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Catalog of Federal Domestic Assistance

Program Descriptions

59.016:  Bond Guarantees for Surety Companies

Popular Name:  Surety Bond Guarantee

Objectives:  To guarantee surety bonds issued by commercial surety companies for small contractors unable to obtain a bond without a guarantee. Guarantees are for up to 90 percent of the losses incurred and paid by participating sureties if certain conditions are met.

PROGRAM AND AWARD	FINANCIAL AND INFORMATION CONTACTS
ELIGIBILITY REQUIREMENTS	FINANCIAL AND ADMINISTRATIVE INFO.
APPLICATION AND AWARD PROCESS	INFORMATION CONTACTS
RELATED PROGRAMS	ASSISTANCE CONSIDERATIONS
PROGRAM ACCOMPLISHMENTS	POST ASSISTANCE REQUIREMENTS

59.016 ELIGIBILITY REQUIREMENTS:

Applicant Eligibility:  Guarantees are limited to those surety companies holding certificates of authority from the Secretary of the Treasury as an acceptable surety for bonds on Federal contracts.

Beneficiary Eligibility:  A small contractor whose gross receipts have been not more than $5,000,000 as averaged for the last 3 fiscal years; a manufacturer whose number of employees does not exceed the small business standards specified in Small Business Size Regulations, Part 13 Code of Federal Regulations, Section 121.601 (13 CFR 121.601).

Credentials/Documentation:  Application and supplement information.

59.016 APPLICATION AND AWARD PROCESS:

Preapplication Coordination:  None. This program is excluded from coverage under E.O. 12372.

Application Procedure:  Small contractor must apply directly to a surety agent/broker for a surety bond. Surety agent/broker in turn acts for or contacts surety company to process the bond request. Under the Prior Approval Program, surety company deals directly with appropriate SBA Area Office regarding guarantee request. Area and district SBA offices also serve as contact points for program information purposes. PSB sureties deal directly with Headquarters.

Award Procedure:  Under the prior approval program, SBA notifies the surety company of SBA's approval of the requested guarantee and furnishes company with written authorization. Surety company (or agent/broker) notifies the bond applicant and issues bond. PSB sureties issue guaranteed bonds without SBA's prior approval and notify SBA on a monthly basis. Prior approval and PSB sureties remit 20 percent of their premium to SBA. Contractor pays fees of $6.00 per thousand dollars of contract value to SBA.

Deadlines:  None.

Range of Approval/Disapproval Time:  Within short time if underwriting data complete, usually 1 to 5 days after receipt of application from surety company.

Appeals:  None.

Renewals:  Not applicable.

Criteria for Selecting Proposals:  Not applicable.

Examples of Funded Projects:  Not applicable.

Range and Average of Financial Assistance:  Size range of contracts awarded and bonded, $475 to $1,250,000; Average Contract: $185,480; Average Guarantee: $150,237.

59.016 RELATED PROGRAMS:

59.016 PROGRAM ACCOMPLISHMENTS:

59.016 FINANCIAL AND ADMINISTRATIVE INFO:

Federal Agency:  SMALL BUSINESS ADMINISTRATION

Type of Assistance:  Insurance (Guaranteed Surety Bonds).

Obligations:  (Guaranteed Surety Bonds) FY 99 $523,945,000; FY 00 est $1,672,000,000; and FY 01 est $1,672,000,000.

Budget Account Number:  73-4156-0-3-376.

Authorization:  Small Business Investment Act of 1958, Title IV, Part B, Sections 410 and 411, as amended, 15 U.S.C. 687 (b) and (c), 15 U.S.C. 694 (a) and (b); Inspector General Act of 1978, 5 U.S.C. Appendix I, Public Law 100-590, Title II; Public Law 101-574, Section 216.

Regulations, Guidelines, and Literature:  13 CFR 115.

59.016 INFO CONTACTS:

Regional or Local Office:  Applicants must contact a local agent or broker of surety bonds. General program particulars may be obtained from SBA Area Offices listed in Appendix IV of the Catalog.

Headquarters Office:  Associate Administrator, Office of Surety Guarantees, Small Business Administration, 409 3rd Street, SW., Washington, DC 20416. Contact: Robert J. Moffitt. Phone: (202) 205-6540. Use the same number for FTS.

(See Appendix IV for more contact info.)

59.016 ASSISTANCE CONSIDERATIONS:

Formula and Matching Requirements:  Not applicable.

Length and Time Phasing of Assistance:  Guarantee runs to termination of bond (usually completion of contract).

Uses and Use Restrictions:  Contracts of $1.250 million or less, where a surety bond is required but not available privately without an SBA guarantee. Guarantee is limited to bid, payment, and performance bonds (and ancillary bonds incidental to the performance of a specific contract). Guarantee is provided directly to the surety for a particular contract. Under the Prior Approval Program, sureties must apply for each guarantee on a case-by-case basis. Sureties participating in the Preferred Surety Bond (PSB) Program are empowered to issue, monitor and service bonds, subject to SBA's guarantee, without prior SBA approval. Guarantee covers up to 90 percent of surety's losses on that contract under the Prior Approval Program and up to 70 percent of surety's losses under the PSB program.

59.016 POST ASSISTANCE REQUIREMENTS:

Reports:  Monthly, Internal SBA Reports, SBA, as requested, sends to participating sureties and other interested parties a summary report on program activity.

Audits:  SBA has the right to audit its accounts with any participating surety. Each participating PSB surety must be audited annually.

Records:  SBA Headquarters maintains records on contractors in default and/or claim status (including recoveries on paid claims) as furnished by sureties. SBA Headquarters and each SBA Area Office has information about SBA guaranteed contractors in that Area with SBA guaranteed bonds.