[Code of Federal Regulations]

[Title 48, Volume 1]

[Revised as of October 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 48CFR28.203-2]



[Page 558-559]

 

            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM

 

                CHAPTER 1--FEDERAL ACQUISITION REGULATION

 

PART 28_BONDS AND INSURANCE--Table of Contents

 

           Subpart 28.2_Sureties and Other Security for Bonds

 

Sec. 28.203-2  Acceptability of assets.



    (a) The Government will accept only cash, readily marketable assets, 

or irrevocable letters of credit from a federally insured financial 

institution from individual sureties to satisfy the underlying bond 

obligations.

    (b) Acceptable assets include--

    (1) Cash, or certificates of deposit, or other cash equivalents with 

a federally insured financial institution;

    (2) United States Government securities at market value. (An escrow 

account is not required if an individual surety offers Government 

securities held in book entry form at a depository institution. In lieu 

thereof, the individual shall provide evidence that the depository 

institution has (i) placed a notation against the individual's book 

entry account indicating that the security has been pledged in favor of 

the respective agency; (ii) agreed to notify the agency prior to 

maturity of the security; and (iii) agreed to hold the proceeds of the 

security subject to the pledge in favor of the agency until a 

substitution of securities is made or the security interest is formally 

released by the agency);

    (3) Stocks and bonds actively traded on a national U.S. security 

exchange with certificates issued in the name of the individual surety. 

National security exchanges are--(i) the New York Stock Exchange; (ii) 

the American Stock Exchange; (iii) the Boston Stock Exchange; (iv) the 

Cincinnati Stock Exchange; (v) the Midwest Stock Exchange; (vi) the 

Philadelphia Stock Exchange; (vii) the Pacific Stock Exchange; and 

(viii) the Spokane Stock Exchange. These assets will be accepted at 90 

percent of their 52-week low, as reflected at the time of submission of 

the bond. Stock options and stocks on the over-the-counter (OTC) market 

or NASDQ Exchanges will not be accepted. Assistance in evaluating the 

acceptability of securities may be obtained from the Securities and 

Exchange Commission, Division of Enforcement, 450 Fifth Street NW., 

Washington, DC 20549.

    (4) Real property owned in fee simple by the surety without any form 

of concurrent ownership, except as provided in paragraph (c)(3)(iii) of 

this subsection, and located in the United States or its outlying areas. 

These assets will be accepted at 100 percent of the most current tax 

assessment value (exclusive of encumbrances) or 75 percent of the 

properties' unencumbered market value provided a current appraisal is 

furnished (see 28.203-3).

    (5) Irrevocable letters of credit (ILC) issued by a federally 

insured financial institution in the name of the contracting agency and 

which identify the



[[Page 559]]



agency and solicitation or contract number for which the ILC is 

provided.

    (c) Unacceptable assets include but are not limited to--

    (1) Notes or accounts receivable;

    (2) Foreign securities;

    (3) Real property as follows:

    (i) Real property located outside the United States and its outlying 

areas.

    (ii) Real property which is a principal residence of the surety.

    (iii) Real property owned concurrently regardless of the form of co-

tenancy (including joint tenancy, tenancy by the entirety, and tenancy 

in common) except where all co-tenants agree to act jointly.

    (iv) Life estates, leasehold estates, or future interests in real 

property.

    (4) Personal property other than that listed in paragraph (b) of 

this subsection (e.g., jewelry, furs, antiques);

    (5) Stocks and bonds of the individual surety in a controlled, 

affiliated, or closely held concern of the offeror/contractor;

    (6) Corporate assets (e.g., plant and equipment);

    (7) Speculative assets (e.g., mineral rights);

    (8) Letters of credit, except as provided in 28.203-2(b)(5).



[54 FR 48987, Nov. 28, 1989, as amended at 68 FR 28083, May 22, 2003]