For Defense Environmental Restoration Program construction contracts entered into pursuant to 10 U.S.C. 2701 and executed between December 5, 1991, and December 31, 1999-
(1) Any rights of action under the performance bond shall only accrue to, and be for the exclusive use of, the obligee named in the bond.
(2) In the event of default, the surety's liability on the performance bond is limited to the cost of completion of the contract work, less the balance of unexpended funds. Under no circumstances shall the liability exceed the penal sum of the bond.
(3) The surety shall not be liable for indemnification or compensation of the obligee for loss or liability arising from personal injury or property damage, even if the injury or damage was caused by a breach of the bonded contract.
(4) Once it has taken action to meet its obligations under the bond, the surety is entitled to any indemnification and identical standard of liability to which the contractor was entitled under the contract or applicable laws and regulations.
(a) The requirement for performance and payment bonds is waived for cost-reimbursement contracts. However, for cost type contracts with fixed-price construction subcontracts over $25,000, require the prime contractor to obtain from each of its construction subcontractors-
(i) A payment bond in favor of the prime contractor sufficient to pay labor and material costs; and
(ii) A performance bond in an equal amount if available at no additional cost.
Fidelity and forgery bonds generally are not required but may be used when-
(1) Necessary for the protection of the Government or the contractor; or
(2) The investigative and claims services of a surety company are desired.
(a) Withholding may be appropriate in other than construction contracts (see 232.970-1(b)).
When a requirement for a performance bond or other security is included in a solicitation for dismantling, demolition, or removal of improvements (see FAR 37.300), use the provision at 252.228-7004, Bonds or Other Security. Set a period of time (normally ten days) for return of executed bonds.