To guarantee surety bonds issued by commercial surety companies for small businesses unable to obtain a bond without an SBA guarantee.
The guarantees range between 70 and 90% and cover losses and expenses incurred by a participating surety should the small business default on the contract.
The Small Business Administration maintains and strengthens the nationís economy by aiding, counseling, assisting and protecting the interests of small businesses and by helping families and businesses recover from national disasters.
In fiscal year 2004, 5,809 bid bond applications were approved and 1,617 final bond guarantees were issued.
Uses and Use Restrictions
Contracts not exceeding $2 million, where a surety bond is required but not obtainable privately without an SBA guarantee.
Guarantee is for bid, payment, and performance bonds (and ancillary bonds incidental to the performance of a specific contract).
It is provided directly to the surety for a particular contract.
Under the Prior Approval program, sureties must apply to SBA for each guarantee.
Sureties in the Preferred Bond Program are empowered to issue, service, and monitor bonds without prior SBA approval.
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.
Specific criteria apply to the Prior Approval and PSB Sureties.
For Federal contracts, a small business is eligible for the surety bond program if it qualifies as a small business under Code of Federal Regulations Subpart 121, Size Eligibility Provisions and Standards. For State, local, and commercial contracts, a small business is eligible if its average annual revenues do not exceed $6.5 million.
Application and supplement information.
Aplication and Award Process
This program is excluded from coverage under E.O.
A small business must apply directly to a surety agent who represents a participating surety company. The application includes background, credit, and financial information. Under the Prior Approval Program, the surety company deals directly with the SBA Area Office concerning the bond guarantee. Headquarters, Area and District SBA Offices serve as contact points for program information purposes.
Under the Prior Approval Program, SBA notifies the surety company of SBA's approval of the guarantee and furnishes the surety with written authorization. Surety company (or agent/broker) notifies the bond applicant and issues the bond. Preferred sureties issue bonds guaranteed by SBA without SBA's prior approval. Prior approval and PSB sureties remit 26 percent of the premium they charge small businesses to SBA. Small businesses pay SBA a fee of .729% of the contract price.
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 108-447.
Range of Approval/Disapproval Time
The goal for completing the review of a bond guarantee application is 3 days.
Formula and Matching Requirements
Length and Time Phasing of Assistance
Guarantee runs to termination of bond (usually completion of contract).
Post Assistance Requirements
Monthly Internal SBA Reports.
SBA has the right to audit its accounts with any participating surety. Each participating PSB surety must be audited every three years.
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 have information about participating small businesses for its assigned geographic area.
Guarantee Program: FY 07 $547,000,000; FY 08 $1,000,000,000; and FY 09 $1,000,000,000. Subsidies: FY 07 $2,824,000; FY 08 $3,000,000; and FY 09 $2,000,000. Administration: FY 07 $6,926,000; FY 08 $7,553,000; and FY 09 $8,094,000.
Range and Average of Financial Assistance
Size range of contracts awarded and bonded, $475 to 2,000,000; Average Contract: $325,000; Average Guarantee: $325,000.
Regulations, Guidelines, and Literature
13 CFR 115.
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.
Director, Office of Surety Guarantees, Small Business Administration, 409 3rd Street, S.W., Washington, DC 20416. Contact: Johnnie Albertson. Telephone: (202) 205-6540.
Criteria for Selecting Proposals