Contractors who bond routinely ask a reasonable question: rather than a separate bond for every job, can we not have one bond for the year?
The FAR has an answer, and it is more specific than most people expect. The annual bonds exist. Construction is not allowed to use them.
The two definitions, and the parenthetical in both
FAR 28.001 lists the types of bonds used in Part 28. Two of them are annual.
“An annual bid bond is a single bond furnished by a bidder, in lieu of separate bonds, which secure all bids (on other than construction contracts) requiring bonds submitted during a specific Government fiscal year.”
“An annual performance bond is a single bond furnished by a contractor, in lieu of separate performance bonds, to secure fulfillment of the contractor’s obligations under contracts (other than construction contracts) requiring bonds entered into during a specific Government fiscal year.”
The same exclusion, in both, inside the parentheses. This is not an omission that has to be inferred from elsewhere in the regulation — the drafters wrote the carve-out into the definitions themselves, twice.
What an annual bond does where it is allowed
Where it applies, the structure is straightforward. One instrument, furnished once, standing in place of the separate bonds that would otherwise be furnished — for bids submitted, or contracts entered into, during a specific Government fiscal year.
The unit is the fiscal year and the substitution is explicit: in lieu of separate bonds. It is an administrative simplification for a bidder or contractor whose bonded obligations recur throughout the year in a form the surety can underwrite once.
Why the construction carve-out is structural, not clerical
Look at how the FAR sizes a construction bond. Under FAR 28.102-2(b)(1) the performance bond penal amount must equal “100 percent of the original contract price,” and 28.102-2(a) defines original contract price as the award price of that contract.
That is a per-contract measurement. It cannot be restated as one annual number without losing the thing it measures. A single bond covering a fiscal year of construction work would have to name a penal sum, and no penal sum tracks the individual contract prices the regulation ties the requirement to.
The escalation rule points the same way. FAR 28.102-2(b)(1)(ii) adds “an additional amount equal to 100 percent of the increase” whenever the contract price increases. An annual instrument would need to absorb every change order on every job in the year, which is not a bounded obligation at the moment the instrument is written.
What contractors are usually describing instead
When a construction contractor says they are “on an annual program,” they generally mean one of two things, and neither is an annual bond in the FAR sense.
A bond facility or line. The surety has underwritten the contractor once and agreed, in principle, to a single-job limit and an aggregate limit. Individual bonds are still issued job by job — the facility governs how readily, not whether.
A general indemnity agreement already in place. The indemnity paperwork is signed once and stands behind future bonds. That removes a step; it does not remove the separate bonds.
Both are real and useful. Neither is an instrument furnished to an obligee, and neither satisfies a bond requirement on any particular contract.
The distinction that matters at bid time
A solicitation requires bonds for the contract it solicits. What a contractor has arranged with its surety in general is invisible to that requirement. The bonds furnished have to be the bonds the contract calls for, sized as Part 28 sizes them.
An arrangement that speeds up the issuing of those bonds is worth having. An arrangement mistaken for the bonds themselves is a problem discovered at the worst possible moment.
What this page does not cover
This is FAR Part 28 and federal contracting. State and local public-works bonding is governed by state statutes, which have their own rules and do not adopt the FAR’s definitions; whether any of them permit an annual form is a question for the individual statute.
It also does not cover license and permit bonds, which are frequently written as continuous or term instruments and follow a different logic entirely — those bonds secure compliance with a licensing scheme, not performance of a particular contract.
