52.228-14 — Irrevocable Letter of Credit.

FAR 52.228-14 — Irrevocable Letter of Credit.. This clause is part of the Federal Acquisition Regulation and may be included in government contracts as a solicitation provision or contract clause.

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 institu

• (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.
• (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.
• (e) The following format shall be used by the issuing financial institution to create an ILC: [Issuing Financial Institution's Letterhead or Name and Address] Issue Date Irrevocable Letter of Credit No.
• 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.
• 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.
• ] It is a condition of this confirmation that it be deemed automatically extended without amendment for one year 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.
• 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.