News from U.S. Senator Olympia J. Snowe
Chair, Senate Committee on Small Business and Entrepreneurship
For Immediate Release: August 4, 2006
Contact:  Chris Chichester, 202-228-5843
 

SNOWE INTRODUCES BILL TO STRENGTHEN SMALL BUSINESS CONTRACTING

            Washington, D.C. - Senator Olympia J. Snowe (R-ME), Chair of the Senate Committee on Small Business and Entrepreneurship, today introduced the “Surety Bond Improvements Act of 2006," (S. 3785) legislation that will reform the Small Business Administration Surety Bond Guarantee (SBG) program by increasing the number of surety companies underwriting bonds and the number of small businesses receiving bonds through the program.   A surety bond binds a contractor to comply with the terms and conditions of a contract.   If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities so the project is completed.

            "My legislation will help ensure that small businesses are able to obtain the surety bonds they need to compete for government contracts and create jobs," said Senator Snowe.   “These necessary program changes will help revitalize the SBG program and make it easier for small business to fulfill their contractual obligations.”   

            Senator Snowe noted that surety bonds are most often used on large contracts where the work of many subcontractors is necessary to finish a project on time.  The principal contractor will require that each subcontractor obtain a surety bond.  A subcontractor’s surety bond will guarantee that they will meet their contract’s time and quality requirements.   The majority of small and large businesses fulfill their contractual obligations, and claims against surety bonds are infrequent.  If a claim occurs, the surety firm is responsible for any monetary damages that occur because the bonded company did not fulfill its contractual obligations.        

            The bill will:

            * Increase the principal guarantee amount of any bondable contract in the SBG program from the existing $2 million dollar cap to a new $3 million dollar cap.

            * Prevent the unraveling of SBA surety bond guarantees by stipulating that once a bond has been approved through the prior approval program, the SBA can't reject a claim on the bond. 

            * Eliminate price controls and rate requirements on the Preferred Surety Bond (PSB) program.         

            * Require that the SBA make available to the public any study used to justify a fee increase as well as the overall fees taken in by the program and the program’s overall expenses.