[Federal Register Volume 68, Number 119 (Friday, June 20, 2003)]
[Rules and Regulations]
[Pages 36944-36945]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-15654]
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DEPARTMENT OF DEFENSE
48 CFR Part 228
[DFARS Case 2002-D030]
Defense Federal Acquisition Regulation Supplement; Payment Bonds
on Cost-Reimbursement Contracts
AGENCY: Department of Defense (DoD).
ACTION: Final rule.
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SUMMARY: DoD is issuing a final rule amending the Defense Federal
Acquisition Regulation Supplement (DFARS) to permit the use of
alternative payment protections for fixed-price construction
subcontracts between $25,000 and $100,000 issued under
[[Page 36945]]
cost-reimbursement contracts. This change is consistent with the
corresponding Federal Acquisition Regulation (FAR) policy applicable to
fixed-price construction contracts.
EFFECTIVE DATE: June 20, 2003.
FOR FURTHER INFORMATION CONTACT: Mr. Euclides Barrera, Defense
Acquisition Regulations Council, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062
Defense Pentagon, Washington, DC 20301-3062. Telephone (703) 602-0296;
facsimile (703) 602-0350. Please cite DFARS Case 2002-D030.
SUPPLEMENTARY INFORMATION:
A. Background
This final rule updates DFARS policy on performance and payment
bonds for construction contracts. In accordance with the Miller Act (40
U.S.C. 270a-270f), FAR 28.102-1(a) requires performance and payment
bonds for construction contracts exceeding $100,000. In accordance with
Section 4104(b)(2) of the Federal Acquisition Streamlining Act of 1994
(Public Law 103-355), FAR 28.102-1(b) permits alternative payment
protections for construction contracts between $25,000 and $100,000.
DFARS 228.102-1 waives the requirement for performance and payment
bonds for cost-reimbursement contracts, but requires the prime
contractor to obtain bonds for its fixed-price subcontracts exceeding
$25,000. This DFARS rule authorizes the use of alternative payment
protections for subcontracts between $25,000 and $100,000, for
consistency with the corresponding FAR policy applicable to prime
contracts.
In addition, this rule updates text implementing 10 U.S.C. 2701(h)
and (i), pertaining to bonds under Defense Environmental Restoration
Program contracts. 10 U.S.C. 2701(h) and (i) were to expire on December
31, 1999; however, Section 314 of the National Defense Authorization
Act for Fiscal Year 2002 (Public Law 107-107) removed this expiration
date. Therefore, the corresponding DFARS text has been amended to
remove the expiration date. Additionally, the text has been relocated
from 228.102-1 to a new section at 228.102-70, to identify the subject
matter as DoD-unique.
DoD published a proposed rule at 68 FR 7490 on February 14, 2003.
DoD received no comments on the proposed rule. Therefore, DoD has
adopted the proposed rule as a final rule without change.
This rule was not subject to Office of Management and Budget review
under Executive Order 12866, dated September 30, 1993.
B. Regulatory Flexibility Act
DoD certifies that this final rule will not have a significant
economic impact on a substantial number of small entities within the
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq.,
because the rule still requires payment protections for fixed-price
construction subcontracts exceeding $25,000, while providing
flexibility for subcontractors to chose the type of protection to be
provided for subcontracts between $25,000 and $100,000.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the rule does
not impose any information collection requirements that require the
approval of the Office of Management and Budget under 44 U.S.C. 3501,
et seq.
List of Subjects in 48 CFR Part 228
Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.
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Therefore, 48 CFR part 228 is amended as follows:
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1. The authority citation for 48 CFR part 228 continues to read as
follows:
Authority: 41 U.S.C. 421 and 48 CFR chapter 1.
PART 228--BONDS AND INSURANCE
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2. Section 228.102-1 is revised to read as follows:
228.102-1 General.
The requirement for performance and payment bonds is waived for
cost-reimbursement contracts. However, for cost-type contracts with
fixed-price construction subcontracts over $25,000, require the prime
contractor to obtain from each of its construction subcontractors
performance and payment protections in favor of the prime contractor as
follows:
(1) For fixed-price construction subcontracts over $25,000, but not
exceeding $100,000, payment protection sufficient to pay labor and
material costs, using any of the alternatives listed at FAR 28.102-
1(b)(1).
(2) For fixed-price construction subcontracts over $100,000--
(i) A payment bond sufficient to pay labor and material costs; and
(ii) A performance bond in an equal amount if available at no
additional cost.
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3. Section 228.102-70 is added to read as follows:
228.102-70 Defense Environmental Restoration Program construction
contracts.
For Defense Environmental Restoration Program construction
contracts entered into pursuant to 10 U.S.C. 2701-
(a) Any rights of action under the performance bond shall only
accrue to, and be for the exclusive use of, the obligee named in the
bond;
(b) In the event of default, the surety's liability on the
performance bond is limited to the cost of completion of the contract
work, less the balance of unexpended funds. Under no circumstances
shall the liability exceed the penal sum of the bond;
(c) The surety shall not be liable for indemnification or
compensation of the obligee for loss or liability arising from personal
injury or property damage, even if the injury or damage was caused by a
breach of the bonded contract; and
(d) Once it has taken action to meet its obligations under the
bond, the surety is entitled to any indemnification and identical
standard of liability to which the contractor was entitled under the
contract or applicable laws and regulations.
[FR Doc. 03-15654 Filed 6-19-03; 8:45 am]
BILLING CODE 5001-08-P