52.228-14 Irrevocable Letter of Credit.

As prescribed in 28.204-4 , insert the following clause:

Irrevocable Letter of Credit (Nov 2014)

(a) "Irrevocable letter of credit" (ILC), as used in this clause, means a written commitment by a

federally insured financial institution to pay all or part of a stated amount of money, until the

expiration date of the letter, upon presentation by the Government (the beneficiary) of a written

demand therefor. Neither the financial institution nor the offeror/Contractor can revoke or condition

the letter of credit.

(b) If the offeror intends to use an ILC in lieu of a bid bond, or to secure other types of bonds such as

performance and payment bonds, the letter of credit and letter of confirmation formats in

paragraphs (e) and (f) of this clause shall be used.

(c) The letter of credit shall be irrevocable, shall require presentation of no document other than a

written demand and the ILC (including confirming letter, if any), shall be issued/confirmed by an

acceptable federally insured financial institution as provided in paragraph (d) of this clause, and-

(1) If used as a bid guarantee, the ILC shall expire no earlier than 60 days after the close of the bid

acceptance period;

(2) If used as an alternative to corporate or individual sureties as security for a performance or

payment bond, the offeror/Contractor may submit an ILC with an initial expiration date estimated to

cover the entire period for which financial security is required or may submit an ILC with an initial

expiration date that is a minimum period of one year from the date of issuance. The ILC shall

provide that, unless the issuer provides the beneficiary written notice of non-renewal at least 60

days in advance of the current expiration date, the ILC is automatically extended without

amendment for one year from the expiration date, or any future expiration date, until the period of

required coverage is completed and the Contracting Officer provides the financial institution with a

written statement waiving the right to payment. The period of required coverage shall be:

(i) For contracts subject to 40 U.S.C. chapter 31, subchapter III, Bonds, the later of-

(A) Oneyear following the expected date of final payment;

(B) For performance bonds only, until completion of any warranty period; or

(C) For payment bonds only, until resolution of all claims filed against the payment bond during the

one-year period following final payment.

(ii) For contracts not subject to 40 U.S.C. chapter 31, subchapter III, Bonds, the later of-

(A) 90 days following final payment; or

(B) For performance bonds only, until completion of any warranty period.

(d)

(1) Only federally insured financial institutions rated investment grade by a commercial rating
service shall issue or confirm the ILC.

(2) Unless the financial institution issuing the ILC had letter of credit business of at least $25 million

in the past year, ILCs over $5 million must be confirmed by another acceptable financial institution

that had letter of credit business of at least $25 million in the past year.

(3) The Offeror/Contractor shall provide the Contracting Officer a credit rating that indicates the

financial institutions have the required credit rating as of the date of issuance of the ILC.

(4) The current rating for a financial institution is available through any of the following rating

services registered with the U.S. Securities and Exchange Commission (SEC) as a Nationally

Recognized Statistical Rating Organization (NRSRO). NRSRO’s can be located at the website

http://www.sec.gov/answers/nrsro.htm maintained by the SEC.

(e) The following format shall be used by the issuing financial institution to create an ILC:

_________________________________________________ [Issuing Financial Institution’s Letterhead

orNameandAddress]

Issue Date __________

Irrevocable Letter of Credit No. _______________________

Account party’s name _______________________________

Account party’s address ______________________________

For Solicitation No. _________________ (for reference only)

To: [U.S. Government agency]

[U.S. Government agency’s address]

1. We hereby establish this irrevocable and transferable Letter of Credit in your favor for one or

more drawings up to United States $______. This Letter of Credit is payable at [issuing financial

institution’s and, if any, confirming financial institution’s] office at [issuing financial institution’s

address and, if any, confirming financial institution’s address] and expires with our close of business

on ___________, or any automatically extended expiration date.

2. We hereby undertake to honor your or the transferee’s sight draft(s) drawn on the issuing or, if

any, the confirming financial institution, for all or any part of this credit if presented with this Letter

of Credit and confirmation, if any, at the office specified in paragraph 1 of this Letter of Credit on or

before the expiration date or any automatically extended expiration date.

