NACM Joins Groups Urging Individual Surety Reform in U.S. Code
The Honorable Anne Rung
Administrator for Federal Procurement Policy
Office of Management and Budget
Eisenhower Executive Office Building – Room 263
1650 Pennsylvania Avenue, NW
Washington, DC 20503
Dear Madam Administrator:
Pursuant to Sections 1302 and 1303 of Title 41, United States Code, we, on behalf of the members of the signatory associations, request that you initiate a modification to Part 28.203 (Acceptability of Individual Sureties) of the Federal Acquisition Regulation (FAR) to require that the assets pledged by an individual surety are real and readily available by requiring that such pledged assets meet the standards currently required by FAR Part 28.204.
The requirements of the Miller Act (41 USCA Section 3131 et seq) are designed to protect the interest of the federal contracting agencies, as stewards of taxpayer funds by requiring bid and performance bonds and the interests of subcontractors and suppliers by requiring payment bonds, which provide such downstream parties payment protection of last resort for work performed and supplies furnished.
The current coverage of the Government-wide Federal Acquisition Regulation (FAR) Subpart 28.2 (Sureties and Other Security for Bonds) provides the contracting officer guidance, but implementation can be compromised by the severe challenges faced by even the most seasoned construction contracting officer. A determined and unscrupulous individual surety can too readily pledge assets that provide only illusory or insufficient protection. The core challenge for the contracting officer relates to verifying the existence of and assessing the value of the assets being pledged by the individual surety in support of the surety bonds being furnished to the Government. Those assets deemed "acceptable" under FAR 28.203-2(b)(3) include stocks, bonds, and real property owned in fee simple. The contracting officer faces several challenges in determining if the "acceptable assets" actually exist and can be readily liquidated to pay valid claims against a payment bond.