[Federal Register Volume 84, Number 157 (Wednesday, August 14, 2019)]
[Pages 40466-40467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-17442]



[Docket No.: SBA-2018-0007]

Surety Bond Guarantee Program Fees

AGENCY: U.S. Small Business Administration.

ACTION: Notification of extension of temporary initiative to test lower 
fees for an additional year.


SUMMARY: This document announces a one-year extension of the temporary 
decrease in the guarantee fees that the U.S. Small Business 
Administration (SBA) charges all Surety companies and Principals on 
each guaranteed bond (other than a bid bond) issued in SBA's Surety 
Bond Guarantee (SBG) Program.

DATES: The temporary initiative to test lower fees in the SBG Program, 
which is currently in effect through September 30, 2019, will be 
extended for an additional year to apply to all SBA surety bond 
guarantees approved through September 30, 2020.

FOR FURTHER INFORMATION CONTACT: Jermanne Perry, Management Analyst, 
Office of Surety Guarantees; (202) 401-8275 or [email protected].

SUPPLEMENTARY INFORMATION: Under its SBG Program, the SBA guarantees a 
certain percentage of bid, payment, and performance bonds for small and 
emerging contractors who cannot obtain surety bonds through regular 
commercial channels. The SBA guarantee incentivizes Sureties to provide 
bonding for small businesses and thereby assists small businesses in 
obtaining greater access to contracting opportunities. Pursuant to its 
statutory authority to ``establish such fee or fees for small business 
concerns and premium or premiums for sureties as it deems reasonable 
and necessary,'' and to administer the SBG Program ``on a prudent and 
economically justifiable basis,'' 15 U.S.C. 694b(h), SBA assesses a 
guarantee fee against both the small business concern (the Principal) 
and the Surety and deposits these fees into a revolving fund to cover 
the program's liabilities and certain program expenses.
    SBA's rules provide that the amount of the fees to be paid by the 
Surety and the Principal will be determined by SBA and published in 
Notices in the Federal Register from time to time. See 13 CFR 115.32(b) 
and (c) and 115.66. On July 30, 2018, SBA published a notification in 
the Federal Register (83 FR 36658) that announced that, for all 
guaranteed bonds approved during the one year period beginning October 
1, 2018 through September 30, 2019, the Surety fee would decrease from 
26% of the bond premium to 20% of the bond premium, and the Principal 
fee would decrease from $7.29 per thousand dollars of the contract 
amount to $6 per thousand dollars of the contract amount (the decrease 
in the Surety and Principal fees referred to, collectively, as ``lower 
fees''). SBA invited comments on this temporary initiative and received 
a total of eight comments, with six comments from surety companies and 
agents and two comments from trade associations, all of which expressed 
support for the lower fees.
    SBA has determined that it requires more data to fully evaluate the 
effect of the lower fees on the SBG Program. Accordingly, to provide 
more time to gather and evaluate the requisite data, SBA is announcing 
a one-year extension of the temporary initiative to test the lower 
fees. The lower fees will now apply to all bond guarantees (other than 
bid bonds) approved through September 30, 2020. During the additional 
year that the lower fees are in effect, SBA will evaluate how the lower 
fees affect the SBG Program, including program utilization by surety 
companies, surety agents and small businesses; the size and 
characteristics of the portfolio; and the risk level of the program, 
including cash flow and defaults. After carefully reviewing program 
performance with the additional data, SBA will determine whether the 
guarantee fees should remain at these reduced amounts, if they should 
revert to the higher amounts, or if they should otherwise be changed.

[[Page 40467]]

    Authority:  13 CFR 115.32(b) and (c) and 115.66.

William M. Manger,
Associate Administrator, Office of Capital Access.
[FR Doc. 2019-17442 Filed 8-13-19; 8:45 am]