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    Where in the FAR does it talk about Escrow Companyies in lieu of Surety Companys. I have read FAR 28.


    Answer

    FAR 28.102 discusses an escrow agreement. 

    28.102 -- Performance and Payment Bonds and Alternative Payment Protections for Construction Contracts.

    28.102-1 -- General.

    (a) The Miller Act (40 U.S.C. 3131 et seq.) requires performance and payment bonds for any construction contract exceeding $150,000, except that this requirement may be waived--
      (1) By the contracting officer for as much of the work as is to be performed in a foreign country upon finding that it is impracticable for the contractor to furnish such bond; or
      (2) As otherwise authorized by the Miller Act or other law.
    (b)
      (1) Pursuant to 40 U.S.C. 3132, for construction contracts greater than $30,000, but not greater than $150,000, the contracting officer shall select two or more of the following payment protections, giving particular consideration to inclusion of an irrevocable letter of credit as one of the selected alternatives:
        (i) A payment bond.
        (ii) An irrevocable letter of credit (ILC).
        (iii) A tripartite escrow agreement. The prime contractor establishes an escrow account in a federally insured financial institution and enters into a tripartite escrow agreement with the financial institution, as escrow agent, and all of the suppliers of labor and material. The escrow agreement shall establish the terms of payment under the contract and of resolution of disputes among the parties. The Government makes payments to the contractor’s escrow account, and the escrow agent distributes the payments in accordance with the agreement, or triggers the disputes resolution procedures if required.
        (iv) Certificates of deposit. The contractor deposits certificates of deposit from a federally insured financial institution with the contracting officer, in an acceptable form, executable by the contracting officer.
        (v) A deposit of the types of security listed in 28.204-1 and 28.204-2.
      (2) The contractor shall submit to the Government one of the payment protections selected by the contracting officer.
    (c) The contractor shall furnish all bonds or alternative payment protection, including any necessary reinsurance agreements, before receiving a notice to proceed with the work or being allowed to start work.

    28.102-2 -- Amount Required.

    (a) Definition. As used in this subpart--
      “Original contract price” means the award price of the contract; or, for requirements, contracts, the price payable for the estimated total quantity; or, for indefinite-quantity contracts, the price payable for the specified minimum quantity. Original contract price does not include the price of any options, except those options exercised at the time of contract award.
    (b) Contracts exceeding the $150,000 (Miller Act)--.
      (1) Performance bonds. Unless the contracting officer determines that a lesser amount is adequate for the protection of the Government, the penal amount of performance bonds must equal--
        (i) 100 percent of the original contract price; and
        (ii) If the contract price increases, an additional amount equal to 100 percent of the increase.
      (2) Payment Bonds.
        (i) Unless the contracting officer makes a written determination supported by specific findings that a payment bond in this amount is impractical, the amount of the payment bond must equal—
          (A) 100 percent of the original contract price; and
          (B) If the contract price increases, and additional amount equal to 100 percent of the increase.
        (ii) The amount of the payment bond must be no less than the amount of the performance bond.
    (c) Contracts exceeding $30,000 but not exceeding $150,000. Unless the contracting officer determines that a lesser amount is adequate for the protection of the Government, the penal amount of the payment bond or the amount of alternative payment protection must equal--
      (1) 100 percent of the original contract price; and
      (2) If the contract price increases, an additional amount equal to 100 percent of the increase.
    (d) Securing additional payment protection. If the contract price increases, the Government must secure any needed additional protection by directing the contractor to—
      (1) Increase the penal sum of the existing bond;
      (2) Obtain an additional bond; or
      (3) Furnish additional alternative payment protection.
    (e) Reducing amounts. The contracting officer may reduce the amount of security to support a bond, subject to the conditions of 28.203-5(c) or 28.204(b).

    28.102-3 -- Contract Clauses.

    (a) Insert a clause substantially the same as the clause at 52.228-15, Performance and Payment Bonds -- Construction, in solicitations and contracts for construction that contain a requirement for performance and payment bonds if the resultant contract is expected to exceed $150,000. The contracting officer may revise paragraphs (b)(1) and/or (b)(2) of the clause to establish a lower percentage in accordance with 28.102-2(b). If the provision at 52.228-1 is not included in the solicitation, the contracting officer must set a period of time for return of executed bonds.
    (b) Insert the clause at 52.228-13, Alternative Payment Protections, in solicitations and contracts for construction, when the estimated or actual value exceeds $30,000 but does not exceed $150,000. Complete the clause by specifying the payment protections selected (see 28.102-1(b)(1)) and the deadline for submission. The contracting officer may revise paragraph (b) of the clause to establish a lower percentage in accordance with 28.102-2(c).

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