Tripartite Escrow Agreements may be helpful, if you are a small-sized contractor, you are often unable to submit proposals or offers to Federal Government agencies or departments. This not only shuts you out of the competition, but also denies the government the benefits of working with smaller companies, that offer more individualized attention, quicker response time and lower costs. Pursuant to the Federal Acquisition Streamlining Act of 1994, Public Law 103-355.

Tripartite Escrow Agreements are approved as an alternative payment protection for federal government contracts up to $150,000. This law created Tripartite Escrow Agreements to increase the business opportunities among small-sized contractors, while presenting the government with more available contractors.

To review the Federal Acquisition Regulation FAR 28.102-1 and FAR 52.228-13 regarding Tripartite Escrow Agreements Click on the following buttons:

“The prime contractor establishes an escrow account in a federally insured financial institution and enters into a tripartite escrow agreement with the financial institution, as escrow agent, and all of the suppliers of labor and material. The Tripartite Escrow Agreement shall establish the terms of payment under the contract and of resolution of disputes among the parties. The Government makes payments to the contractor’s escrow account, and the escrow agent distributes the payments in accordance with the agreement, or triggers the disputes resolution procedures if required.”


A contractor now has five (5) alternative payment protection options, per Federal Acquisition Regulation Part 28 Section 102 the options are as follows:

1. Payment bond.

2. An irrevocable letter of credit.

3. A certificate of deposit.

4. Other deposits for the type of security listed in FAR 28.204-1 and FAR 28.204-2.


Tripartite Escrow Agreement (contracts up to $150,000)

There is a better choice. Pursuant to the regulations FAR §28.102 the Government authorizes Tripartite Escrow Agreements in lieu of payment bonds, and other indicated payment protection alternatives. To utilize the Tripartite Escrow Agreement the fee is only 2% of the contract. With the Tripartite Escrow Agreement no financial statements, tax returns, working capital or work experience are needed to be approved. If you have a Tripartite Escrow Agreement as an option in your solicitation, you can save money and time, and the financial restrictions of an irrevocable letter of credit or certificate of deposit.

The following is the Escrow Process.