Surety Bond Guarantee Program; Disaster and Miscellaneous Amendments, 21521-21523 [2010-9434]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 75, Number 79 (Monday, April 26, 2010)]
[Proposed Rules]
[Pages 21521-21523]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-9434]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 75, No. 79 / Monday, April 26, 2010 / 
Proposed Rules

[[Page 21521]]



SMALL BUSINESS ADMINISTRATION

13 CFR Part 115

RIN 3245-AF77


Surety Bond Guarantee Program; Disaster and Miscellaneous 
Amendments

AGENCY: Small Business Administration.

ACTION: Proposed rule.

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SUMMARY: This Proposed Rule would implement the authority provided by 
the Small Business Disaster Response and Loan Improvements Act of 2008 
for issuing surety bond guarantees for contracts and orders related to 
a major disaster. The Proposed Rule would also clarify that the Small 
Business Administration (SBA) does not cover any costs related to any 
insurance or indemnification requirements in the bonded contract.

DATES: Comments must be received on or before May 26, 2010.

ADDRESSES: You may submit comments, identified by RIN 3245-AF77 by any 
of the following methods:
     Federal eRulemaking Portal: https://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 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, Special Assistant, Office of Surety Guarantees, 409 
Third Street, SW., Washington, DC 20416 or send an e-mail to 
barbara.brannan@sba.gov. 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 J. Brannan, Office of 
Surety Guarantees, 202-205-6545, e-mail: barbara.brannan@sba.gov.

SUPPLEMENTARY INFORMATION: 

I. Background Information

    SBA guarantees a portion of bid, payment and performance bonds on 
contracts up to $2 million for small and emerging contractors who 
cannot obtain Surety bonds through regular commercial channels. SBA's 
guarantee gives Sureties an incentive to provide bonding for small 
businesses and thereby assists small businesses in obtaining greater 
access to contracting opportunities. The Proposed Rule includes four 
proposed revisions to 13 CFR 115. Three of the four revisions would 
implement the authority granted to the Agency in Sec.  12079 of 
subtitle B of title XII of Public Law 110-246. The fourth revision 
would clarify that SBA does not cover any costs related to any 
insurance or indemnification requirements in the bonded contract.
    Section 12079 of Public Law 110-246 sets forth the bonding 
thresholds for any procurement related to a major disaster. For 
Contracts and Orders, as defined in 13 CFR 115.10, related to a major 
disaster, a new provision would be added to SBA regulations, 13 CFR 
115.12(e)(5), to authorize SBA to approve, under certain conditions, an 
SBA bond guarantee on an individual Contract or Order up to $5,000,000 
at the time of bond execution. For products or services procured under 
non-Federal Contracts or Orders up to $5,000,000, an SBA bond guarantee 
may be issued if the products will be manufactured or the services will 
be performed in the major disaster area identified in the Federal 
Emergency Management Agency (FEMA) Web site. SBA finds that the 
manufacturing of any products or the performance of any services in the 
disaster area will assist recovery efforts in the disaster area by 
generating economic activity and that, therefore, these procurements 
are reasonably related to the major disaster.
    For products or services procured under a Federal Contract or Order 
up to $5,000,000, an SBA bond guarantee may be issued if: (a) The 
products will be manufactured or the services will be performed in the 
major disaster area identified in the FEMA Web site; or (b) the 
products will be manufactured or the services will be performed outside 
the major disaster area and the products or services will directly 
assist in the recovery efforts in the major disaster area. The SBA bond 
guarantee may be issued on a Federal Contract or Order that meets one 
of the above two conditions up to $10,000,000 at the request of the 
Head of the Agency involved in disaster reconstruction efforts.
    In addition, SBA believes that recovery efforts after a major 
disaster will generally continue for the first 12 months after the 
disaster is declared. Accordingly, the Proposed Rule provides that 
SBA's authority to guarantee bonds in the amounts authorized by Public 
Law 110-246 for a particular disaster would apply only during the 12 
months following the disaster declaration unless SBA extends, in its 
discretion, the authority for such disaster. SBA will publish a notice 
of any extension in the Federal Register.
    This new bond authority is also subject to the availability of 
funds appropriated in advance specifically to carry out Sec.  12079 of 
Public Law 110-246. In accordance with the new authority, the 
definition of Applicable Statutory Limit set forth in 13 CFR 115.10 
would be revised, and a new definition for Head of Agency would be 
added to 13 CFR 115.10.
    In addition, the Proposed Rule would clarify that SBA does not 
cover any costs related to any insurance or indemnification 
requirements in the bonded contract. As insurance and indemnification 
requirements may appear in Contracts, SBA is proposing to add a new 
paragraph (5) to Sec.  115.16(f) to clarify that SBA excludes the 
following from the losses covered by the SBA guarantee: (1) Any costs 
that arise from the Principal's failure to secure and maintain 
insurance coverage required by the Contract or Order; (2) any costs 
that result from any claims or judgments that exceed the amount of any 
insurance coverage required by the Contract or Order; and (3) any costs 
that arise from any agreement by the Principal in the Contract or Order 
to indemnify the Obligee or any other Persons.

