81 FR 45855 - Federal Acquisition Regulation; Revision to Standard Forms for Bonds

DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

Federal Register Volume 81, Issue 135 (July 14, 2016)

DoD, GSA, and NASA are issuing a final rule to amend five Standard Forms prescribed by the Federal Acquisition Regulation (FAR) for contracts involving bonds and other financial protections. The revisions are aimed at clarifying liability limitations and expanding the options for organization types.

[Federal Register Volume 81, Number 135 (Thursday, July 14, 2016)]
[Rules and Regulations]
[Pages 45855-45866]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-16248]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Part 53

[FAC 2005-89; FAR Case 2015-025; Item IV; Docket No. 2015-0025, 
Sequence No. 1]
RIN 9000-AN11


Federal Acquisition Regulation; Revision to Standard Forms for 
Bonds

AGENCY: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: DoD, GSA, and NASA are issuing a final rule to amend five 
Standard Forms prescribed by the Federal Acquisition Regulation (FAR) 
for contracts involving bonds and other financial protections. The 
revisions are aimed at clarifying liability limitations and expanding 
the options for organization types.

DATES: Effective: August 15, 2016.

FOR FURTHER INFORMATION CONTACT: Ms. Kathlyn J. Hopkins, Procurement 
Analyst, at 202-969-7226, for clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat Division at 202-501-4755. Please cite FAC 2005-89, FAR Case 
2015-025.

SUPPLEMENTARY INFORMATION: 

I. Background

    DoD, GSA, and NASA published a proposed rule in the Federal 
Register at 80 FR 63485 on October 20, 2015, soliciting public comments 
on clarifying liability limitations and expanding the options for 
organization types on Standard Forms (SFs) 24, 25, 25A, 34, and 35. The 
proposed rule addressed concerns that surety bond producers may be 
adversely affected by differing Federal Agency views on the proper type 
of organization to indicate on these Standard Forms when the subject 
business was a limited liability company (LLC), an increasingly 
prevalent form of business in the construction industry. The proposed 
rule added a box labelled ``Other: (Specify)'' to the ``Type of 
Organization'' block on each of the five forms (SFs 24, 25, 25A, 34, 
and 35) in order to expand the range of business types to include not 
just LLCs, but others, as they evolve.

[[Page 45856]]

    In addition, given recent questions from the construction industry 
regarding the appropriate value to report in the ``Liability Limit'' 
block on these Standard Forms, the proposed rule added clarifying 
instructions to the appropriate SFs (24, 25, and 25A). Finally, the 
proposed rule made various editorial corrections to the existing 
instructions.
    Three respondents submitted public comments.

II. Discussion and Analysis

    The Civilian Agency Acquisition Council and the Defense Acquisition 
Regulations Council (the Councils) reviewed the public comments in the 
development of the final rule. A discussion of the comments is provided 
as follows:

A. Summary of Significant Changes

    There were no changes made to the rule as a result of the comments 
received.

B. Analysis of Public Comments

1. Support for the Rule
    Comment: Three respondents expressed support for the changes, 
highlighting their helpfulness to the procurement process, both by 
reducing confusion and by promoting efficient completion of forms. 
Moreover, two respondents affirmed that LLCs were a common type of 
business within the construction industry.
    Response: The Government notes the public support for this rule.
2. Clarification of Liability Limit
    Comment: One respondent, while applauding the improvements proposed 
for the forms' instructions, suggested additional clarifications. The 
respondent noted that sureties that provide bonds must hold a 
Certificate of Authority, and be identified as such in the U.S. 
Treasury Circular 570, which sets forth the underwriting limitations 
for each company. Pursuant to 31 CFR 223.11, a surety bond producer may 
write a bond in excess of its underwriting limitation if exceptions 
such as co-surety arrangements or reinsurance coverages exist. The 
respondent's specific concern was that a contracting officer might, 
upon comparing the amount in the ``Liability Limit'' block to the 
surety producer's underwriting limit, reject the bond without exploring 
the applicability of exceptions.
    Response: The Government appreciates this concern, but notes that 
the proposed rule included instructions that clearly differentiate 
between individual sureties and co-surety arrangements, and how to 
complete the ``Liability Limit'' block in each case. Additionally, the 
instructions refer to the Treasury's list (Circular 570). Note (b) in 
Circular 570 specifically addresses the relationship between penal sum 
(face amount) and underwriting limitations, as well as exceptions and 
protections (co-insurance, reinsurance, or other methods in accordance 
with 31 CFR 223.10 and 223.11).

III. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993. This rule is not a major rule 
under 5 U.S.C. 804.

