Friday, November 17, 2000 - 10:04 pm:
The Miller Act (implemented by FAR 28.102-1(a) requires
performance and payment bonds in any construction contract
The definition at FAR 28.102-2(a) states that "original contract
price means...for indefinite quantity contracts, the price
payable for the specified minimum quantity".
Additionally, FAR 28.102-2(b)(1)(ii) and (b)(2)(i)(B)address
increases in the contract price and bond requirements for the
If you write a contract delivery order for $56,000 ("seed"
project representing the funds the customer has available) that
establishes the specified minimum quantity, bonds are not
required, but alternate payment protection methods must be
selected (FAR 28.102-1(b)).
1) Do subsequent delivery orders, regardless of dollar amount,
effectively increase the "original contract price"?
If so, then once the aggregate of all delivery orders exceeds
the $100,000 threshold, performance and payment bonds will be
required. Until the threshold is exceeded, presumably we only
need to require the contractor to increase the level in their
alternate payment protection forms.
2) If subsequent delivery orders have no bearing on the
"original contract price", what protection devices do we
incorporate for delivery orders over $100,000?
3) Should delivery orders under the contract, especially those
over $100,000, be treated as "mini" contracts in relation to the
requirement for performance and payment bonds.
on Friday, November 17, 2000 - 11:30 pm:
Franc, you obviously have tried the "Ask a Professor
Construction and A-E Contracts" site, without success. The
"professor" seems to have given up answering questions.
I believe the answers to your questions relate to the threshold
for the Miller Act, which is intended to provide payment
protection for subs, employees and suppliers on Federal
construction projects, exceeding $100k. The Miller Act was
necessary because Federal Property is not subject to "liens",
which are widely applicable to non-federal property.
I'm certain that if you have an aggregate of over $100k in
"open" task orders, you need the bond. That should answer
questions number two and three. I'm not sure that you need bonds
IF you never have an aggregate of $100k in open orders.
Once you obtain a bond, it's easier to maintain the bond than
obtaining a new one each time you go over $100k, plus
incremental bond costs are usually cheaper than the initial
issue bond. Happy Sails! Joel
on Tuesday, November 21, 2000 - 05:18 pm:
Franc and Joel:
The FAR coverage of Miller Act bonding for an IDIQ construction
contract strikes me as nearly unintelligible. All the same,
Franc, here is how I would answer your questions:
Upon contract award, the type and amount of bonding should be
based on the minimum quantity of the IDIQ contract, as required
by FAR. As orders are issued, the type and amount of bonding
should be adjusted to reflect the net value of the uncompleted
work under all orders.
I think that Joel is right that treating each order as a
separate contract is likely to be more costly to the government.
FAR does not require you to treat each order as a separate
contract for bonding purposes, so I wouldn't do it that way if
it would cost more.
Tuesday, November 21, 2000 - 08:19 pm:
I can tell you really love the DAR Council!
If you adjust the type and amount of bonding to reflect the net
value of uncompleted work, what would happen if you had a
$50,000 order at 20%completion and a newly issued order for
$70,000? The net value of uncompleted work would be over
Does this trigger the "full" bonding requirements of the Wagner
Act, even if the amount of uncompleted work under the first
delivery order was already "payment protected" under the
alternates outlined in 28.102-1(b)?
I agree with you and Joe about the higher bonding costs
associated with treating each delivery order separately. At this
location, it appears that cost is a secondary issue. Every IDIQ
solicitation contains a statement, typed under clause 52.228-15,
saying that bonds are required on every delivery order.
joel hoffman on Wednesday, November 22, 2000 - 07:03 am:
Franc, are you referring to the "Miller Act" ?
(of 1935 covering bonding requirementss, see more information at
the Surety Information Office at:
or the "Wagner Act" ?
