At Last: Final Rule on Revisions to Federal Bond Forms Published
Diligence and persistence pays off. On Thursday, July 14, the FAR Council, comprised of the Department of Defense, the General Services Administration (GSA), and the National Aeronautics and Space Administration, published in the Federal Register a final rule to address the concerns that NASBP brought to their attention regarding the “Type of Organization” block in federal standardized bond forms, specifically Standard Forms (SF) 24, 25, 25A, 34 and 35. This multi-year effort undertaken by NASBP first produced a proposed rule published in the Federal Register at 80 FR 63485 on October 20, 2015, after NASBP and U.S. Representative Michelle Lujan Grisham (D-NM 1st) exchanged correspondence with the General Services Administration about the need to permit users of federal bond forms to indicate types of organizations that were then not addressed on the forms, such as limited liability companies, as such types have grown more common in the construction industry.
The final rule, which became effective on August 15, 2016 and can be viewed here, makes two improvements originally requested by NASBP: (1) insert “Other” in the “Type of Organization” block to permit principals to indicate their type of organization, if an LLC or other similar type, and (2) provide better instructions on what should be inserted in the “Liability Limit” block. The final rule now establishes that SF bonds will include “Other” in the choices in the “Type of Organization” block; thus the SF bonds will permit the principal or his or her agent to indicate “Other” and then specify the type of organization that otherwise is not listed on the form, such as LLC. Moreover, the instructions to SF bonds will include the statement: “The value put into the LIABILITY LIMIT block is the penal sum (i.e., the face value) of the bond, unless a co-surety arrangement is proposed.”
The FAR Council received three public comments in support of the proposed rule and therefore made no significant changes in the final rule. In the background statement of the final rule, the FAR Council noted the following: “The proposed rule addressed concerns that surety bond producers may be adversely affected by differing Federal Agency views on the proper type of organization to indicate on these Standard Forms when the subject business was a limited liability company (LLC), an increasingly prevalent form of business in the construction industry.”
NASBP first embarked on this odyssey to amend the SF bonds over five years ago. Clearly nothing in Washington is ever simple, as they say. Even inserting the word “other” in a boilerplate standardized bond form, clearly has its challenges. We are grateful to Representative Michelle Lujan Grisham for her aid in drawing the attention of the FAR Council to this simple but important matter, which may have languished even longer without her support, and to the GSA who gathered industry feedback and pursued the matter until completion.
To access the newly published, amended forms, click the links below.
SF 24 Bid Bond
SF 25 Performance Bond
SF 25A Payment Bond
SF 34 Annual Bid Bond
SF 35 Annual Performance Bond