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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: June 20, 2003

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

SOURCE: Federal Register, June 20, 2003, Vol. 68, No. 119, page 36944

AGENCIES: Department of Defense (DOD)

ACTION: Final Rule

SYNOPSIS: DOD is revising 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.

EDITOR'S NOTE: For more on the proposed rule, see the February 14, 2003, FEDERAL CONTRACTS DISPATCH "Defense Federal Acquisition Regulation Supplement (DFARS); Payment Bonds on Cost-Reimbursement Contracts."

EFFECTIVE DATE: June 20, 2003.

FOR FURTHER INFORMATION CONTACT: Euclides Barrera, Defense Acquisition Regulations Council, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; 703-602-0296; fax: 703-602-0350. Cite "DFARS Case 2002-D030" when referring to this final rule.

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).

Paragraph (a) of DFARS 228.102-1, General, waived the requirement for performance and payment bonds for cost-reimbursement contracts, but required 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, DOD published a proposed rule on February 14, 2003, to 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 proposed rule would revise the text that preceded paragraph (a) of DFARS 228.102-1, which implemented 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) 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 proposed rule would have removed the expiration date from the text that precedes paragraph (a) of DFARS 228.102-1. Also, the proposed rule would have relocated that text to a new DFARS 228.102-70, Defense Environmental Restoration Program Construction Contracts, because its location in DFARS 228.102-1 had caused confusion regarding its relationship to the text in paragraph (a).

Since no comments were submitted on the proposed rule, DOD is adopting it as a final rule without change.

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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