DATE: February 19, 2001

FROM: Barry McVay, CPCM

SUBJECT: Small Business Administration; Surety Bond Maximum Increased to $2,000,000

SOURCE: Small Business Administration News Release, February 16, 2001

AGENCIES: Small Business Administration (SBA)

ACTION: Announcement

SYNOPSIS: On February 16, 2001, SBA announced that it is increased the maximum size of the surety bonds it can guarantee for small businesses from $1,250,000 to $2,000,000 "in an effort to broaden contracting opportunities for small, minority and women contractors."

EDITOR'S NOTE: SBA's regulations are in Title 13 of the Code of Federal Regulations, Business Credit and Assistance, Chapter 1, Small Business Administration. The regulations affected by this are in Part 115, Surety Bond Guarantee, paragraph (e) of Section 115.12, General Program Policies and Provisions.

EFFECTIVE DATE: December 21, 2000.

FOR FURTHER INFORMATION CONTACT: Cecilia Taylor, 202-205-6740.

SUPPLEMENTAL INFORMATION: On December 21, 2000, President Clinton signed into law Public Law 106-554, Making Omnibus Consolidated and Emergency Supplemental Appropriations for Fiscal Year 2001. Included in Public Law 106-554 is the Small Business Reauthorization Act of 2000, and Section 803 of the Small Business Reauthorization Act amended Section 411 of the Small Business Investment Act of 1958 to increase the maximum size of the surety bonds it can guarantee for small and emerging contractors who cannot obtain surety bonds through regular commercial channels from $1,250,000 to $2,000,000. SBA is announcing that it is implementing this change.

Under the Surety Bond Guarantee Program, SBA guarantees from 70% to 90% of losses incurred by surety companies in the event of a contractor's default on contracts not exceeding $2 million. Contractors served by the Surety Bond Guarantee Program typically lack the required combination of experience and financial strength needed to secure bonds through regular surety channels. By making surety bonds available to qualified and deserving companies, the program ensures competitiveness and fairness in the construction industry.

This assistance is produced at little or no cost to the government, since an average of $8 million per year is generated in income through contractors and surety fees. In fiscal year 2000, the Surety Bond Guarantee Program backed more than 1,795 final bonds on contracts valued at nearly $328.9 million.

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2001 by Panoptic Enterprises. All Rights Reserved.

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