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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: February 14, 2003

SUBJECT: Defense Federal Acquisition Regulation Supplement (DFARS); Payment Bonds on Cost-Reimbursement Contracts

SOURCE: Federal Register, February 14, 2003, Vol. 68, No. 31, page 7490

AGENCIES: Department of Defense (DOD)

ACTION: Proposed Rule

SYNOPSIS: DOD is proposing to amend DFARS 228.102, Performance and Payment Bonds for Construction Contracts, to permit the use of alternative payment protections for fixed-price construction subcontracts between $25,000 and $100,000 issued under cost-reimbursement contracts.

DATES: Comments on the proposed rule must be submitted on or before April 15, 2003.

ADDRESSES: Respondents may submit comments directly on the web site at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. As an alternative, respondents may e-mail comments to: dfars@acq.osd.mil. Also, respondents who cannot submit comments through the web site or by e-mail may submit comments to Defense Acquisition Regulations Council, Attn: Euclides Barrera, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062, or by fax to 703-602-0350. Cite "DFARS Case 2002-D030" when making comments on this proposed rule.

FOR FURTHER INFORMATION CONTACT: Euclides Barrera, 703-602-0296.

SUPPLEMENTAL INFORMATION: The Miller Act (40 U.S.C. 270a-270f) requires performance and payment bonds for construction contracts exceeding $100,000, and this requirement is reflected in paragraph (a) of Federal Acquisition Regulation (FAR) 28.102-1, General. In addition, Section 4104(b)(2) of the Federal Acquisition Streamlining Act of 1994 (Public Law 103-355) permits five alternative payment protections for construction contracts between $25,000 and $100,000, and this is reflected in FAR 28.102-1(b).

Currently, paragraph (a) of DFARS 228.102-1, General, 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. To make DFARS 228.102-1 consistent with FAR 28.102-1, this proposed rule would revise DFARS 228.102-1(a) to require the prime contractor to obtain from each of its construction subcontractors with fixed-price 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)."

In addition, the DFARS 228.102-1 text that precedes paragraph (a) implemented 10 U.S.C. 2701(h) and (i) and pertained to bonds under Defense Environmental Restoration Program contracts. 10 U.S.C. 2701(h) and (i) expired on December 31, 1999, but 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 would be amended to remove the expiration date. Also, the text would be relocated to a new DFARS 228.102-70, Defense Environmental Restoration Program Construction Contracts, because its location in DFARS 228.102-1 causes confusion regarding its relationship to the text in paragraph (a).

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2003 by Panoptic Enterprises. All Rights Reserved.

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