[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 688 Introduced in House (IH)]

112th CONGRESS
  1st Session
                                H. R. 688

  To amend title 49, United States Code, to provide authority to the 
    Secretary of Transportation to guarantee sureties against loss 
  resulting from a breach of the terms of a bond by an eligible small 
               business concern, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 14, 2011

 Mr. Cummings introduced the following bill; which was referred to the 
             Committee on Transportation and Infrastructure

_______________________________________________________________________

                                 A BILL


 
  To amend title 49, United States Code, to provide authority to the 
    Secretary of Transportation to guarantee sureties against loss 
  resulting from a breach of the terms of a bond by an eligible small 
               business concern, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Department of Transportation Bonding 
Assistance Authority Act of 2011''.

SEC. 2. AUTHORITY OF SECRETARY TO GUARANTEE SURETY AGAINST LOSS FROM 
              PRINCIPAL'S BREACH OF BOND.

    Subsection (e) of section 332 of title 49, United States Code, is 
amended to read as follows:
    ``(e) Authority of Secretary To Guarantee Surety Against Loss From 
Principal's Breach of Bond.--
            ``(1) Authority.--
                    ``(A) In general.--The Secretary may, upon such 
                terms and conditions as the Secretary may prescribe, 
                guarantee and enter into commitments to guarantee any 
                surety against loss resulting from a breach of the 
                terms of a bid bond, payment bond, performance bond, or 
                bonds ancillary thereto, by a principal.
                    ``(B) Limitation.--No such guarantee may be issued, 
                unless--
                            ``(i) the person who would be principal 
                        under the bond is an eligible small business 
                        concern;
                            ``(ii) the bond is required in order for 
                        such person to bid on a contract, or to serve 
                        as a prime contractor or subcontractor thereon;
                            ``(iii) such person is not able to obtain 
                        such bond on reasonable terms and conditions 
                        without a guarantee under this subsection; and
                            ``(iv) there is a reasonable expectation 
                        that such principal will perform the covenants 
                        and conditions of the contract with respect to 
                        which such bond is required, and the terms and 
                        conditions of such bond are reasonable in light 
                        of the risks involved and the extent of the 
                        surety's participation.
            ``(2) Indemnification of surety against loss from avoiding 
        breach.--Subject to the provisions of this subsection, in 
        connection with the issuance by the Secretary of a guarantee to 
        a surety under paragraph (1), the Secretary may agree to 
        indemnify such surety against a loss sustained by such surety 
        in avoiding or attempting to avoid a breach of the terms of a 
        bond guaranteed by the Secretary in accordance with the 
        following:
                    ``(A) Prior to making any payment under this 
                paragraph, the Secretary shall first determine that a 
                breach of the terms of such bond was imminent.
                    ``(B) A surety must obtain approval from the 
                Secretary prior to making any payments pursuant to this 
                paragraph.
                    ``(C) No payment by the Secretary pursuant to this 
                paragraph shall exceed 10 percent of the contract price 
                unless the Secretary determines that a greater payment 
                should be made as a result of a finding by the 
                Secretary that the surety's loss sustained in avoiding 
                or attempting to avoid such breach was necessary and 
                reasonable.
                    ``(D) In no event shall the Secretary pay a surety 
                pursuant to this paragraph an amount exceeding the 
                guaranteed share of the bond available to such surety 
                pursuant to paragraph (1).
            ``(3) Reimbursement of surety.--
                    ``(A) In general.--Any guarantee or agreement to 
                indemnify under this subsection shall obligate the 
                Secretary to pay to the surety a sum--
                            ``(i) not to exceed 90 percent of the loss 
                        incurred and paid by the surety, but in no 
                        event may the Secretary make any duplicate 
                        payment pursuant to paragraph (2) or any other 
                        paragraph; or
                            ``(ii) determined pursuant to paragraph 
                        (2), if applicable.
                    ``(B) Exception.--Pursuant to any such guarantee or 
                agreement, the Secretary shall reimburse the surety, as 
                provided in subparagraph (A), except that the Secretary 
                shall be relieved of all liability if--
                            ``(i) the surety obtained such guarantee or 
                        agreement, or applied for such reimbursement, 
