[Federal Register Volume 76, Number 10 (Friday, January 14, 2011)]
[Rules and Regulations]
[Pages 2571-2572]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-652]



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Rules and Regulations
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Federal Register / Vol. 76, No. 10 / Friday, January 14, 2011 / Rules 
and Regulations

[[Page 2571]]



SMALL BUSINESS ADMINISTRATION

13 CFR Part 115

RIN 3245-AF77


Surety Bond Guarantee Program; Disaster and Miscellaneous 
Amendments

AGENCY: Small Business Administration.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The U.S. Small Business Administration (SBA) is issuing this 
final rule to implement the authority provided by the Small Business 
Disaster Response and Loan Improvements Act of 2008, for issuing surety 
bond guarantees for contracts and orders related to a major disaster. 
The rule also clarifies that the SBA does not cover any costs related 
to any insurance or indemnification requirements in the bonded 
contract.

DATES: This rule is effective on February 14, 2011.

FOR FURTHER INFORMATION CONTACT: Ms. Barbara J. Brannan, Office of 
Surety Guarantees, 202-205-6545, e-mail: barbara.brannan@sba.gov.

SUPPLEMENTARY INFORMATION: SBA guarantees bonds on contracts up to $2 
million for small and emerging contractors who cannot obtain surety 
bonds through regular commercial channels. SBA's guarantee provides 
sureties with the incentive to provide bonding for these contractors, 
strengthening their ability to obtain bonding and to access greater 
contracting opportunities.
    This rule implements the authority granted to the Agency in 
Sec.12079 of subtitle B of title XII of Public Law 110-246, which 
establishes the bonding thresholds for any procurement related to a 
major disaster. It adds a new provision to SBA regulations that 
authorizes SBA to approve, under certain conditions, an SBA bond 
guarantee on an individual Contract or Order up to $5,000,000 at the 
time of bond execution. For products or services procured under non-
Federal Contracts or Orders up to $5,000,000, SBA may issue a bond 
guarantee if the products will be manufactured or the services will be 
performed in a major disaster area identified in the Federal Emergency 
Management Agency (FEMA) Web site. For products or services procured 
under Federal Contracts or Orders up to $5,000,000, SBA may issue a 
bond guarantee if: (a) The products will be manufactured or the 
services will be performed in the major disaster area identified in the 
FEMA Web site; or (2) the products will be manufactured or the services 
will be performed outside the major disaster area and the products or 
services will directly assist in the recovery efforts in the major 
disaster area. SBA may issue a bond guarantee on a Federal Contract or 
Order up to $10,000,000 if it meets one of the conditions above and is 
requested by the Head of the Agency involved in disaster reconstruction 
efforts.
    Additionally, this final rule provides that SBA's authority to 
guarantee bonds in the amounts authorized by Public Law 110-246 for a 
specific disaster would apply only during the 12 month period following 
the disaster declaration unless SBA extends, in its discretion, the 
authority for such disaster. SBA will publish any notices of extension 
in the Federal Register.
    Lastly, this final rule clarifies that SBA does not cover any costs 
related to any insurance or indemnification requirements in the bonded 
contract.

Discussion of Public Comments

    On April 26, 2010, SBA published the notice of proposed rulemaking 
with request for comment on these changes to the surety bond program in 
the Federal Register at 75 FR 21521. The comment period ended on May 
26, 2010. SBA did not receive any public comments.

Compliance With Executive Orders 12866, 12988, and 13132, the Paperwork 
Reduction Act (44 U.S.C. Ch. 35) and the Regulatory Flexibility Act (5 
U.S.C. 601-612)

Executive Order 12866
    The Office of Management and Budget (OMB) has determined that this 
rule does not constitute a significant regulatory action under 
Executive Order 12866. This rule is also not a major rule under the 
Congressional Review Act.
Executive Order 12988
    This action meets applicable standards set forth in Sections 3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden. The action does not 
have retroactive or preemptive effect.
Executive Order 13132
    For purposes of Executive Order 13132, SBA has determined that this 
final rule will not have substantial, direct effects on the States, on 
the relationship between the national government and the States, or on 
the distribution of power and responsibilities among the various levels 
of government. Therefore, for the purpose of Executive Order 13132, 
Federalism, SBA has determined that this final rule has no federalism 
implications warranting preparation of a federalism assessment.
Paperwork Reduction Act, 44 U.S.C., Ch. 35
    SBA has determined that this final rule does not impose additional 
reporting or recordkeeping requirements under the Paperwork Reduction 
Act, 44 U.S.C., Chapter 35.
Regulatory Flexibility Act, 5 U.S.C. 601-612
    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires 
administrative agencies to consider the effect of their actions on 
small entities, small non-profit enterprises, and small local 
governments. Pursuant to the RFA, when an agency issues a rulemaking, 
the agency must prepare a regulatory flexibility analysis which 
describes the impact of the rule on small entities. However, section 
605 of the RFA allows an agency to certify a rule, in lieu of preparing 
an analysis, if the rulemaking is not expected to have a significant 
economic impact on a substantial number of small entities. Within the 
meaning of RFA, SBA certifies that this rule will not have a 
significant economic impact on a substantial number of small entities. 
There are sixteen Sureties that participate in the SBA program, and no 
part of this final rule would impose any significant additional cost or 
burden on them.

