Secrets of Bonding

Sam, that is…

There are lots of federal bonds.  It’s a unique corner of the surety world with special requirements and mandatory bond forms.  Here is a general overview and some specific comments on Performance Bonds for federal contracts.

With so many federal forms for specific situations there’s bound to be some strange ones: Adulterated Butter Bond, Opium Smoking Bond and the Tobacco Tube Manufacturers Strengthening Bond to name a few!

The general categories are:

• Official Bonds covering the actions of people in office
• Immigrant Bonds covering foreign persons in the U.S.
• Excise Bonds cover taxation
• Customs Bonds relating to import and export

In addition to all the various small bonds, there are the Performance and Payment Bonds which often are for millions of dollars covering contracts for construction and services. Let’s talk about these.

For construction, the federal forms are Bid Bond #24, Performance Bond #25 and Payment Bond #25A.

Some unique aspects to note:

• If issued by a corporate surety, they must appear on the current version of Circular 570 (T-List) for an amount sufficient to cover the bond in question.  You can refer to the current list here: http://www.fms.treas.gov/c570/c570.html
• The use of 24, 25 and 25A is mandatory on contracts offered directly by a branch of the federal government. Projects that include federal funding, but are offered by a local non-federal entity, are governed by whatever bonding requirements they designate.
• On Bid Bonds, the “Date Bond Executed” and “Bid Date” are not required to be identical, but the execution date cannot be after the bid date.
• Federal bids bonds are normally for 20% of the proposal amount.
• On the #24 Bid Bond, it is not necessary to fill in a dollar amount for the penal sum of the bid bond – as long as the Percent of Bid Price (such as 20%) has been indicated.  It is also not necessary or correct for the surety to indicate their T-List limit in the Penal Sum area or in the signing area “Surety A.”  The correct dollar amount of responsibility is automatically calculated based on the proposed contract amount.  Entering a dollar figure is only necessary if the surety wishes to cap the bid bond amount by setting a maximum value.  (Refer to Secret #8.  Call if you don’t have it. (856) 304-7348.
• On 25 and 25A, it is not necessary to enter a dollar amount in the signing area “Surety A” unless there is a co-surety on the bond.  Liability Limit in the Surety A section is not asking for the T-list amount.
• Federal bonds are always made out to the United States of America.  They do not name the actual governmental agency.
• In the current edition, the nature of the work is listed on the Bid Bond, but not on the Performance or Payment Bond.  Only the contract number is indicated.
• You can download the current edition of these Standard Forms here: http://www.gsa.gov/portal/forms/type/SF  That’s important because a bond can be rejected by the C.O. if an obsolete version of SFs are used.
• In the current edition (2004), the form 24 Bid Bond says “Pervious edition is usable.”  Which, despite the poor spelling, means older versions are OK, same with the form 25A Payment bond.  Be sure to always read the printed details on the form which indicate the expiration date and other important facts.
• Another “Ooops!” from Uncle: There is no typable field provided on the form to enter a bond number.  You need to do this manually. “Perviously” the form was not even typable.  Small steps!

There you have it.  Federal Bond forms are different, but that doesn’t mean we can’t still be friends.

Readers please note: These posts are for your entertainment and enjoyment.  We do not assume responsibility for your correct execution of bonds, nor are we responsible to any third parties.

FIA Surety is a NJ based bonding company (carrier) that has specialized in Site, Subdivision, Bid and Performance Bonds since 1979 – we’re good at it!  Call us with your next one.

Steve Golia, Marketing Mgr.: 856-304-7348

First Indemnity of America Ins. Co.

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