Transcript No Slide Title

Helping Contractors Grow
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Program Mission
The Small Business Administration (SBG) Program
was created in 1971 to assist small, emerging, and
disadvantaged contractors obtain bonds that were
otherwise unavailable to them.
The Office of Surety Guarantees’ mission is to
provide greater access to contract opportunities for
those contractors, by giving surety companies an
incentive (guarantee) to provide the necessary
bonding.
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Importance of the SBG Program
 Increase opportunities for small and emerging businesses to
obtain contracts by providing access to bonding.
 Especially important to small minority and businesses located
in underserved areas.
 Enables small business owners to sustain and grow their
businesses by competing in contracting marketplace.
 Creates jobs.
 Will provide access to bonding for small contractors
participating in Gulf States reconstruction.
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What is a Surety Company
Most large property and casualty insurance companies
have surety departments.
SBA guarantees bonds written by approved surety listed
in the U.S. Treasury’s Circular 570.
“Surety” includes an agent, independent agent,
underwriter, or other company or individual empowered
to act on behalf of the Surety.
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What is Suretyship?
Suretyship is a contractual relationship
whereby one party (a surety), agrees to
answer for the debt, default, or
miscarriage of another (contractor).
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What Is A Surety Bond?
A three party written agreement.
Surety
(guarantor)
Project owner
(obligee)
Contractor
(principal)
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What Is An SBA Surety Guarantee?
It is an agreement between a surety and the SBA.
SBA agrees to assume a predetermined
percentage of loss in the event the contractor
breaches the terms of the contract.
A guarantee strengthens a small contractor’s
ability to compete within the free enterprise
system.
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Four Major Contract Surety Bonds
Frequently Required
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1) Bid Bond
Guarantees the bidder will enter
into the contract and furnish the
required performance and
payment bonds.
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2) Performance Bond
Guarantees the contractor will
perform the contract according
its terms.
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3) Payment Bond
Guarantees payment from the
contractor to parties who furnish
equipment, supplies, labor, and
material.
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4) Ancillary Bond
Bonds that are incidental and
essential to the performance
of the contract.
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SBA OSG Bond Programs
Prior Approval Program
Preferred Surety Bond Program
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Prior Approval Program or Plan A
 Administered through 4 SBA Area Offices
 Provides an 80 or 90% bond guarantee
 Less experienced emerging SBS
 Specialty Surety Companies
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Preferred Surety Bond Program or PSB
 Administered by SBA HQ
 Provides 70% bond guarantee
 More mature SBs
 Standard Market Insurance Companies
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WHO NEEDS A BOND?
The Miller Act requires prime contractors bidding on
federal projects valued at $100,000 or more to post a
surety bond.
Almost all public construction projects and some services
contracts require bonding.
Many states, counties and municipalities observe laws
similar to the Miller Act., sometimes referred to as “little
miller acts.” Likewise, many private sector projects and
subcontracts require surety bonds.
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How Can SBA Help A Contractor
Obtain Bonding?
SBA guarantees bonds written by any surety
company that has been approved to
participate, and is listed in the U.S. Treasury’s
Circular 570.
Through two separate guarantee programs,
SBA can provide a surety a 70, 80, or 90%
bond guarantee on behalf of a small business.
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Eligibility Requirements
For The Surety Bond Guarantee Programs
 The applicant must be a small business.
 Average annual receipts for the past 3 years cannot
exceed $6.5 million.
 Manufacturing firms where the employees do not exceed
between 500-1,000.
 $6 million size standard waived on 8(a) contracts only.
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Eligibility Requirements For
The Surety Bond Guarantee Programs (cont.)
Contract must require bonds.
The contract cannot exceed $2 million.
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Bond Guarantee Pathway
Plan A: Prior Approval
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Contractor applies to bond agency
Bond agency submits application to Area Office
Area Office reviews & notifies bond agency
Bond agency issues bond to contractor
Plan B: Preferred Surety Bond Program
• Contractor applies to bond agency
• Bond agency/surety company notifies SBA
• Bond agency issues bond to contractor
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Steps To Obtain Bonding
A Contractor Must:
Find a participating agent.
Provide the agent with his credit,
capacity, and character information.
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A Surety Bond Agent:
Evaluates the contractor’s information and
decides if the SBA guarantee is needed.
Issues the bond, or requests SBA’s guarantee.
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How Does A Contractor Find
A Surety Agent?
SBA cannot recommend a specific
surety or agent, but does provide a
listing of agents doing business in your area.
The agent listing will be provided to you
after this training session.
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What Information Will An Agent Require from
the Contractor?
Most companies will (at a minimum) require the following:
An organizational chart
Business plan
Current financial statements
(prepared by an accountant or CPA)
Financial statements for the last three years
Resumes of key people
Record of contract performance
Status of work in process
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What Costs Are Involved?
Surety Charges:
The contractor between 2 and 3 percent of the contract price.
SBA Fees:
Does not charge for an application or bid bond guarantee.
SBA charges the Surety 26% of the premium that the surety
charges the contractor.
SBA charges the contractor $.729 per every $1,000 of the contract
amount.
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On the Horizon
• Electronic Processing:
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Underwriting application and claim reimbursement
requests will be submitted electronically via the
Internet.
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A 50% decrease in processing time expected.
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Implementation planned this fiscal year.
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AREA OFFICE 1 (Serving Regions 1, 2, 3, & 5)
Philadelphia, PA
Daniel Sossaman, Supervisor
Dmitri Matishen, SBG Specialist
Keturah Burrell, SBG Specialist
215-580-2703
215-580-2720
215-580-2719
GEOGRAPHIC TERRITORY
Connecticut, Delaware, Illinois, Indiana, Maine, Maryland,
Massachusetts, Minnesota, New Hampshire, New Jersey,
New York, Ohio, Pennsylvania, Puerto Rico, Rhode Island, U.S.
Virgin Islands, Vermont, Virginia, West Virginia, and Wisconsin.
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AREA OFFICE 2 (serving Regions 4 and 6)
Atlanta, GA
Frank Hagan, Supervisor
Margaret Johnson, SBG Specialist
Lillian Martin, SBG Specialist
(404) 331-0100, ext. 701
(404) 331-0100, ext. 702
(404) 331-0100, ext. 703
GEOGRAPHIC TERRITORY
Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana,
Mississippi, New Mexico, North Carolina, Oklahoma,
South Carolina, Tennessee and Texas.
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AREA OFFICE 3 (serving Regions 7 and 8)
Denver, CO
Darryl Bellamy, Supervisor
Walter Lee, SBG Specialist
Beryl Williams, SBG Specialist
Deborah Williams, SBG Technician
(303) 844-0531, Ext. 261
(303) 844-5231, Ext. 254
(303) 844-5231, Ext. 243
(303) 844-5231, Ext. 256
GEOGRAPHIC TERRITORY
Colorado, Iowa, Kansas, Missouri, Montana, Nebraska,
North Dakota, South Dakota, Utah, and Wyoming.
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AREA OFFICE 4 (serving Regions 9 and 10)
Seattle, Washington
Tom Ewbank, Supervisor
William Schelly, SBG Specialist
(206) 553-0961
(206) 553-2746
GEOGRAPHIC TERRITORY
Alaska, Arizona, California, Guam, Hawaii, Idaho,
Oregon, Nevada, and Washington.
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