Contract Surety

Federal Contracts Without Bonding Requirements May Still Require Bonds

01/22/2019

Federal construction contracts over $150,000 requiring payment and performance bonds should not be a surprise to federal construction contractors. But what happens when a federal contract over $150,000 is ambiguous as to whether it’s specifically called a construction contract but still requires services related to construction? Are payment and performance bonds still required in that scenario? The Federal Circuit says yes.

In K-Con, Inc. v. Secretary of the Army, 908 F.3d 719 (Fed. Cir. 2018), K-Con, Inc. was awarded two task orders from the Army, each valued at over $150,000, for pre-engineered metal buildings. Neither contract for either order included express bonding requirements nor FAR 52.228-15, which requires payment and performance bonds for construction contracts valued at over $150,000.  The contracts did, however, include construction related tasks, including construction of the buildings themselves in addition to the purchase of the buildings. That made it unclear as to whether these were commercial item or construction contracts. K-Con, Inc. did not seek clarification on whether the bonds were required before submitting a bid on these contracts.

The Federal Circuit found that FAR 52.228-15 was incorporated into the contract due to the construction related services within the contract. Under the Christian doctrine, clauses are incorporated if mandatory or deeply ingrained in public policy. FAR and the Miller Act were found to make these clauses mandatory because of the court’s determination that they were construction contracts. As for the second part of the Christian doctrine, it was found that payment and performance bonds for construction contracts are deeply ingrained in public policy. Therefore, the court determined that FAR 52.228-15 is to be read into construction contracts where it was otherwise not included expressly. K-Con also was held to have a duty to inquire as to whether the ambiguous contracts were construction contracts before bidding.

Ultimately, just because bonding requirements are not expressly written out in contracts doesn’t mean they won’t be required in the end. It’s essential for a contractor to seek clarification on what exactly is required before placing a bid and winning a contract. Otherwise, you can be held responsible for the obligation, as well as cost, to provide payment and performance bonds. Learn more about federal contract bonding requirements.

So where can you purchase bid and payment/performance bonds?

Colonial offers the direct and digital way to obtain bid and payment/performance bonds as well as any other surety bonds. We are the insurance company — which means no agent, no broker, and no middleman. We make it easy to obtain your bond. The steps are easy — get a quote online, fill out your information, satisfy underwriting requirements, and enter your payment method. Print your bond from your office. It’s that simple!