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4 hours ago, ji20874 said:

Thanks.  You made an insightful observation -- but I'm not wholly convinced that the definition of bond in FAR Part 28 excludes subcontractor bonds -- I think the word contractor in the definition is illustrative, not prescriptive.  Many times in the FAR (many, many times), the term contractor also reaches to subcontractor depending on the context -- for example, FAR 31.001 gives a definition of Compensation for personal services -- that definition speaks of "services rendered by employees to the contractor" -- but surely, when the cost principles of FAR Part 31 are applied subcontracts, the word contractor reaches to mean subcontractor? 

An important skill for a contracting officer is to call it, one way or the other -- like an umpire behind the plate.  Some people never develop that skill.  When a contracting officer makes a bad call (or even when the contracting officer makes a good call but someone doesn't like it), the process always allows for a remedy.  I have great respect for contracting officers who make the call on principled and well-thought-out reasons, even if I think I might have decided differently.  As you continue to read here, I hope you will start thinking along the lines of "What would I do in this case?" 

 

Subcontractor bonds are not necessarily unallowable under the cost principles. Said that long ago. If it is considered reasonable for the circumstances, such as have been discussed early in this thread, then they can be included in the contract price. 

Subcontractor performance and payment bonds don’t meet the definition of Miller Act Bonds, that’s all.

They are commercial performance and payment bonds. They protect the prime’s bonding company and the prime.  

They aren’t required or even covered under the Miller Act.

The government is not the obligee. 

The prime must indemnify it’s bonding company for any losses- un-recovered expenses. It’s easier for the prime to make a claim against the subs bond than it is to have to sue to recover losses from a responsible sub. 

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I wonder how much experience some people here actually have  in administering construction contracts, reviewing and processing consents of surety, dealing with sureties and their bonding agencies,, negotiating and dealing with Tender and Release agreements, Takeover agreements, etc., etc. , handling construction progress payments with numerous CLINs and SubCLINs, etc that are inclusive of bond premiums and which may involve multiple subcontractors. 

Its a rhetorical question - some of the responses here make me wonder how many people have suddenly become experts in this area. 

 

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7 hours ago, ALAL said:

I just wanted to point out that there was a lot of discussion about bonds, but nobody even mentioned the FAR definition (I think it's the only FAR definition) of "bond," which does not cover subcontractor bonds.

Why should "contractor" be interpreted as "prime contractor" in the FAR definition of "bond"?

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4 hours ago, joel hoffman said:

I wonder how much experience some people here actually have  in administering construction contracts, reviewing and processing consents of surety, dealing with sureties and their bonding agencies,, negotiating and dealing with Tender and Release agreements, Takeover agreements, etc., etc. , handling construction progress payments with numerous CLINs and SubCLINs, etc that are inclusive of bond premiums and which may involve multiple subcontractors. 

Its a rhetorical question - some of the responses here make me wonder how many people have suddenly become experts in this area. 

 

How dare you!  I strongly suggest that you remove this post.

4 hours ago, joel hoffman said:

The government is not the obligee.

 

Wrong!     "Where a subcontractor furnishes a bond, however, the obligee may be the owner or the prime contractor or both."  NACM’s Manual of Credit and Commercial Laws, 104th edition.

aka Dual-Multiple Obligee Rider

I will read this thread but I will not be responding further as it is clear that no reference can be provided that supports that a subcontractor bond cost can not be reimbursed in the manner I have repeated in a couple of posts.  When a reference is provide d I will respond as appropriate.  

 

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14 hours ago, joel hoffman said:

I wonder how much experience some people here actually have  in administering construction contracts, reviewing and processing consents of surety, dealing with sureties and their bonding agencies,, negotiating and dealing with Tender and Release agreements, Takeover agreements, etc., etc. , handling construction progress payments with numerous CLINs and SubCLINs, etc that are inclusive of bond premiums and which may involve multiple subcontractors. 

Its a rhetorical question - some of the responses here make me wonder how many people have suddenly become experts in this area.

Hmmm... I wonder if this comment was aimed at me?

This isn't a rhetorical question.

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12 hours ago, C Culham said:

How dare you!  I strongly suggest that you remove this post.

 

Wrong!     "Where a subcontractor furnishes a bond, however, the obligee may be the owner or the prime contractor or both."  NACM’s Manual of Credit and Commercial Laws, 104th edition.

aka Dual-Multiple Obligee Rider

I will read this thread but I will not be responding further as it is clear that no reference can be provided that supports that a subcontractor bond cost can not be reimbursed in the manner I have repeated in a couple of posts.  When a reference is provide d I will respond as appropriate.  

