(a) Performance bonds may be required for contracts exceeding the simplified acquisition threshold when necessary to protect the Government's interest. The following situations may warrant a performance bond:
- (1) Government property or funds are to be provided to the contractor for use in performing the contract or as partial compensation (as in retention of salvaged material).
- (2) A contractor sells assets to or merges with another concern, and the Government, after recognizing the latter concern as the successor in interest, desires assurance that it is financially capable.
- (3) Substantial progress payments are made before delivery of end items starts.
- (4) Contracts are for dismantling, demolition, or removal of improvements.
- (b) The Government may require additional performance bond protection when a contract price is increased.
- (c) The contracting officer must determine the contractor's responsibility (see subpart 9.1) even though a bond has been or can be obtained.
[48 FR 42286, Sept. 19, 1983, as amended at 60 FR 34759, July 3, 1995; 61 FR 39213, July 26, 1996]