                        by fraud or material misrepresentation;
                            ``(ii) the surety has breached a material 
                        term or condition of such guarantee or 
                        agreement; or
                            ``(iii) the surety has substantially 
                        violated the regulations issued by the 
                        Secretary pursuant to paragraph (4).
            ``(4) Regulations.--The Secretary may establish and 
        periodically review regulations for participating sureties 
        which shall require such sureties to meet the Secretary's 
        standards for underwriting, claim practices, and loss ratios.
            ``(5) Procedure for reimbursement.--The Secretary may, upon 
        such terms and conditions as the Secretary may prescribe, adopt 
        a procedure for reimbursing a surety for its paid losses billed 
        each month, based upon prior monthly payments to such surety, 
        with subsequent adjustments after such disbursement.
            ``(6) Reports to and audits by the secretary.--
                    ``(A) Reports to the secretary.--The Secretary 
                shall require each participating surety to make reports 
                to the Secretary at such times and in such forms as the 
                Secretary requires.
                    ``(B) Audits by the secretary.--The Secretary may 
                at all reasonable times audit, in the offices of a 
                participating surety, all documents, files, books, 
                records, and other material relevant to the Secretary's 
                guarantee, commitments to guarantee, or agreements to 
                indemnify any surety pursuant to this subsection.
                    ``(C) Timing.--Each participating surety shall be 
                audited at least once every three years by examiners 
                selected and approved by the Secretary.
            ``(7) Administrative provisions.--The Secretary shall 
        administer this subsection on a prudent and economically 
        justifiable basis and establish such fee or fees for eligible 
        small business concerns and premium or premiums for sureties as 
        the Secretary deems reasonable and necessary, to be payable at 
        such time and under such conditions as may be determined by the 
        Secretary.
            ``(8) State program.--
                    ``(A) In general.--The Secretary shall establish a 
                program under which not more than 5 States may be 
                selected to carry out, with a portion of the amounts 
                appropriated for this subsection, the following:
                            ``(i) Activities of the Secretary under 
                        this subsection with respect to issuing 
                        guarantees.
                            ``(ii) Activities of a surety to assist 
                        eligible small business concerns.
                    ``(B) Assessments and standards.--States selected 
                to participate in the program under subparagraph (A) 
                shall be subjected to such assessments and shall meet 
                such standards and conditions as the Secretary may 
                prescribe.
                    ``(C) Reports by states.--A State selected to 
                participate in the program under subparagraph (A) shall 
                submit to the Secretary an annual report describing, at 
                a minimum, the nature of the program such State 
                administers, the total number and amounts of guarantees 
                provided by the program, and the number of eligible 
                small business concerns that have participated in the 
                program.
            ``(9) Annual report.--Not later than June 1, 2012, and 
        annually thereafter, the Secretary shall submit to the 
        Committee on Transportation and Infrastructure of the House of 
        Representatives and the Committee on Commerce, Science, and 
        Transportation of the Senate a report that describes, at a 
        minimum--
                    ``(A) the actions taken to implement this 
                subsection;
                    ``(B) the number of sureties that have received 
                guarantees, the States with respect to which guarantees 
                were issued, the number of eligible small business 
                concerns that have participated in the program, and the 
                number and total amount of guarantees paid by the 
                Secretary; and
                    ``(C) the number of States that have applied to 
                manage amounts under the program established under 
                paragraph (8), the number of States approved to 
                participate in such program, and the results achieved 
                by States participating in such program.
            ``(10) Definitions.--In this subsection, the following 
        definitions apply:
                    ``(A) Bid bond.--The term `bid bond' means a bond 
                conditioned upon the bidder on a contract entering into 
                the contract, if the bidder receives the award thereof, 
                and furnishing the prescribed payment bond and 
                performance bond.
                    ``(B) Eligible small business concern.--The term 
                `eligible small business concern' means an entity 
                determined by the Secretary to be any of the following:
                            ``(i) A small business concern owned and 