 

The US Government has no privity of contract with subcontractors to an 8(a) or subcontractors to a prime contractor. 

A specific exception could sometimes be a Tri-party Takeover Agreement with a completion subcontractor - however , in that case, the existing bond remains in force. No new bond is furnished and the government wouldn’t pay for it anyway.

In a Tender and Release, the surety provides for a new prime and surety to substitute and takeover completion of the work. In that event, we required the surety to remain responsible for any latent defects, gross mistakes, and anything else that the new contractor wouldn’t be responsible for.  We issued separate contracts to the new contractor(s) with new bond(s). 

However, to the best of my recollection, we  didn’t get any pay request for the new bond. The original sureties assumed those costs and may or may not have recouped it from the original prime. 

Sorry that you don’t seem to understand the Digest to the GAO Decision which you hung your hat on. The GAO described how it would be legal to make upfront reimbursement for bonds, if the FPR and ASPR were to be amended accordingly. 

I just got off the phone with a friend of mine, who is a local surety bonding agent for several sureties. He confirmed that he regularly sells bonds for federal government construction contracts as well as for state, local and private construction. 

We discussed subcontractor bonds for those types of construction contracts. 

Subcontractor bonding is more prevalent on private construction that for federal construction. It is generally used when the surety won’t or is reluctant to pre-approve a prime contractor for the size and/or complexity of a construction  project without obtaining subcontractor bonds from its MAJOR subcontractors and/or subcontracts over some determined $ limit.

He doesn’t recall a surety requiring all subs to provide bonds. 

He said - without me prompting - that a subcontract bond on a federal contract is between the prime and the sub; that the purpose is for the benefit and protection of the prime and its surety.

He said that the oblugee(s) on those type bonds are the prime and or the prime and the surety. He said that the federal government is not an obligee because “there is no contract between the subcontractor and the government”. 

He said that the owner on a private construction project could be named as an obligee.He said that a surety may require those major subs to bond part of the prime contract or may write the bond for the entire amount but require that it will be the obligee, etc. Depends upon many factors.

He also stated, without my input (paraphrasing here) : “a bond is not an insurance policy because, unlike instance, anything that the surety has to pay out beyond recovery will be recouped from the bonded contractor, to the extent that it can recover the loss. 

He said it would be a very complex task to administer contracts as an obligee on multiple bonds even without bond claims.

Nobody here has shown how subcontractor bonds meet the criteria for bonds required by law (Specifically, Miller Act as stated in the Decision).

Have you or anyone else found the background information for the amended ASPR and FPR clauses to support your assertions that they allow reimbursement for anything other than Miller Act required  bonds? 

If so, please share. Thanks. 

 

 

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2 hours ago, ji20874 said:

Hmmm... I wonder if this comment was aimed at me?

This isn't a rhetorical question.

Not necessarily. 

However, I am puzzled why nobody here seems to understand or acknowledge what the GAO decided would be the legal basis for amending the ASPR and FPR in order to allow the government to make upfront payments. 

Now some seem to be arguing or implying  that there is no difference between a sub and a prime and/or a Miller Act Bond and a subcontract bond under Part 28.

The GAO noted the recommendations of those asking for its opinion whether and  how to pay the bond premiums upfront , including subcontractor bonds vs. amortizing them as the work progresses or in a mobilization and predatory bid item, similar to non federal construction contracts. The GAO had previously held that they weren’t eligible as mob and predatory expenses or payable upfront. 

Nobody, including me has seen the implementing background for the amended ASPR/FPR payment clauses. I’ve got the ASPR clause somewhere at home but haven’t found it.

The ASPR was superseded by the Defense Acquisition Regulations (DAR) in 1978. 

 Some folks don’t understand the distinctions between federal construction contract bonding and bonding, in general. Most or all states have adopted “little Miller Acts” for public contracting . But I am not familiar with the details or distinctions between those state statutes or between them and the federal statute. 

Private and commercial construction contract are diverse and can use varied types of surety bonding. 

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14 minutes ago, joel hoffman said:

Not necessarily. 

But maybe?  Partly?  If you're dismissing me from the conversation for an assumed lack of experience or credentials, I'd like to know. 

14 minutes ago, joel hoffman said:

I am puzzled why nobody here seems to understand what the GAO decided would be the legal basis for amending the ASPR and FPR in order to allow the government to make upfront payments.