3. [This paragraph is omitted if used as a bid guarantee, and subsequent paragraphs are

renumbered.] It is a condition of this Letter of Credit that it is deemed to be automatically extended

without amendment for oneyear from the expiration date hereof, or any future expiration date,
unless at least 60 days prior to any expiration date, we notify you or the transferee by registered

mail, or other receipted means of delivery, that we elect not to consider this Letter of Credit

renewed for any such additional period. At the time we notify you, we also agree to notify the

account party (and confirming financial institution, if any) by the same means of delivery.

4. This Letter of Credit is transferable. Transfers and assignments of proceeds are to be effected

without charge to either the beneficiary or the transferee/assignee of proceeds. Such transfer or

assignment shall be only at the written direction of the Government (the beneficiary) in a form

satisfactory to the issuing financial institution and the confirming financial institution, if any.

5. This Letter of Credit is subject to the Uniform Customs and Practice (UCP) for Documentary

Credits, International Chamber of Commerce Publication No. _____________________ (Insert version in

effect at the time of ILC issuance, e.g., "Publication 600, 2006 edition") and to the extent not

inconsistent therewith, to the laws of _____________________ [State of confirming financial institution,

if any, otherwise State of issuing financial institution].

6. If this credit expires during an interruption of business of this financial institution as described in

Article 17 of the UCP, the financial institution specifically agrees to effect payment if this credit is

drawn against within 30 days after the resumption of our business.

Sincerely,

_______________________________ [Issuing financial institution]

(f) The following format shall be used by the financial institution to confirm an ILC:

[Confirming Financial Institution’s Letterhead or Name and Address]

______________________________________________

(Date) __________________

Our Letter of Credit Advice Number ____________________

Beneficiary: _________________ [U.S. Government agency]

Issuing Financial Institution: __________________________

Issuing Financial Institution’s LC No.: __________________

Gentlemen:

1. We hereby confirm the above indicated Letter of Credit, the original of which is attached, issued

by __________ [name of issuing financial institution] for drawings of up to United States dollars

___________/U.S. $_______ and expiring with our close of business on _____________ [the expiration

date], or any automatically extended expiration date.

2. Draft(s) drawn under the Letter of Credit and this Confirmation are payable at our office located

at ___________________.
3. We hereby undertake to honor sight draft(s) drawn under and presented with the Letter of Credit

and this Confirmation at our offices as specified herein.

4. [This paragraph is omitted if used as a bid guarantee, and subsequent paragraphs are

renumbered.] It is a condition of this confirmation that it be deemed automatically extended without

amendment for oneyear from the expiration date hereof, or any automatically extended expiration

date, unless:

(a) At least 60 days prior to any such expiration date, we shall notify the Contracting Officer, or the

transferee and the issuing financial institution, by registered mail or other receipted means of

delivery, that we elect not to consider this confirmation extended for any such additional period; or

(b) The issuing financial institution shall have exercised its right to notify you or the transferee, the

account party, and ourselves, of its election not to extend the expiration date of the Letter of Credit.

5. This confirmation is subject to the Uniform Customs and Practice (UCP) for Documentary Credits,

International Chamber of Commerce Publication No. _____________________ (Insert version in effect at

the time of ILC issuance, e.g., "Publication 600, 2006 edition") and to the extent not inconsistent

therewith, to the laws of _____________________ [State of confirming financial institution].

6. If this confirmation expires during an interruption of business of this financial institution as

described in Article 17 of the UCP, we specifically agree to effect payment if this credit is drawn

against within 30 days after the resumption of our business.

Sincerely,

_______________________________ [Confirming financial institution]

(g) The following format shall be used by the Contracting Officer for a sight draft to draw on the

Letter of Credit:

Sight Draft

_______________________________ [City, State]

(Date) _____________________________ [Name and address of financial institution]

Pay to the order of ______________ [Beneficiary Agency] ___________ the sum of United States

$____________. This draft is drawn under Irrevocable Letter of Credit No. _______________________.

_______________________________ [Beneficiary Agency] _______________________________ [By]

(End of clause)

Parent topic: 52.228 [Reserved]