the FAR. http://www.acquisition.gov/far/
  • Local or private contracts may follow aspects of the FAR if the obligee so choses, however it is voluntary.

This is an important distinction for agents to appreciate because it determines which sureties can be called upon to issue the bond.

For Federal, Corporate Sureties that appear on Circular 570 (the T-List) may be acceptable.

On non-federal projects, such as local contracts that include federal funding, the specs may vary – so no assumptions can be made. Chances are they will differ from the federal guidelines.  Only a review of the documents will reveal the answer.

Non-federal contracts can be local public work, such as a state or municipal job, or they could be private. Private contracts are all unique and as a long established surety, we have bonded many of them.  We have the flexibility to support a wide variety of special bond forms and other challenging aspects such as dual obligee riders that name lenders.  For more info about bonding private contracts, review Secret #18.

Summary:

So when are federal contracts not?

You now know merely having federal funds does not make the contract “federal.”  It is only required to follow the FAR if offered by a direct branch of the federal government.

For non-federal contracts, you will not know the bonding requirements until you review the written requirements – and there is no predicting what you may find.


 A special note from the author: Steve Golia

I am an Independent Broker and Surety Bond Specialist. If you wish to co-broker bond business, together we will deliver the best in bonding expertise for your clients.  I have a broad range of markets available and often can solve problems even when others have failed.

Call me now (856-304-7348) or email: Steven.Golia@gmail.com

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