SBA's Higher Surety Bond Guarantees Will Help Small Businesses Secure Larger Contracts to Assist in Recovery Efforts Following Disasters

The U.S. Small Business Administration has made regulatory changes to its Surety Bond Guarantee [SBG] program -- including higher surety bond guarantee limits that will help construction and service-sector firms secure larger contracts for work in areas impacted by disasters.

The revisions are related to the Small Business Disaster Response and Loan Improvements Act of 2008, which increases the eligible amount for contracts or orders related to a major disaster area.

These changes, which were originally published as part of a proposed rule in the Federal Register in April 2010, are now final and include:

* For a non-federal contract or order up to $5 million, a bond guarantee may be issued if the products will be manufactured or the services performed in the disaster area.

* For a federal contract or order up to $5 million, the performance site can be outside the disaster area if the contract or order will directly assist the disaster recovery efforts.

* For a federal contract or order, the amount of the guarantee can be as much as $10 million at the request of the head of an agency that is involved in reconstruction efforts.

"SBA is committed to mobilizing resources as quickly as possible following disasters to help begin economic recovery for communities, businesses and families," said SBA Administrator Karen Mills [pictured]. "These changes to the Surety Bond Program will have a two-fold impact: Helping small businesses compete for, and win, contracting opportunities gives them the chance to grow and create jobs, while, at the same time, jump-starting economic activity and rebuilding efforts following a disaster when communities and regions need it most.”

The increased amounts would apply during the 12 months following the disaster declaration, unless SBA provides for an extension related to a particular disaster.

In addition to the disaster-related changes, other changes clarify SBA’s position that it does not cover any costs related to insurance or indemnification requirements that may be contained in the bonded contract. It specifically excludes from the losses covered by SBA any costs that arise from the principal’s failure to secure and maintain insurance that result from any claims or judgments that exceed the amount of insurance coverage, and that arise from an agreement by the principal to indemnify the contractor or any other persons.

SBG program regulations also have been amended to allow SBA to guarantee bid and performance bonds for timber sale contracts. Under these contracts, the small business pays the project owner an agreed amount to harvest the lumber or other forest products, such as biomass.

A bond is often required to ensure compliance with contract terms and conditions associated with forest management -- including the protection of natural resources, erosion control, and road maintenance. This change applies to contracts administered by the U.S. Forest Service, plus other public and private entities.

SBA partners with the surety industry to help small businesses that would otherwise be unable to obtain bonding in the traditional commercial marketplace. Under the partnership, SBA provides a guarantee to the participating surety company of between 70 and 90 percent of the bond amount. Through its SBG program, SBA also helps owners by guaranteeing bid, payment and performance bonds to protect the project owner against financial loss if a contractor defaults or fails to perform.

SBA assistance in locating a participating surety company or agent, and completing application forms, is available online. For more information on SBA’s Surety Bond Guarantee program -- including Surety Office contacts -- go online to http://www.sba.gov/osg/; or, call 1-800-U-ASK-SBA.

SOURCES: Library of Congress, U.S. Small Business Administration
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Congressional Budget Office Report: Billions of Taxpayer Dollars Go to Contractors in 'Unprecedented Level of Dependence on Private Firms' in Iraq

According to a new Congressional Budget Office report, one in every five dollars devoted to Iraq has gone to private contractors, who now have more people in Iraq than the U.S. military does. [The accompanying graphic depicts U.S. government obligations for contracts in the Iraq theater -- in billions of dollars.] The New York Times describes this as "a second, private, army...one whose roles and missions and even casualties among its work force have largely been hidden from public view."

As chairman of the Permanent Subcommittee on Investigations, Sen. Norm Coleman failed to hold a single hearing on the waste, fraud, and abuse that sabotaged the reconstruction of Iraq.

"Whenever Norm Coleman is put in charge of Minnesota tax dollars, you can be sure there are corporate special interests getting a big payday," declared Al Franken, Democratic challenger for the U.S. Senate seat that Coleman has held since 2003. "But it's simply unconscionable that he allowed our troops to be put at risk, just so that his cronies could cash in. Instead of being a watchdog, Norm Coleman was a lapdog – and, every day, we learn more about the cost of his inaction."

The New York Times reports: "The United States this year will have spent $100 billion on contractors in Iraq since the invasion in 2003, a milestone that reflects the Bush administration's unprecedented level of dependence on private firms for help in the war, according to a government report to be released Tuesday [Aug. 12, 2008].

"The Pentagon's reliance on outside contractors in Iraq is proportionately far larger than in any previous conflict, and it has fueled charges that this outsourcing has led to overbilling, fraud and shoddy and unsafe work that has endangered and even killed American troops."

A defense contracting expert, Peter Singer, noted, "We have just handed over functions to contractors in a very haphazard way."

And Sen. Byron Dorgan [D-N.D.] said what Al Franken has been saying for years: "It's unfathomable to me that we don't have a bipartisan investigative committee on contracting in Iraq."

This, like so many other Tales from the Oversight-Free Zone, took place while Chairman Coleman, who accepted campaign contributions from Halliburton -- described as "the largest Pentagon contractor in Iraq" -- sat idly by.

Coleman Took $4,000 From Halliburton's PAC
According to the Center for Responsive Politics, in 2001 and 2002, Coleman's U.S. Senate campaign accepted four $1,000 contributions from Halliburton's political action committee. Hmm-m-m...

GoodBiz113's take: As any small-business subcontractor can attest, trying to do business with a federal agency can be challenging -- even to score a five- or six-figure deal. The multimillion- and multibillion-dollar no-bid contracts that the Bush administration has awarded Halliburton, Blackwater and other prime contractors is, point-blank, deplorable. It's time for a changing of the political guard -- in Congress and the White House -- to get our country back on a fiscally accountable, transparent and prosperous track for all.

SOURCES: Center for Responsive Politics, Congressional Budget Office, New York Times
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