[Congressional Record Volume 142, Number 94 (Monday, June 24, 1996)]
[Extensions of Remarks]
[Pages E1151-E1152]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




         INTRODUCTION OF THE EQUAL SURETY BOND OPPORTUNITY ACT

                                 ______


                       HON. ELEANOR HOLMES NORTON

                      of the district of columbia

                    in the house of representatives

                         Monday, June 24, 1996

  Ms. NORTON. Mr. Speaker, today I am pleased to introduce the Equal 
Surety Bond Opportunity Act [ESBOA]. The ESBOA will help qualified 
women- and minority-owned businesses to compete in the contracting 
business by helping them obtain adequate surety bonding. In addition, 
the ESBOA is directed against barriers many qualified small and 
emerging construction firms encounter in obtaining surety bonding.
  Surety bonding is mandatory for bidding on all Federal construction 
work in excess of $25,000, all federally assisted construction projects 
in excess of $100,000, and most State and local public construction. 
Surety bonding requirements, however, are not restricted to government 
contracting. Increasingly, private construction contracts also require 
surety bonding. As surety bonding has become a widespread requirement 
for competition, the inability to obtain surety bonding can cripple a 
construction firm, especially a small or nascent one.
  In 1992, Congress acknowledged the importance of this issue when it 
passed the Small Business Credit Crunch Relief Act and included 
legislation to study the problem of discrimination in the surety 
bonding field, Public Law 102-366, that I had introduced. The survey 
provision required the General Accounting Office [GAO] to conduct a 
comprehensive survey of business firms, especially those owned by women 
and minorities, to determine their experiences in obtaining surety 
bonding from corporate surety firms.
  The GAO completed the requested survey in June 1995. The survey found 
that of the 12,000 small construction firms surveyed, 77 percent had 
never obtained bonds. In addition, minority- and women-owned firms were 
more likely to be asked for certain types of financial documentation. 
Further, minority-owned firms were also more likely to be asked to 
provide collateral and meet other conditions than the firms not owned 
by minorities.
  The ESBOA bill I am introducing today is modeled on the Equal Credit 
Opportunity Act of 1968 which prohibited discrimination in credit 
practices. The ESBOA requires notification of a contractor of the 
action taken on his or her application within 20 days of receipt of a 
completed bond application. If the applicant is denied bonding, the 
surety would also be required, upon request, to provide a written 
statement of specific reasons for each denied

[[Page E1152]]

request. According to the National Association of Minority Contractors 
[NAMC], many minority contractors reported being turned down for a bond 
without an explanation. When explanations are not proffered, a 
perception of discrimination in the surety industry is created. This 
perception drives minority contractors to obtain sureties outside the 
mainstream, often at significant additional expenses and fewer 
protections, placing themselves, their subcontractors, and the 
Government at greater risk.
  This legislation will create an environment in which small business 
firms, particularly those owned and controlled by minorities and women, 
can successfully obtain adequate surety bonding. This legislation will 
enable us to ferret out continuing biases in the industry. Whatever 
these prejudices may be, getting rid of them will open up the industry, 
creating entrepreneurial and employment opportunities and making the 
industry more competitive. I urge my colleagues to support this bill 
and help abolish the artificial impediments to the development and 
survival of emerging small businesses.

                          ____________________