2015-26581. Federal Acquisition Regulation: Revision to Standard Forms for Bonds

AGENCY:

Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).

ACTION:

Proposed rule.

SUMMARY:

DoD, GSA, and NASA are proposing to revise Standard Forms prescribed by the Federal Acquisition Regulation (FAR) for contracts involving bonds and other financial protections. The revisions are aimed at clarifying liability limitations and expanding the options for organization types.

DATES:

Interested parties should submit written comments to the Regulatory Secretariat at one of the addresses shown below on or before December 21, 2015 to be considered in the formation of the final rule.

ADDRESSES:

Submit comments in response to FAR Case 2015-025 by any of the following methods:

• Regulations.gov: http://www.regulations.gov. Submit comments via the Federal eRulemaking portal by searching for “FAR Case 2015-025”. Select the link “Comment Now” that corresponds with “FAR Case 2015-025”. Follow the instructions provided on the screen. Please include your name, company name (if any), and “FAR Case 2015-025” on your attached document.
• Mail: General Services Administration, Regulatory Secretariat (MVCB), ATTN: Ms. Flowers, 1800 F Street NW., 2nd Floor, Washington, DC 20405-0001.

Instructions: Please submit comments only and cite FAR Case 2015-025, Revision to Standard Forms for Bonds in all correspondence related to this case. Comments received generally will be posted without change to http://www.regulations.gov,, including any personal and/or business confidential information provided. To confirm receipt of your comment(s), please check www.regulations.gov,, approximately two to three days after submission to verify posting (except allow 30 days for posting of comments submitted by mail).

FOR FURTHER INFORMATION CONTACT:

Ms. Kathlyn J. Hopkins, Procurement Analyst, at 202-969-7226 for clarification of content. For information pertaining to status or publication schedules, contact the Regulatory Secretariat Division at 202-501-4755. Please cite FAR Case 2015-025.

SUPPLEMENTARY INFORMATION:

I. Background

DoD, GSA, and NASA are proposing to revise the FAR to clarify liability limitations and to expand the options for organization types on Standard Forms (SFs) 24, 25, 25A, 34, and 35. This case addresses concerns of surety bond producers that may be adversely affected by differing Federal Agency views on the proper type of organization to indicate on these Standard Forms when a business is a limited liability company (LLC), which is an increasingly prevalent form of business in the construction industry. In some cases, companies are being told to leave the “Type of Organization” block blank because there is no good fit; in other cases, they select the closest fit and are challenged on that selection. To address these concerns, this rule proposes to add a box labelled “Other: (Specify)” to the “Type of Organization” block on each of the five forms (SFs 24, 25, 25A, 34, and 35) in order to expand the range of business types to include LLCs and others, as they evolve.

In addition, there have been questions about the appropriate value to report in the “Liability Limit” block on these standard forms (i.e., whether to cite the Surety Company's T-limit, as established by the Treasury Department, or the penalty limit for a given bond (its face value)); this has caused processing delays and even some rejections of bids. To address this concern, this rule proposes to add clarifying instructions to each of the forms (SFs 24, 25, 25A, 34, and 35) that amplify the fact that the typical value put into the “Liability Limit” block is the face value of the bond, unless a co-surety arrangement is proposed. These instructions are inserted into item (4) of the SF 24 and into item (3) of SFs 25, 25A, 34, and 35, along with some editorial corrections to the existing instructions.

II. Executive Orders 12866 and 13563

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under Section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

III. Regulatory Flexibility Act

DoD, GSA, and NASA do not expect this proposed rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act 5 U.S.C. 601, et seq., because the rule simply provides additional choices for offerors in characterizing their organization types on SFs 24, 25, 25A, 34, and 35, as well as clarifying what offerors should specify in terms of liability limits. However, an initial regulatory flexibility analysis (IRFA) has been prepared consistent with 5 U.S.C. 603. The analysis is summarized as follows:

The reason for this action is to provide more choices for organization types on five Standard Forms and to clarify instructions; the action's objective is to make the forms more reflective of current forms of business in the construction industry. The proposed rule would apply to all entities, both small and other than small, performing as contractors or subcontractors on U.S. Government contracts that require bonds and other financial protections. The Federal Procurement Data System-Next Generation (FPDS-NG) indicates that the U.S. Government awarded 3,495 new construction contracts that required bonds and other financial protections from October 1, 2014 through August 4, 2015. Approximately 78 percent (2,711) of the total awards (3,495) were awarded to small entities (comprised of 1,687 unique small entities). However, the small entities will not be materially affected by this rule, as it simply allows all businesses to choose from a broader array of organization types.