IV. Regulatory Flexibility Act

    DoD, GSA and NASA have prepared a Final Regulatory Flexibility 
Analysis (FRFA) consistent with the Regulatory Flexibility Act 5 U.S.C. 
601, et seq. The FRFA is summarized as follows:

    The final rule amends five Standard Forms to provide more 
choices for organization types on five Standard Forms and to clarify 
instructions; the action's objective is to make the forms more 
reflective of current forms of business in the construction 
industry.
    There were no significant issues raised by the public in 
response to the Initial Regulatory Flexibility Analysis provided in 
the proposed rule.
    The final rule applies to all entities, both small and other 
than small, performing as contractors or subcontractors on U.S. 
Government contracts that require bonds and other financial 
protections. The Federal Procurement Data System indicates that the 
U.S. Government awarded 3,495 new construction contracts that 
required bonds and other financial protections from October 1, 2014 
through August 4, 2015. Approximately 78 percent (2,711) of the 
total awards (3,495) were awarded to small entities (comprised of 
1,687 unique small entities).
    There are no reporting or recordkeeping requirements associated 
with this rule. There were no significant alternatives identified 
that would meet the objective of the rule. However, the small 
entities will not be materially affected by this rule, as it simply 
allows all businesses to choose from a broader array of organization 
types.

    Interested parties may obtain a copy of the FRFA from the 
Regulatory Secretariat Division. The Regulatory Secretariat Division 
has submitted a copy of the FRFA to the Chief Counsel for Advocacy of 
the Small Business Administration.

V. Paperwork Reduction Act

    This rule affects the information collection requirements in the 
provisions at FAR 28.1 and 28.2; 52.228-1; 52.228-2; 52.228-13, 52.228-
15; and 52.228-16, currently approved under OMB Control Number 9000-
0045, titled: Bid Guarantees, Performance, and Payments Bonds, in 
accordance with the Paperwork Reduction Act (44 U.S.C. chapter 35). The 
impact, however, is negligible, because this rule simply provides 
additional choices for offerors in characterizing their organization 
types on SFs 24, 25, 25A, 34, and 35, as well as clarifying what 
offerors should specify in terms of liability limits.

List of Subjects in 48 CFR Part 53

    Government procurement.

    Dated: June 30, 2016.
William F. Clark,
Director, Office of Government-wide Acquisition Policy, Office of 
Acquisition Policy, Office of Government-wide Policy.

    Therefore, DoD, GSA, and NASA amend 48 CFR part 53 as set forth 
below:

0
1. The authority citation for 48 CFR part 53 continues to read as 
follows:

PART 53--FORMS

    Authority:  40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.


0
2. Amend section 53.228 by revising paragraphs (a) through (g) to read 
as follows:


53.228   Bonds and insurance.

* * * * *
    (a) SF 24 (Rev. 8/2016) Bid Bond. (See 28.106-1.) SF 24 is 
authorized for local reproduction and can be found in the GSA Forms 
Library at http://www.gsa.gov/forms.
    (b) SF 25 (Rev. 8/2016) Performance Bond. (See 28.106-1(b).) SF 25 
is authorized for local reproduction and can be found in the GSA Forms 
Library at http://www.gsa.gov/forms.
    (c) SF 25A (Rev. 8/2016) Payment Bond. (See 28.106-1(c).) SF 25A is 
authorized for local reproduction and can be found in the GSA Forms 
Library at http://www.gsa.gov/forms.
    (d) SF 25B (Rev. 10/83), Continuation Sheet (For Standard Forms 24, 
25, and 25A) (See 28.106-1(d).) This form can

[[Page 45857]]

be found in the GSA Forms Library at http://www.gsa.gov/forms.
    (e) SF 28 (Rev. 6/03) Affidavit of Individual Surety. (See 28.106-
1(e) and 28.203(b).) SF 28 is authorized for local reproduction and can 
be found in the GSA Forms Library at http://www.gsa.gov/forms.
    (f) SF 34 (Rev. (8/2016) Annual Bid Bond. (See 28.106-1(f).) SF 34 
is authorized for local reproduction and can be found in the GSA Forms 
Library at http://www.gsa.gov/forms.
    (g) SF 35 (Rev. 8/2016) Annual Performance Bond. (See 28.106-1.) SF 
35 is authorized for local reproduction and can be found in the GSA 
Forms Library at http://www.gsa.gov/forms.
* * * * *

0
3. Revise section 53.301-24 to read as follows:


53.301-24   Bid Bond.

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0
4. Revise section 53.301-25 to read as follows:


53.301-25  Performance Bond.
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[[Page 45861]]


0
5. Revise section 53.301-25A to read as follows:


53.301-25A  Payment Bond.
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[[Page 45863]]


0
6. Revise section 53.301-34 to read as follows:


53.301-34  Annual Bid Bond.
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[[Page 45864]]


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[[Page 45865]]


0
7. Revise section 53.301-35 to read as follows:


53.301-35  Annual Performance Bond.
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[FR Doc. 2016-16248 Filed 7-13-16; 8:45 a.m.]
 BILLING CODE 6820-14-C