[[Page 2572]]

List of Subjects in 13 CFR Part 115

    Claims, Reporting and recordkeeping requirements, Small businesses, 
Surety bonds.
    For the reasons stated in the preamble, the Small Business 
Administration amends 13 CFR Part 115 as follows:

PART 115--SURETY BOND GUARANTEE

0
1. The authority citation for part 115 is revised to read as follows:

    Authority: 5 U.S.C. app. 3; 15 U.S.C. 687b, 687c, 694a, 694b 
note, Pub. L. 106-554; Pub. L. 108-447, Div K, Sec. 203; Pub. L. 
110-246, Sec. 12079, 122 Stat. 1651; and Pub. L. 111-5, 123 
Stat.115.


0
2. In Sec.  115.10, revise the definition of ``Applicable Statutory 
Limit'' and add a definition of ``Head of Agency'' in alphabetical 
order to read as follows:


Sec.  115.10  Definitions.

* * * * *
    Applicable Statutory Limit means the maximum amount of any Contract 
or Order for which section 411(a) of the Small Business Investment Act, 
as amended from time to time, or other law, authorizes SBA to 
guarantee, or commit to guarantee, a Bid Bond, Payment Bond, 
Performance Bond, or Ancillary Bond.
* * * * *
    Head of Agency means in the case of a cabinet department, the 
Secretary; and in the case of an independent commission, board, or 
agency, the Chair or Administrator; or any person to whom the 
Secretary, Chair, or Administrator has directly delegated the authority 
to request SBA to guarantee bonds on Contracts or Orders in excess of 
$5,000,000.
* * * * *

0
3. In Sec.  115.12, add paragraph (e)(5) to read as follows:


Sec.  115.12  General program policies and provisions.

* * * * *
    (e) * * *
    (5) Guarantee authority for Contracts and Orders related to a major 
disaster area. Subject to the availability of funds appropriated in 
advance specifically for the purpose of guaranteeing bonds for any 
Contract or Order related to a major disaster, SBA may guarantee bonds 
on any Contract or Order under the following terms and conditions:
    (i) The Contract or Order does not exceed $5,000,000 at the time of 
bond execution, and:
    (A) For products or services procured under a Federal Contract or 
Order, the products will be manufactured or the services will be 
performed in the major disaster area identified in the Federal 
Emergency Management Agency (FEMA) Web site at http://www.fema.gov, or 
the products will be manufactured or the services will be performed 
outside the major disaster area and the products or services will 
directly assist in the recovery efforts in the major disaster area; or
    (B) For products or services procured under any other Contract or 
Order, the products will be manufactured or the services will be 
performed in the major disaster area identified in the FEMA Web site at 
http://www.fema.gov;
    (ii) At the request of the Head of the Agency involved in 
reconstruction efforts in response to a major disaster, SBA may 
guarantee bonds on Federal Contracts or Orders in excess of $5,000,000, 
but not more than $10,000,000;
    (iii) The restrictions set forth in paragraph (e)(3) of this 
section do not apply to the guarantees issued under this paragraph 
(e)(5); and
    (iv) A guarantee may be issued under this paragraph (e)(5) for any 
Contract or Order for which an offer is submitted or an award is made 
within 12 months from the date an area is designated a major disaster 
area in the Federal Register. SBA may, at its discretion, extend this 
time period for any particular disaster, and will publish a notice of 
the extension in the Federal Register.
* * * * *

0
4. Amend Sec.  115.16 as follows:
0
a. Remove the word ``and'' at the end of paragraph (f)(3);
0
b. Remove the punctuation ``.'' at the end of paragraph (f)(4) and add 
``; and'' in its place; and
0
c. Add paragraph (f)(5) to read as follows:


Sec.  115.16  Determination of Surety's Loss.

* * * * *
    (f) * * *
    (5) Any costs that arise from the Principal's failure to secure and 
maintain insurance coverage required by the Contract or Order, or any 
costs that result from any claims or judgments that exceed the amount 
of any insurance coverage required by the Contract or Order, as well as 
any costs that arise as a result of any agreement by the Principal in 
the Contract or Order to indemnify the Obligee or any other Persons.

    Dated: January 6, 2011.
Karen G. Mills,
Administrator.
[FR Doc. 2011-652 Filed 1-13-11; 8:45 am]
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