[Federal Register Volume 77, Number 24 (Monday, February 6, 2012)]
[Proposed Rules]
[Pages 5721-5724]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-2519]
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SMALL BUSINESS ADMINISTRATION
13 CFR Part 115
RIN 3245-AG39
Surety Bond Guarantee Program--Quick Bond Guarantee Application
and Agreement
AGENCY: Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would implement a streamlined application
process in the Prior Approval Program of the Surety Bond Guarantee
(SBG) Program for contract amounts not exceeding $250,000 and would
make other minor administrative changes to the SBG Program regulations
to, among other things, clarify the procedures for submitting the
application forms and paying of fees, and delete an obsolete reference
to a form.
DATES: Comments must be received on or before April 6, 2012.
ADDRESSES: You may submit comments, identified by RIN: 3245-AG39 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.
SBA will post all comments on http://www.regulations.gov. If you wish
to submit confidential business information (CBI) as defined in the
User Notice at www.regulations.gov, please submit the information to
Ms. Barbara Brannan, Management Analyst, Office of Surety Guarantees,
409 Third Street SW., Washington, DC 20416 or send an email to
Barbara.brannan@sba.gov. Highlight the information that you consider to
be CBI and explain why you believe SBA should hold this information as
confidential. SBA will review the information and make the final
determination whether it will publish the information.
FOR FURTHER INFORMATION CONTACT: Ms. Barbara Brannan, Office of Surety
Guarantees, (202) 205-6545, email: Barbara.brannan@sba.gov.
SUPPLEMENTARY INFORMATION:
I. Background Information
Through the Surety Bond Guarantee (SBG) Program, SBA guarantees
bid, payment, and performance bonds for contracts up to $2 million for
small and emerging contractors who cannot obtain bonds through regular
commercial
[[Page 5722]]
surety channels. SBA's guarantee provides the incentive needed for
sureties to bond these contractors, giving them greater access to
contracting opportunities. The SBG Program consists of the Prior
Approval Program and the Preferred Surety Bond (PSB) Program. In the
Prior Approval Program, sureties must apply to SBA for each bond
guarantee and must receive SBA approval before issuing bonds. Sureties
in the PSB Program can issue SBA guaranteed bonds without SBA's prior
approval.
This rule proposes to implement a streamlined application process
for use in the Prior Approval Program for contract amounts not
exceeding $250,000. For these smaller contracts, SBA proposes to create
a new form, the Quick Bond Guarantee Application and Agreement, SBA
Form 990A, which will consolidate two of the forms currently used in
the SBG Program--SBA Form 990, Surety Bond Agreement and the SBA Form
994, Application for Surety Bond Guarantee Assistance. The proposed SBA
Form 990A complements the existing industry practice of offering a
streamlined bond application for smaller contract amounts. In addition,
SBA will not require the Principal to complete and submit two other
forms for these smaller contract amounts, including SBA Form 994F,
Schedule of Work in Process, and SBA Form 413, Personal Financial
Statement. Instead, to mitigate any risk associated with these smaller
contract amounts, the new SBA Form 990A will require the Principal to
provide a list of the largest three contracts completed in the last 5
years.
The streamlined application process will also help to address
sureties' concerns about the amount of paperwork necessary to obtain
bond guarantees in the SBG Program. In FY 2010, SBA guaranteed 2,206
Bid Bonds and 729 Final Bonds in the Prior Approval Program for
contracts of $250,000 or less. The proposed changes would reduce the
paperwork burden in applying for surety bond guarantee assistance for
contracts of this size. By offering this streamlined application
process for lower contract amounts, SBA also hopes to increase activity
by participating sureties and to encourage more sureties to begin using
the program. As a result, bonding opportunities would be available to
more small businesses. This streamlined process will be monitored
closely to mitigate any increased risk exposure, including through the
use of periodic on-site audits of participating surety companies. SBA
will pay particular attention to guaranteed bonds for contracts that
are within the dollar limits at the time of application, but that
increase to over $250,000 after the guaranteed bond is issued. The
proposed rule also sets forth the circumstances under which the new SBA
Form 990A may not be utilized.