Maybe because the GAO decision was made in the pre-FAR days, and presumably, the FAR drafters gave appropriate consideration to the matter.  Thus, we work with the FAR text today.  Today, it is common knowledge that performance and payment bond premium reimbursements are not advance payments. so we no longer need to refer back to the 1977 case to support that understanding.

It is true that federal construction contract bonding is not an easy subject.  It is better when the discussion is narrow (namely, federal construction contract bonding).  There is no purpose of introducing little Miller Act or private bonding practices unless as a comparison, but really, these topics are not relevant to our discussion.

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Ah, ji, but I think they are extremely relevant to understand the specific distinctions between federal bonding requirements and other bonding practices. Especially when people say that “it’s is common...”

Im not dismissing you, ji. 

I wouldn’t dismiss that GAO opinion, either though. I don’t think that the laws limiting progress payments have changed  since 1977.

I joined the USACE in 1980.  The way I described how prime contractor bond premiums are reimbursed was the way it was done in 1980 and, as far as I know, it’s still the same way now. There was an attempt to use a separate CLIN for bonds back in the 1990’s but it was discontinued shortly thereafter. The UASCE uses a standardized Contract Admin software program that provides for a prime contractor performance and payment bond reimbursement up front. Then the software liquidates it as progress is earned. 

If one mixes subcontractor bonds into that  reimbursement, it can’t be correctly liquidated because subcontractor bonds/work is not a spread cost over the entire contract amount.  And, where there are multiple line items, is specific to certain line items. 

Someone suggested that you can separate the bond and administratively adjust all the affected CLIN amounts in the invoice payment.  Not in our system. The progress pay estimates are interlinked with all of the other financial and contract admin software syStems. They must reflect the contractual line item amounts. 

And then, what happens if a sub defaults or is otherwise replaced before or during performance? The government has reimbursed a subcontract bond payment before it was earned and won’t be earned. That isn’t in the interest of either the prime or the government. 

You may end up with contract admin accounting nightmares. 

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As I shared earlier,

On ‎9‎/‎18‎/‎2019 at 10:02 AM, ji20874 said:

If I were again in a construction setting, in my contracting officer practice I might be willing to reimburse subcontractor bond premiums under FAR 52.232-5(g) if subcontractor bonds were required--

  1. by the prime contract; or 
  2. by the prime contractor's surety as common practice in the industry (in contrast to elective self-protection choices made by the prime contractor).

I'm comfortable with that approach.  I've done a lot of construction contracting, but I have not yet seen 1. or 2. in real life.

As I understand things, bond premium reimbursements don't need to be liquidated, for either or both of two reasons:  First, the contractor is required to deliver performance and payment bonds, and does so, so it is entitled to full payment.  Second, I would not want to impose the liquidation philosophy for other progress payments (such as in the clause of FAR 52.232-16, Progress Payments) on payments for construction contracts under FAR 52.232-5, Payments Under Fixed-Price Construction Contracts.  A construction progress payment is not a progress payment that has to be liquidated; rather, it is a progress payment that reflects the percent complete.  The concept of liquidating progress payments applies to services and supplies, not construction (see the definition of liquidate in FAR 32.001).  At least, that's how I understand things.

I hate it when our automated systems dictate to us, rather than helping us.  I hate it when automated systems take away flexibility we would otherwise have under the law.  I hate it when our automated systems impose requirements that aren't real (such as your automated system trying to liquidate construction progress payments).

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8 hours ago, ji20874 said:

As I understand things, bond premium reimbursements don't need to be liquidated, for either or both of two reasons:  First, the contractor is required to deliver performance and payment bonds, and does so, so it is entitled to full payment. 

ji, by “liquidated”, the GAO (in the 1977 Decision) and I don’t mean that the government is taking back the bond premium money that it paid up front.

What happens is this- as the contractor reports, for example , 10% progress in a subsequent payment estimate. Thus, 10% progress will include 10% of the bond premium which has already been paid.

The payment estimate form that we use will show for that payment estimate a cumulative 90% for the bond and 10% progress. That plus stored materials is total earnings to date.

 Then we subtract previous payments from the latest cumulative total earnings to calculate the amount of the progress payment. 

It looks weird but since we are subtracting previous total earnings from current earnings it works out. 

This goes on the same way for each progress payment request until bond payment shows zero and  progress shows 100% 

The trick is basically total current earnings minus previous total earnings. 