(National Labor Relations Act of 1935 - see: "http://www.britannica.com/seo/w/wagner-act/"
) Happy Sails! Joel
joel on Wednesday, November 22, 2000 - 07:23 am:
By the way - the Surety Information Office has a wealth of
information available on bonding, free. I was unable to fill my
order for some technical reason but they are at the website
referenced above. Happy Sails! Joel
bob antonio on Wednesday, November 22, 2000 - 07:33 am:
I am going to add the site to this one. I try to find sites that
give information for free.
on Wednesday, November 22, 2000 - 09:19 am:
In my opinion, each order affects the "original contract price"
of an IDIQ contract. As orders are issued and completed the
original contract price increases and decreases. That's my
conclusion based on logic; but I cannot cite a regulation to
The nature and amount of the bond guarantees for a contract
should reflect the Miller Act requirements and the government's
exposure. Thus, there should be enough to satisfy the Miller Act
with regard to the work outstanding. Each order increases the
government's exposure and thus requires an increase in the
bonding, and the completion of each order reduces the
government's exposure. However, I don't think the increase needs
to cover the sum of the face values of the outstanding orders,
just the sum of the values of the uncompleted work. FAR clearly
gives the contracting officer discretion in that regard.
I also think that when the sum of the values of the uncompleted
work exceeds $100,000 you need to require the bonding for a
contract in excess of $100,000. That is not clear from the FAR,
but that is what makes sense to me in light of what I can glean
from the FAR.
joel hoffman on Wednesday, November 22, 2000 - 09:36 am:
Franc and Vern, as a bit of advice, I'd count the value of
all uncompleted orders, when initiating or adding to a bond.
Under the Miller Act, a sub, supplier or laborer can take an
action against the bond several months after providing the
material, labor or service. The remaining value on the task
order may be far less than the claim exposure against the bond
for unpaid workers, suppliers and subs or in case of default.
Plus, the bonding company typically calculates the premium on
the total amount of the contract - for task orders, I'd include
and track the total of each task order covered by the bond.
Makes it much cleaner to negotiate and to administer. Bonding
company keeps up with the total work covered through periodic
inquiries to the Government, plus the SF 1415's and other forms
If you have separate, alternate coverage for initial small
tasks, you can separate those tasks from the bonded tasks. I
believe that would be workable. Happy Sails! joel
Vern Edwards on Wednesday, November 22, 2000 - 09:39 am:
That's good advice. Thanks.
joel hoffman on Wednesday, November 22, 2000 - 09:40 am:
To clarify, I recommend including the total cost of task
orders to be covered by the bond (not just the uncompleted
amount of the task order). For task orders not covered by bond
but by alternate security, keep those separate. I believe that
should answer Franc's question about avoiding duplicate
protections. Does this make sense? Happy Sails!
By Julee McTaggart
on Friday, December 08, 2000 - 07:27 pm:
I think you'll be interested in FAR clause 52.228-15,
Performance and Payment Bonds -- Construction. I quote from the
definitions paragraph -"ORIGINAL CONTRACT PRICE means the award
price of the contract; or, for requirements contracts, the price
payable for the estimated total quantity; or for
indefinite-quantity contracts, the price payable for the
specified minimum quanity. Original contract price does not
include the price of any options, except those options exercised
at the time of contract award."
Hope this helps.
on Saturday, December 09, 2000 - 08:44 am:
Julee, the wording in the clause would logically indicate
that the bond isn't required until the contract amount, as
measured by task orders, exceeds the Miller Act threshold of
$100k. If alternate coverage was provided for initial task
orders below the threshold, I wouldn't count those totals in the
threshold amount, as there is already some protection provided
by the alternative approaches. I'd apply the bond only to the
remaining task orders.
If all follow-on task orders are below $100k, I suppose you
could treat each as a separate contract, forego bonds, and use
alternative protection. That would be cumbersome, though.
I just received some material from the Surety Information
Office. This information reminded me that claimants under a
payment bond must file a claim no sooner than 90 days after the
last material or labor were furnished and no later than 1 year
after that date. Therefore, I'd repeat my 22 November 2000
Happy Sails! Joel