In addition, the proposed rule would make other minor changes to
the existing SBG Program rules, including clarifying that SBA Form 990
or SBA Form 990A must be submitted to and approved by SBA prior to the
Surety's execution of the bond (except for surety bonding lines) and,
with respect to the rules regarding surety bonding lines, removing the
reference to SBA Form 994C as this form is no longer used.
II. Section-by-Section Analysis
Section 115.10. SBA is proposing to amend the definition of the
term, ``Prior Approval Agreement'', to add the ``Quick Bond Guarantee
Application and Agreement (SBA Form 990A)'' to the agreements into
which a Prior Approval Surety can enter with SBA.
Section 115.30(d)(1). SBA is proposing to clarify in paragraph
(d)(1) that, where the Surety Bond Guarantee Agreement (SBA Form 990)
is used, it must be approved before the Prior Approval Surety executes
a Bid or a Final Bond, except in the case of a bonding line under Sec.
115.33(d). Until SBA has an opportunity to review and approve or
decline an application, the Surety may not execute the bond. SBA is
also proposing to amend this paragraph to clarify that the applicable
guarantee fees must be paid in accordance with 13 CFR 115.32, and not
as set forth in the current section 115.30(d), which gives the
Principal up to 45 days (15 days in the case of a bonding line) after
bond execution to pay its fee. Under section 115.32(b), the Principal's
fee must be remitted by the Surety with the Prior Approval Agreement.
Section 115.30(d)(2). SBA is proposing to add this new provision to
implement a streamlined application process for bond guarantees for
contracts that do not exceed $250,000. SBA is proposing that applicants
use a new form, the ``Quick Bond Guarantee Application and Agreement
(SBA Form 990A)'' in place of SBA Form 990 and SBA Form 994. This new
provision would also require that the Quick Bond Guarantee Application
and Agreement (SBA Form 990A) be submitted to and approved by SBA
before the Surety executes the Bid or Final Bond. Until SBA has an
opportunity to review and approve or decline an application, the Surety
may not execute the bond. The new provision also would require that the
guarantee fees be paid in accordance with 13 CFR 115.32. This provision
also sets forth the circumstances under which this streamlined
application process may not be used.
Section 115.32(b). SBA is proposing to amend this provision to add
the requirement that the Principal's fee be remitted to SBA with the
new SBA Form 990A, just as it is required to be submitted with SBA Form
990.
Section 115.32(c). SBA is proposing to amend this paragraph to
clarify that the requirements regarding the guarantee fee paid by the
Surety applies to the new SBA Form 990A, just as it applies to the SBA
Form 990.
Section 115.32(d)(1). SBA is proposing to delete the words
``Supplemental Form 990'' from this paragraph to make it clear that
this provision applies to bond guarantees approved under the new SBA
Form 990A in addition to SBA Form 990. SBA is also proposing to add a
sentence to provide that, in notifying SBA of any increase or decrease
in the Contract or bond amount, the Surety must use the same form that
it used in applying for the original bond guarantee.
Section 115.33(d). SBA is proposing to eliminate references to the
Surety Bond Guarantee Review Update (SBA Form 994C) throughout this
provision because the form is no longer used.
Compliance With Executive Orders 12866, 12988, 13132, and 13563, 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
proposed rule does not constitute a significant regulatory action under
the meaning of Executive Order 12866. This proposed 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
SBA has determined that the 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,
[[Page 5723]]
Federalism, SBA has determined that this proposed rule has no
federalism implications warranting preparation of a federalism
assessment.
Executive Order 13563
In accordance with Executive Order 13563, SBA discussed
implementing a streamlined application process with several surety
industry associations and surety company representatives and they
responded very favorably.
