[Federal Register Volume 77, Number 24 (Monday, February 6, 2012)]
[Proposed Rules]
[Pages 5721-5724]
From the Federal Register Online via the Government Publishing 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 
[email protected]. 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: [email protected].

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