There are no reporting or recordkeeping requirements associated with this rule.

The rule does not duplicate, overlap, or conflict with any other Federal rules.

There were no significant alternatives identified that would meet the objective of the rule.

The Regulatory Secretariat has submitted a copy of the IRFA to the Chief Counsel for Advocacy of the Small Business Administration. A copy of the IRFA may be obtained from the Regulatory Secretariat. DoD, GSA, and NASA invite comments from small business concerns and other interested parties on the expected impact of this rule on small entities.

DoD, GSA, and NASA will also consider comments from small entities concerning the existing regulations in subparts affected by the rule in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 610 (FAR Case 2015-025), in correspondence.

IV. Paperwork Reduction Act

This rule affects the information collection requirements in the provisions at FAR 28.1 and 28.2; 52.228-1; 52.228-2; 52.228-13, 52.228-15; and 52.228-16, currently approved under OMB Control Number 9000-0045, titled: Bid Guarantees, Performance, and Payments Bonds, in accordance with the Paperwork Reduction Act (44 U.S.C. chapter 35). The impact, however, is negligible, because this rule simply provides additional choices for offerors in characterizing their organization types on SFs 24, 25, 25A, 34, and 35, as well as clarifying what offerors should specify in terms of liability limits.

List of Subjects in 48 CFR Part 53

• Government procurement

William F. Clark,

Director, Office of Government-Wide Acquisition Policy, Office of Acquisition Policy, Office of Government-Wide Policy.

Therefore, DoD, GSA, and NASA proposes to amend 48 CFR part 53 as set forth below:

PART 53—FORMS

1. The authority citation for 48 CFR part 53 continues to read as follows:

Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 U.S.C. 20113.

2. Amend section 53.228 by revising the introductory text and paragraphs (a) through (g) to read as follows:

53.228

Bonds and insurance.

The following standard forms are prescribed for use for bond and insurance requirements, as specified in part 28 of this chapter:

(a) SF 24 (Rev. (Date)) Bid Bond. (See 28.106-1.) SF 24 is authorized for local reproduction and can be found in the GSA Forms Library at gsa.gov/forms.

(b) SF 25 (Rev. (Date)) Performance Bond. (See 28.106-1(b).) SF 25 is authorized for local reproduction and can be found in the GSA Forms Library at gsa.gov/forms.

(c) SF 25-A (Rev. (Date)) Payment Bond. (See 28.106-1(c).) SF 25-A is authorized for local reproduction and can be found in the GSA Forms Library at gsa.gov/forms.

(d) SF 25-B (Rev. 10/83), Continuation Sheet (For Standard Forms 24, 25, and 25-A). (See 28.106-1(d).) This form can be found in the GSA Forms Library at gsa.gov/forms.

(e) SF 28 (Rev. 6/03) Affidavit of Individual Surety. (See 28.106-1(e) and 28.203(b).) SF 28 is authorized for local reproduction and can be found in the GSA Forms Library at gsa.gov/forms.

(f) SF 34 (Rev. (Date)), Annual Bid Bond. (See 28.106-1(f).) SF 34 is authorized for local reproduction and can be found in the GSA Forms Library at gsa.gov/forms.

(g) SF 35 (Rev. (Date)), Annual Performance Bond. (See 28.106-1.) SF 35 is authorized for local reproduction and can be found in the GSA Forms Library at gsa.gov/forms.

* * * * *

3. Revise section 53.301-24 to read as follows:

53.301-24

Bid Bond.

4. Revise section 53.301-25 to read as follows:

53.301-25

Performance Bond.

5. Revise section 53.301-25A to read as follows:

53.301-25A

Payment Bond.

6. Revise section 53.301-34 to read as follows:

53.301-34

Annual Bid Bond.

7. Revise section 53.301-35 to read as follows:

53.301-35

Annual Performance Bond.