How Much Bonding is Required?

[Matt]

If a company has a multi-year federal construction contract that consists of performing numerous construction projects, how much performance and payment bonding is required? I know that FAR 28.102-2 requires the penal amount to equal 100% of the contract award and any additional increases in the contract award. Does this mean that if the original award amount is the guaranteed minimum under the contract - say 400k - and if another 500k of construction work is ordered that the bond has to increase to $900k from the original 400k? What if the original $400k construction project has been completed and accepted by the government before the new project is ordered under the same contract, does the company still have to increase the penal sum to $900k or can it be just be increased to $500k to cover the new project?

[Surety Queen]

Originally Posted by Matt

If a company has a multi-year federal construction contract that consists of performing numerous construction projects, how much performance and payment bonding is required? I know that FAR 28.102-2 requires the penal amount to equal 100% of the contract award and any additional increases in the contract award. Does this mean that if the original award amount is the guaranteed minimum under the contract - say 400k - and if another 500k of construction work is ordered that the bond has to increase to $900k from the original 400k? What if the original $400k construction project has been completed and accepted by the government before the new project is ordered under the same contract, does the company still have to increase the penal sum to $900k or can it be just be increased to $500k to cover the new project?

When a performance bond is issued it's written to coincide with the contract you have received from the Obligee. So, if there is an increase in the contract, there will be an increase in the bond amount and consequently the premium. We will generally do an audit billing at the end of a project to see if there were any change orders and bill the additional premium at that time. It would be recommended that the Obligee issue you a new contract and get a new bond for the new project.