FAR Part 28: Bonds and Insurance

In plain English

FAR Part 28 covers financial protection requirements for federal contracts, including bid guarantees, performance and payment bonds, alternative payment protections, and insurance. It matters because contractors must often provide these guarantees to be eligible for award and to protect the Government from losses.

Key rules

• A contracting officer cannot require a bid guarantee unless a performance bond or performance and payment bond is also required. (28.101-1)
• For construction contracts over $150,000, performance and payment bonds are generally required under 40 U.S.C. chapter 31, subchapter III (Miller Act). (28.102-1)
• For non-construction contracts, performance and payment bonds are generally not required, but may be used when necessary to protect the Government's interest. (28.103-1, 28.103-2)
• Corporate sureties must be listed on the Treasury Department's Listing of Approved Sureties (Circular 570) to be acceptable. (28.202)
• Instead of a corporate or individual surety, a contractor may provide alternative security such as U.S. bonds or notes, certified checks, or an irrevocable letter of credit. (28.204, 28.204-1, 28.204-2, 28.204-3)
• Under cost-reimbursement contracts, contractors must carry insurance for workers' compensation, employer's liability, and other liabilities as specified. (28.307, 28.307-2)
• When the Government requires insurance, policies must include an endorsement requiring written notice before cancellation or material change. (28.302)

Who does what

In practice

• If you bid on a construction contract over $150,000, you will likely need to provide performance and payment bonds; factor the cost and time to obtain them into your bid.
• For non-construction contracts, bonds are less common but may be required if the contracting officer determines they are necessary to protect the Government.
• You can use alternative security like an irrevocable letter of credit instead of a surety bond, but you must follow the specific requirements in 28.204-3.
• Under cost-reimbursement contracts, you must carry specified insurance and may need prior approval for group insurance plans.

Common pitfalls

• Assuming a bid guarantee is always required: it is only required if a performance bond or performance and payment bond is also required (28.101-1).
• Using a corporate surety not listed on Treasury's Circular 570: such bonds are not acceptable (28.202).
• Failing to provide evidence of authority for an attorney-in-fact signing a bid bond: this can make the bid nonresponsive (28.101-3).
• Neglecting to obtain consent of surety when modifying a contract: this may be required and failure to do so can cause problems (28.106-5).

Written by AI from this part's codified text (2026-10-04); cited sections are checked against the part. A guide, not legal advice: the regulation text, the solicitation and your contract rule.