[Federal Register Volume 61, Number 41 (Thursday, February 29, 1996)]
[Notices]
[Page 7848]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-4612]



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SMALL BUSINESS ADMINISTRATION


Surety Bond Guarantee Program Fees

AGENCY: Small Business Administration (SBA).

ACTION: Notice.

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SUMMARY: This Notice establishes the fees payable by Principals and 
Sureties participating in SBA's Surety Bond Guarantee Program (13 CFR 
Part 115).

FOR FURTHER INFORMATION CONTACT: Barbara Brannan, Office of Surety 
Guarantees, (202) 205-6540.

SUPPLEMENTARY INFORMATION: In a final rule published on January 31, 
1996, SBA indicated that it was completing an analysis of the 
performance of the Surety Bond Guarantee Program and was evaluating 
whether changes in the Principal's guarantee fee and the Surety's 
guarantee fee were warranted. See 61 FR 3266, 3269 (January 31, 1996). 
SBA has completed that review and is setting the Principal's and the 
Surety's fees in this Federal Register Notice. Capitalized terms used 
in this Notice have the meanings assigned to such terms in 13 CFR 
Sec. 115.10.
    Beginning March 1, 1996 and ending on April 30, 1996, the following 
guarantee fees will be in effect:
    (1) The guarantee fee payable by Principals under 13 CFR 
Secs. 115.32(b) and 115.66 will be $6.00 per thousand dollars of the 
Contract amount.
    (2) The guarantee fee payable by Prior Approval Sureties under 13 
CFR Sec. 115.32(c) and by PSB Sureties under 13 CFR Sec. 115.66 will be 
20% of the bond Premium.
    Beginning May 1, 1996, the following guarantee fees will become 
effective:
    (1) The guarantee fee payable by Principals under 13 CFR 
Secs. 115.32(b) and 115.66 will be $7.45 per thousand dollars of the 
Contract amount.
    (2) The guarantee fee payable by Prior Approval Sureties under 13 
CFR Sec. 115.32(c) and by PSB Sureties under 13 CFR Sec. 115.66 will be 
23% of the bond Premium.
    The guarantee fees scheduled to take effect on May 1, 1996 are 
higher than the guarantee fees currently in place in the Surety Bond 
Guarantee Program, but are lower than the fees SBA had proposed for the 
Program in the proposed rule published on November 27, 1995. See 60 FR 
58263 (November 27, 1995). SBA's proposal to increase the Principal's 
fee to $8.00 per thousand dollars of the Contract amount and the 
Surety's fee to 25% of the bond Premium was not well-received by the 
participants in the Program. Most of the comments submitted to SBA 
predicted serious adverse consequences for Principals and for the 
Program if the fees were increased as proposed.
    After a careful review of these comments and of Program performance 
and trends, it has been determined that some increase in the fees is, 
nevertheless, necessary to increase the reserves in the Program's 
revolving fund to cover potential unfunded liabilities should the 
Program be terminated. While improvements in Program operations have 
resulted in decreased claims payments and increased claims recoveries 
over the past several years, current reserves in the revolving fund are 
not sufficient to satisfy all such unfunded Program liabilities. The 
increased fees established in this Notice have been calculated as the 
minimum necessary to bridge this gap over a period of years. The 
increases are not scheduled to go into effect until May 1, 1996 in 
order to allow sufficient time for Program participants to make any 
necessary adjustments to their accounting systems.
    SBA will continue to evaluate the performance of the Surety Bond 
Guarantee Program to determine whether the fee increases adopted today 
remain necessary, and to monitor their effect on both Principals and 
the Program generally. If the Program continues to perform as well as 
it has in the recent past, SBA would expect, eventually, to be able to 
reduce Program fees.
    Any future changes in the fee amounts will be published by SBA in 
the form of a Notice in the Federal Register.
    Information on other requirements concerning the fees may be found 
at 13 CFR Secs. 115.32 and 115.66.

    Dated: February 23, 1996.
Philip Lader,
Administrator.
[FR Doc. 96-4612 Filed 2-28-96; 8:45 am]
BILLING CODE 8025-01-P