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FFP construction contract in SC. Competitive IFB, SDVOSB set-aside. Question on behalf of the prime contractor. The government is required to promptly reimburse a contractor the cost of performance and payment bond premiums per FAR 52.232-5(g). Bonding companies generally require prime contractors also obtain bonds from subcontractors for subcontracts over a certain threshold (usually $250k for small-midsize companies). The prime contractor has several instances of where the subcontractor bond premium was reimbursed by the government along with the prime’s own bond premium AND several instances (from the same agency no less) where the pay application was denied on the basis of the subcontractor’s bond not being a government requirement. In my opinion, the subcontractor bond (required by the bonding company of the prime contractor) qualifies as “coinsurance” as stated in FAR 52.232-5(g) because without the subcontractor bond, the bond premium rate applied to the prime (for the entire value of the contract) would have been higher. Is anyone aware of any case history or regulatory references that substantiate or refute my position? Thanks in advance.
