SBA Seeks Comment on Proposed Changes to Bond Program

by Shannon Allen

The Small Business Administration (“SBA”) announces proposed rule changes to the Surety Bond Guarantee Program (“Bond Program”).  Under the Bond Program, the SBA “guarantees bid, payment and performance bonds” for small contractors who are unable to acquire surety bonds “through regular commercial channels.”  The SBA agrees to “assume a certain percentage of the Surety's loss” if a small contractor defaults.  The Bond Program provides an incentive to Sureties and helps small businesses obtain “greater access to contracting opportunities.” 

The SBA’s proposal would make Bond Program regulations conform to particular provisions of the National Defense Authorization Act for Fiscal Year 2013 (“NDAA”).  These changes include:

• increasing the contract amount from $2 million to $6.5 million;
• increasing the contract amount to $10 million with a Federal contracting officer's certification that it is crucial for the small business to obtain bonding;
• authorizing the SBA to deny liability at its discretion;
• prohibiting the SBA from denying liability based on material information that was provided as part of the guarantee application in the Prior Approval Program;
• clarifying that the principal must retain full responsibility for the oversight and management of the contract;
• encouraging greater use of the Quick Bond Guarantee Application and Agreement;
• updating the dollar threshold to $100,000 for certain provisions determining when a change in the contract or bond amounts meet particular criteria; and
• reducing timeframes for taking certain actions related to claims.

Interested parties are invited to submit comments, identified by RIN 3245-AG56, by September 30, 2013 by any of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
• Mail: Office of Surety Guarantees, Suite 8600, 409 Third Street SW., Washington, DC 20416.
• Hand Delivery/Courier: Office of Surety Guarantees, 409 Third Street SW., Washington, DC 20416.
• Confidential business information (“CBI”) as defined in the User Notice at www.regulations.gov.  Please submit the information to Office of Surety Guarantees, 409 Third Street SW., Washington, DC 20416 or send an email to the Office of Surety Guarantees. Highlight the information that you consider to be CBI and explain why you believe the SBA should hold this information as confidential. The SBA will review the information and make the final determination whether it will publish the information.