I mentioned how stored materials are handled only to use a an example. As stored materials come out of the inventory they go into the work progress so that there is no double payment for the same materials. Each pay estimate includes the updated value of overall stored materials. Eventually that is reduced or liquidated to zero as materials are incorporated into the work. (Zeroed Out as progress accumulates.) 

I’m simplifying that a bit for materials but am explaining it that way for illustrative purposes. 

That what I meant by liquidating the bond payment  it is absorbed into the line items that comprise total progress to date. The overall amount paid isn’t affected by this method. 

It.  looks more complicated than it is. In an early assignment,  I used to  prepare all the monthly construction payment estimates by hand, using my trusty TI-30 calculator.

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Oh - ji, we still disagree about up front payment for any subcontractor bond premiums unless they are required by the contract - AND show the government as the obligee. That would be a VERY rare occurrence. 

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Well, I think you are making it too hard.  Liquidation is required for "normal" progress payments in contracts for supplies and services using the Progress Payments clause, but applying that approach to construction progress payments seems to me to be unnecessary and is neither required nor contemplated by the FAR or the Payments Under Fixed-Price Construction Contracts clause.  

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6 hours ago, ji20874 said:

Well, I think you are making it too hard.  Liquidation is required for "normal" progress payments in contracts for supplies and services using the Progress Payments clause, but applying that approach to construction progress payments seems to me to be unnecessary and is neither required nor contemplated by the FAR or the Payments Under Fixed-Price Construction Contracts clause.  

It has been done for decades on hundreds of billions of dollars of construction contracts for stored materials and for upfront bond payments since sometime after 1977. They were doing it in 1980, when I started with USACE.

Stored materials are materials and equipment that have been reimbursed up front prior to incorporation into the work . The paid inventory is liquidated (the cumulative amount of stored materials is zeroed out) as the material is incorporated into the work.

Look at bond reimbursement similarly as the unliquidated bond premium is subsequently incorporated into the cumulative earned progress on in place work. 

 Another way is to use a separate line item which is paid for based upon paid receipts. However, it is clunky in my opinion - I’ve used that method during a USACE trial period in the early 90’s.  The line item didn’t always match the actual cost of the bonds, so the contractor had to wait until the end of the contract to be paid the full line item amount. And it raised eyebrows like in the GSBCA defective pricing claim. The separate line item skewed earned progress too.

Liquidating bond payments were mentioned in the GAO decision on page 5, in reference to earlier GAO decisions. So, it was either proposed or being done prior to that.

its not rocket science. It’s good contract administration. 😃

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Payment for mobilization and prepatory  work is sometimes liquidated into the multiple earned progress line items if there isn’t a separate line item and where it can’t be identified with specific line items.

A separate line item was also clunky in practice. Contractors often front end loaded that line item for early payment. Different methods were used to allow payment and many were controversial.

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2 hours ago, joel hoffman said:

It’s good contract administration. 

I'll accept that as your opinion.  

I cannot speak to USACE practices in 1977 and 1980, but I will accept your assertions that USACE had a practice of liquidating progress payments on fixed-price construction contracts in those days.

I hope you will accept the following as facts--

  1. Liquidate means to decrease a payment for an accepted supply item or service under a contract for the purpose of recouping financing payments previously paid to the contractor."  See FAR 32.001 (emphasis added).  
  2. The clause at FAR 52.232-5, Payments Under Fixed-Price Construction Contracts, neither requires nor contemplates liquidation of construction progress payments.  See FAR 52.232-5.
  3. In contrast, the clause at FAR 52.232-16, Progress Payments, does require liquidation of progress payments where progress payments are based on incurred costs.  However, that clause is not applicable to fixed-price construction contracts.  See FAR 32.500.

Because on these facts, and consistent with my understanding that progress payments based on percent complete are wholly different from progress payments based on incurred costs (notwithstanding the similar use of "progress payments" as a term), I do not liquidate progress payments in fixed-price construction contracts in my contracting officer practice.  I simply administer the clause at FAR 52.232-5 as it is written. I see this as good contract administration.

You aren't going to persuade me to change my practice.  If you want to continue the exchange, can we limit it to whether I have presented the facts correctly in 1, 2, and 3 above?

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1 hour ago, ji20874 said:

I'll accept that as your opinion.  

I hope you will accept the following as facts--

  1. Liquidate means to decrease a payment for an accepted supply item or service under a contract for the purpose of recouping financing payments previously paid to the contractor."  FAR 32.001, emphasis added.  
  2. The clause at FAR 52.232-5, Payments Under Fixed-Price Construction Contracts, neither requires nor contemplates liquidation of construction progress payments.

