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Nov 13

Written by: admin
11/13/2014 2:43 PM  RssIcon

Effective Date: November 13, 2014

This final rule amends the FAR in order to remove all references to OFPP Pamphlet No. 7, Use of Irrevocable Letters of Credit (ILC), and provides updated sources of data required to verify the credit worthiness of a financial entity issuing or confirming an ILC. The objective of the rule is to provide up to date and readily available information on requirements regarding credit rating for the financial institution issuing or confirming an ILC.

  • FAR 28.204-3 is revised to reflect extracted language from the OFFP Pamphlet No. 7. The extracted language contains relevant and current information regarding ILC’s and provides additional sources of data required to verify the credit worthiness of a financial entity issuing or confirming an ILC.

    • This will apply to all contracts for services, supplies, or construction, when a bid guarantee or performance and payment bonds are required. 40 
      U.S.C. 3131 requires performance and payment bonds for any construction contract exceeding $100,000; this was raised for inflation to $150,000 (see FAR 1.109). Any person required to furnish a bond has the option to furnish a bond secured by an ILC. 

    • For construction contracts valued at $30,000 to $150,000, alternative payment protection is required, which may involve an ILC. Generally, 
      agencies do not require bonds for other than construction contracts. 

  • FAR clause 52.228-14 “Irrevocable Letter of Credit” is also revised to delete the  reference to Pamphlet No.7 and incorporate the appropriate extracted text from  the obsolete pamphlet.

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