                        controlled by socially and economically 
                        disadvantaged individuals (as such term is 
                        defined in section 8(d)(3) of the Small 
                        Business Act (15 U.S.C. 637(d)(3))).
                            ``(ii) A small business concern owned and 
                        controlled by service-disabled veterans (as 
                        such term is defined under section 3(q) of the 
                        Small Business Act (15 U.S.C. 632(q))).
                            ``(iii) A qualified HUBZone small business 
                        concern (as such term is defined under section 
                        3(p) of the Small Business Act (15 U.S.C. 
                        632(p))).
                            ``(iv) A small business concern owned and 
                        controlled by women (as such term is defined 
                        under section 3(n) of the Small Business Act 
                        (15 U.S.C. 632(n))).
                    ``(C) Obligee.--The term `obligee' means--
                            ``(i) in the case of a bid bond, the person 
                        requesting bids for the performance of a 
                        contract; or
                            ``(ii) in the case of a payment bond or 
                        performance bond, the person who has contracted 
                        with a principal for the completion of the 
                        contract and to whom the obligation of the 
                        surety runs in the event of a breach by the 
                        principal of the conditions of a payment bond 
                        or performance bond.
                    ``(D) Payment bond.--The term `payment bond' means 
                a bond conditioned upon the payment by the principal of 
                money to persons under contract with the principal.
                    ``(E) Performance bond.--The term `performance 
                bond' means a bond conditioned upon the completion by 
                the principal of a contract in accordance with its 
                terms.
                    ``(F) Prime contractor.--The term `prime 
                contractor' means the person with whom the obligee has 
                contracted to perform the contract.
                    ``(G) Principal.--The term `principal' means a 
                person who may be a prime contractor or a subcontractor 
                and--
                            ``(i) in the case of a bid bond, is bidding 
                        for the award of a contract; or
                            ``(ii) is primarily liable to complete a 
                        contract for the obligee, or to make payments 
                        to other persons in respect of such contract, 
                        and for whose performance of his obligation the 
                        surety is bound under the terms of a payment or 
                        performance bond.
                    ``(H) Secretary.--The term `Secretary' means the 
                Secretary of Transportation, acting through the 
                Minority Resource Center established under subsection 
                (b).
                    ``(I) Subcontractor.--The term `subcontractor' 
                means a person who has contracted with a prime 
                contractor or with another subcontractor to perform a 
                contract.
                    ``(J) Surety.--The term `surety' means the person 
                or State that--
                            ``(i) under the terms of a bid bond, 
                        undertakes to pay a sum of money to the obligee 
                        in the event the principal breaches the 
                        conditions of the bond;
                            ``(ii) under the terms of a performance 
                        bond, undertakes to incur the cost of 
                        fulfilling the terms of a contract in the event 
                        the principal breaches the conditions of the 
                        contract;
                            ``(iii) under the terms of a payment bond, 
                        undertakes to make payment to all persons 
                        supplying labor and material in the prosecution 
                        of the work provided for in the contract if the 
                        principal fails to make prompt payment; or
                            ``(iv) is an agent, independent agent, 
                        underwriter, or any other company or individual 
                        empowered to act on behalf of such person or 
                        State.
            ``(11) Authorization of appropriations.--There is 
        authorized to be appropriated to the Secretary to carry out 
        activities under this subsection $50,000,000 for each of fiscal 
        years 2012 through 2016, of which not more than $20,000,000 may 
        be made available each fiscal year to carry out activities 
        under paragraph (8).''.

SEC. 3. NATIONAL INFORMATION CLEARINGHOUSE.

    Section 332(b)(1) of title 49, United States Code, is amended by 
striking ``the maintenance, rehabilitation, restructuring, improvement, 
and revitalization of the railroads of the United States'' and 
inserting ``any Federal, State, or local mode of transportation''.

SEC. 4. PROVISION OF RELEVANT INFORMATION.

    Section 332(d) of title 49, United States Code, is amended by 
striking ``United States Railway Association, the Consolidated Rail 
Corporation, and the''.
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