Definition of recoup from Merriam -Webster:

“Definition of recoup

transitive verb

1ato get an equivalent for (losses) make up for
bREIMBURSECOMPENSATErecoup a person for losses
2REGAINan attempt to recoup his fortune

intransitive verb

to make good or make up for something lost”
 
Well, we aren’t “recouping” any financing payments. Maybe there is a better term but it is simply an accounting exercise. As the unliquidated balances of reimbursed stored materials, paid bond premiums, mobilization and predatory work, etc.  decrease, the values are incorporated into the progress of inplace work, when there are not separate line items for those items. It balances out and the contractor isn’t paying anything back or losing any pay. 
 
The committe that recommended and sought GAO approval to pay the bond premiums up front actually proposed to use that method.
 
What is so hard to understand about that?  
 
People need to understand that the FAR doesn’t have the answer to every aspect and detail of good contract administration procedures.
 
Thus, in response to your point number 2., the clause doesn’t have to specifically provide step by step instructions or specifically “require” or “contemplate” liquidating upfront payments for bonds, stored materials, mobilization and predatory work, etc. someone had to figure out a way to do it so that we don’t double pay for such items. 
 
as for difficult? I was once the office engineer (contract administrator) for a resident engineer office with 20 active ongoing contracts. Some contracts had upwards of 80 line items.  I processed monthly Payment Estimates during a certain two or three day period every month - it was all done by hand on calculators and IBM Selectric typewriters. We had programmable Monroe calculators for the big contracts, which handled the math equations.  Our jobsite QA personnel jointly reviewed and confirmed the contrActor’s reported progress for the contractor to submit with its payment request My  actual math and hand write up only took a couple of hours for all 20 contracts. The secretaries’ typing and the paperwork preparation and our monthly reports consumed most of the time during that three day period.
 
With computerized contract admin software nowadays, it takes a matter of minutes for each contract after the field agrees on progress. In many USACE offices these days the same person assigned to a contract handles both CA and QA duties. It’s not difficult or cumbersome. The programmers have written the logarithms. 
Edited by joel hoffman
Specifically addressed ji’s Point 2.

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We don’t need to debate any longer.. 

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So, am I right in thinking that you don't agree with the three facts?

30 minutes ago, joel hoffman said:

What is so hard to understand about that?

I'm not the problem.

19 minutes ago, joel hoffman said:

We don’t need to debate any longer.. 

Okay.  But if you do want to continue, please, let's limit it to whether I have presented the facts correctly in 1, 2, and 3 above.  I will be unable to see any merit in your position so long as those three facts stand in the way.

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14 minutes ago, ji20874 said:

So, am I right in thinking that you don't agree with the three facts?

I'm not the problem.

Okay.  But if you do want to continue, please, let's limit it to whether I have presented the facts correctly in 1, 2, and 3 above.  I will be unable to see any merit in your position so long as those three facts stand in the way.

See my edited response to your point number two above. Actually, it also addresses your point number 1 for the same reason.

In addition to the above, for points Numbers 1 and 2, 

The FAR isn’t a cookbook for every aspect and step by step procedure for C.A.. 

As is often pointed out by Contracting Officers and others in this forum, please see 1.102(d).

I didn’t see your edited post which added point number three. 

Regarding your point number three, I agree that it isn’t relevant to fixed price construction progress or final payments. 

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FACTS –

  1. Bond premiums of a subcontractor are an allowable cost. (FAR 31.205-4) therefore they may be a direct cost.

  2. There is no Federal regulation as to where a contractor when pricing a Federal contract must place this allowable cost in their pricing and in an instant contract CLIN structure.   Likewise there is no privity of the government to stipulate to a prime contractor the terms and conditions of a subcontract with regard to subcontractor bond premiums and how such bond cost will be placed subcontractor pricing.  Therefore a subcontract agreement can stipulate that the prime contractor will reimburse a subcontractor for subcontractor bond premiums upon presentation/substantiation of the subcontractor’s payment for bonds and the prime contractor can show this cost as a direct cost in their contract pricing.

  3. Payments under FAR 52.232-5 are not contract financing payments (FAR 32.001)

  4. As a payment under 52.232-5 is an invoice payment it is subject to the Prompt Payment Act (FAR 32.001).

  5. Subject to the Prompt Payment Act FAR 52.232-27 prescribes certain requirements for placing prompt payment terms in subcontracts and recognizes the ability of a prime contractor and its subcontractors to address payment for subcontractor bonds.