Paperwork Reduction Act, 44 U.S.C., Ch. 35
SBA has determined that this proposed rule imposes additional
reporting and recordkeeping requirements under the Paperwork Reduction
Act, 44 U.S.C., Chapter 35. As described above, SBA proposes to
implement a new application process for surety bonds for contracts that
are equal to or less than $250,000. The public is invited to comment on
the proposed new form that will be used to collect application
information and to submit any comments by the deadline stated in the
DATES section of this rule to: SBA Desk Officer, Office of Information
and Regulatory Affairs, Office of Management and Budget, Room 10202,
725 17th Street NW., Washington, DC 20503.
SBA invites comments on: (1) Whether the proposed collection of
information is necessary for the proper performance of SBA's functions,
including whether the information will have a practical utility; (2)
the accuracy of SBA's estimate of the burden of the proposed
collections of information, including the validity of the methodology
and assumptions used; (3) ways to enhance the quality, utility, and
clarity of the information to be collected; and (4) ways to minimize
the burden of the collection of information on respondents, including
through the use of automated collection techniques, when appropriate,
and other forms of information technology. SBA will submit the proposed
form and other documents required under the Paperwork Reduction Act to
OMB for review and approval.
A description of this information collection, the respondents, and
the estimate of the annual hour burden resulting from this new process
is provided below. Included in the estimate is the time for reviewing
instructions, searching existing data sources, gathering the data
needed, and completing and reviewing the responses.
Title: Quick Bond Surety Guarantee Application and Agreement (SBA
Form 990A).
Description: The Quick Bond Surety Guarantee Application and
Agreement is a combination application and bond guarantee agreement
that would be used in the Prior Approval Program for contract amounts
that do not exceed $250,000. It is a streamlined alternative to the
existing surety bond application and agreement, the SBA Forms 990 and
994 (OMB Control Number 3245-0007). The information would be used to
evaluate whether the applicant small business meets the program
eligibility criteria and the likelihood that it will successfully
complete performance on the contract.
OMB Control Number: New Collection.
Description of and Estimated Number of Respondents. This proposed
new collection would be submitted by small businesses seeking to obtain
a bond in order to bid or perform on a contract, and by surety
companies and their agents or representatives. Based on the current
volume of bonds for contracts up to $250,000, SBA estimates that
approximately 500 small businesses and 13 Prior Approval Sureties would
submit this streamlined application and agreement form.
Estimated Response Time: It is estimated that each applicant would
require approximately 5 minutes to complete the proposed new form.
Estimated Number of Responses: 4,450. This number is based on SBA's
projection of program activity during Fiscal Year 2012.
Total Estimated Annual Hour Burden: 369 hours.
Estimated Annual Cost Burden: $18,941.
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 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 13 Sureties that currently participate in the SBA Prior
Approval program, and no part of this proposed rule would impose any
significant additional cost or burden on them.
List of Subjects in 13 CFR Part 115
Claims, Reporting and recordkeeping requirements, Small businesses,
Surety bonds.
For the reasons stated in the preamble, SBA proposes to amend 13
CFR Part 115 as follows:
PART 115--SURETY BOND GUARANTEE
1. The authority citation for part 115 continues 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.
Sec. 115.10 [Amended]
2. In Sec. 115.10 amend the definition of ``Prior Approval
Agreement'' by adding ``or Quick Bond Guarantee Application and
Agreement (SBA Form 990A)'' after ``(SBA Form 990)''.
3. Amend Sec. 115.30 as follows:
a. Revise paragraph (d) to read as set forth below; and
b. Add a new paragraph (e) to read as set forth below.
Sec. 115.30 Submission of Surety's guarantee application.
* * * * *
(d) Prior Approval Agreement. To apply for a bond guarantee, a
Prior Approval Surety must submit one of the following forms:
(1) Surety Bond Guarantee Agreement (SBA Form 990). A Prior
Approval Surety may complete and submit a Surety Bond Guarantee
Agreement (SBA Form 990) to SBA for each Bid Bond or Final Bond, and
this Form must be approved by SBA prior to the Surety's Execution of
the bond, except in the case of a surety bonding line approved by SBA
under Sec. 115.33(d). The guarantee fees owed in connection with Final
Bonds must be paid in accordance with Sec. 115.32.
