(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. (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. (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. (3) Substantial progress payments are made before delivery of end items starts.

4. (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.