  6. 52.232-5 as well as 52.232-27 requires the prime contractor to certify that invoice payments received have been used to pay subcontractors and that timely payments will be made from the instant payment requested in accordance with subcontract agreements.  As a subcontractor agreement can provide for reimbursement of bond premiums the prime contractor can therefore certify a subcontractor bond premium payment.

  7. 52.232-5(g)  provides that bond premiums may be reimbursed after the Contractor has furnished evidence of full payment to the surety and that retainage provisions do not apply to the reimbursement.

  8. 52.232-27 provides a nexus to the 52.232-5(g) reference on reimbursement of bond premiums with no retainage as relating to subcontractor bonds where at 52.232-27(d)(1) it states “Retainage permitted. Permit the Contractor or a subcontractor to retain (without cause) a specified percentage of each progress payment otherwise due to a subcontractor for satisfactory performance under the subcontract without incurring any obligation to pay a late payment interest penalty, in accordance with terms and conditions agreed to by the parties to the subcontract, giving such recognition as the parties deem appropriate to the ability of a subcontractor to furnish a performance bond and a payment bond.”

  9. 52.232-5(g) does not provide that only contractor bonds provided under the Miller Act will be reimbursed what it does provide is that the government will  reimburse the Contractor for the amount of premiums paid for performance and payment bonds”

These facts from the FAR substantiate that a prime may require subcontractors to provide bonds, that the cost for such bonds is an allowable and direct cost to a contract; that payment for such cost is not contract financing (nor advance payment) but an invoice payment and as such the prime can be reimbursed upon invoice substantiation of subcontractor bonds.

 

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Joel,

Here are the facts as I understand them:

  1. Liquidate means to decrease a payment for an accepted supply item or service under a contract for the purpose of recouping financing payments previously paid to the contractor."  See FAR 32.001 (emphasis added).  
  2. The clause at FAR 52.232-5, Payments Under Fixed-Price Construction Contracts, neither requires nor contemplates liquidation of construction progress payments.  See FAR 52.232-5.
  3. In contrast, the clause at FAR 52.232-16, Progress Payments, does require liquidation of progress payments where progress payments are based on incurred costs.  However, that clause is not applicable to fixed-price construction contracts.  See FAR 32.500.

For 1, I'm understanding that you want to read fixed-price construction into the definition of "liquidate."  I prefer not to.

For 2, I'm understanding that your point is that liquidation is not prohibited, and is therefore allowable if it is seen as a sound business practice.  I wholly agree with FAR 1.102-4(d), but I'm not convinced it is a sound business practice, so I have two questions-- 

  • In your practice, do you have a USACE or home-made clause that provides liquidation instructions, including, most importantly, a liquidation rate?  
  • I found the USACE CONTRACT ADMINISTRATION MANUAL FOR CONSTRUCTION CONTRACTS, SOUTH ATLANTIC DIVISION, SADDM 1110-1-1, on the internet.  The entire Chapter 4 is about administering progress payments for construction contracts -- Chapter 4 has 20 pages of text on administering progress payments and additional many pages of very detailed how-to exhibits for administering and computing and making progress payments, but there is zero discussion, not a single word, about liquidating progress payments.  Does USACE have another manual that teaches why and how to liquidate progress payments on fixed-price construction contracts? 

For 3, I am hopeful that we agree, inasmuch as you already said we do.  However, I am concerned that you might be using 52.232-16 procedures in your practice of liquidating progress payments payable under 52.232-5, as I do not know where else the procedures for that process come from. 

Edited by ji20874
Corrected 1.102-2(d) to 1.102-4(d).

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Carl,

I agree that progress payments made under FAR 52.232-5 are not contract financing payments, and I appreciate your raising this fact.  This is another reason why I am not ready to agree that those progress payments require liquidation.  Joel has been trying to convince me, but this is another hurdle I will have to overcome before I can agree.

We're a long way from the original posting.

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Unfortunately, Carl still fails to recognize that the digest of the 1977 GAO decision explains what the bond payment is for and why; and that the body of the decision explains why the GAO said that upfront payments don’t qualify as mobilization or prepatory work and that they are a requirement of the law.

Notwithstanding that, Carl - how would you administratively handle subsequent progress payments on contracts with when subcontractor bonds are handled aAs upfront payments with one or more line items for progress.

When a construction contract has several line items, individual subcontracts generally aren’t included (spread over)  all line items. 

Would you establish a separate line item that would include all bonds, including those that do not benefit or protect the government? 

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