(2) Quick Bond Guarantee Application and Agreement (SBA Form 990A).
(i) General procedures. Except as provided in (d)(2)(ii) of this
section, a Prior Approval Surety may complete and submit the Quick Bond
Guarantee Application and Agreement (SBA Form 990A) to SBA for each Bid
Bond or Final Bond, and this Form must be approved by SBA prior to the
Surety's Execution of the bond. SBA Form 990A is a streamlined
application form that may be used only for contract amounts that do not
exceed $250,000 at the time of application. The guarantee fees owed
[[Page 5724]]
in connection with Final Bonds must be paid in accordance with Sec.
115.32.
(ii) Exclusions. SBA Form 990A may not be used under the following
circumstances:
(A) The Principal has previously defaulted on any contract or has
had any claims or complaints filed against it with any court or
administrative agency;
(B) Work on the Contract commenced before a bond is Executed;
(C) The time for completion of the Contract or the warranty/
maintenance period exceeds 12 months;
(D) The Contract includes a provision for liquidated damages that
exceed $250 per day;
(E) The Contract involves asbestos abatement, hazardous waste
removal, demolition, or timber sales; or
(F) The bond would be issued under a surety bonding line approved
under Sec. 115.33.
4. Amend Sec. 115.32 as follows:
a. Revise the fourth sentence of paragraph (b) to read as set forth
below;
b. Revise the second sentence of paragraph (c) to read as set forth
below; and
c. In the second sentence of paragraph (d)(1), remove the words
``(Supplemental Form 990)'', and add the following sentence at the end:
``In notifying SBA of any increase or decrease in the Contract or bond
amount, the Surety must use the same form (SBA Form 990 or SBA Form
990A) that it used in applying for the original bond guarantee.''
Sec. 115.32 Fees and Premiums.
* * * * *
(b) * * * The Principal's fee is rounded to the nearest dollar and
is to be remitted to SBA by the Surety together with the form submitted
under either Sec. 115.30(d)(1) or (2). * * *
(c) * * * Subject to Sec. 115.18(a)(4), the Surety must pay SBA a
guarantee fee on each guaranteed bond (other than a Bid Bond) within 60
calendar days after SBA's approval of the Prior Approval Agreement. * *
*
* * * * *
5. Amend Sec. 115.33 by revising paragraphs (d)(1) and (d)(2) to
read as follows:
Sec. 115.33 Surety bonding line.
* * * * *
(d)(1) Submission of forms to SBA--Bid Bonds. Within 15 business
days after the Execution of any Bid Bonds under a bonding line, the
Surety must submit a ``Surety Bond Guarantee Underwriting Review'' (SBA
Form 994B) to SBA for approval. If the Surety fails to submit the form
within this time period, SBA's guarantee of the bond will be void from
its inception unless SBA determines otherwise upon a showing that a
valid reason exists why the timely submission was not made.
(2) Submission of forms to SBA--Final Bonds. Within 15 business
days after the Execution of any Final Bonds under a bonding line, the
Surety must submit a Surety Bond Guarantee Underwriting Review (SBA
Form 994B) and a Surety Bond Guarantee Agreement (SBA Form 990) to SBA
for approval. If the Surety fails to submit these forms within the time
period or the guarantee fees are not paid in accordance with Sec.
115.32, SBA's guarantee of the bond will be void from its inception
unless SBA determines otherwise upon a showing that the Contract is not
in default and a valid reason exists why the timely submission was not
made.
* * * * *
Dated: January 30, 2012.
Karen G. Mills,
Administrator.
[FR Doc. 2012-2519 Filed 2-3-12; 8:45 am]
BILLING CODE 8025-01-P