II. Section by Section Analysis

    Section 115.10. SBA is proposing to revise the definition of the 
term, ``Applicable Statutory Limit'' to reflect

[[Page 21522]]

that the maximum amount of any Contract or Order for which the Agency 
may issue a surety bond guarantee may be set by statutory provisions 
other than Sec.  411(a) of the Small Business Investment Act, such as 
by Sec.  12079 of Public Law 110-246. SBA is also proposing to add a 
new definition for ``Head of Agency'' to implement Sec.  12079(b) of 
Public Law 110-246.
    Section 115.12(e)(5). SBA is proposing to add a new provision 
relating to the new surety bond guarantee authority provided under 
Sec.  12079 of Public Law 110-246 for Contracts and Orders related to a 
major disaster area. This new authority would apply to an individual 
Contract or Order up to $5,000,000 at the time of bond execution. For 
products or services procured under non-Federal Contracts or Orders up 
to $5,000,000, an SBA bond guarantee may be issued if the products will 
be manufactured or the services will be performed in the major disaster 
area identified in the FEMA Web site. For products or services procured 
under a Federal Contract or Order up to $5,000,000, an SBA bond 
guarantee may be issued if: (a) The products will be manufactured or 
the services will be performed in the major disaster area identified in 
the FEMA Web site; or (b) the products are manufactured or the services 
are performed outside the major disaster area and the products or 
services will directly assist in the recovery efforts in the major 
disaster area. The SBA bond guarantee may be issued on a Federal 
Contract or Order that meets one of the above two conditions up to 
$10,000,000 at the request of the Head of the Agency involved in 
disaster reconstruction efforts.
    In addition, this provision would apply to a Contract or Order for 
which an offer is submitted or award made within 12 months from the 
date an area is designated a major disaster area as identified in the 
FEMA Web site at https://www.fema.gov. SBA may, at its discretion, 
extend this time period for any particular disaster. SBA expects that 
it would consider extending the time period only where efforts to 
recover from the major disaster were still underway one year after its 
occurrence. SBA will publish a notice of any extension in the Federal 
Register. The new bond authority is also expressly conditioned on the 
appropriation of funds in advance.
    Section 115.16(f). SBA is proposing to add a new paragraph (5) to 
clarify that SBA does not cover any costs related to any insurance or 
indemnification requirements in the bonded contract. As insurance and 
indemnification requirements may appear in Contracts, SBA is proposing 
to clarify that the following costs are excluded from the losses 
covered by the SBA guarantee: (1) Any costs that arise from the 
Principal's failure to secure and maintain insurance coverage required 
by the Contract or Order; (2) any costs that result from any claims or 
judgments that exceed the amount of any insurance coverage required by 
the Contract or Order; and (3) any costs that arise from any agreement 
in the Contract or Order by the Principal to indemnify the Obligee or 
any other Persons.

Compliance With Executive Orders 12866, 12988, and 13132, 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 
rule does not constitute a significant regulatory action under 
Executive Order 12866. This 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

    For purposes of 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, 
Federalism, SBA has determined that this Proposed Rule has no 
federalism implications warranting preparation of a federalism 
assessment.

Paperwork Reduction Act, 44 U.S.C., Ch. 35

    SBA has determined that this Proposed Rule does not impose 
additional reporting or recordkeeping requirements under the Paperwork 
Reduction Act, 44 U.S.C., Chapter 35.

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 the 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 approximately one dozen Sureties that participate in the SBA 
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, the Small Business 
Administration proposes to amend 13 CFR Part 115 as follows:

PART 115--SURETY BOND GUARANTEE

    1. The authority citation for part 115 is revised 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.

    2. In Sec.  115.10, revise the definition of ``Applicable Statutory 
Limit'' and add the definition of ``Head of Agency'' to read as 
follows:


Sec.  115.10  Definitions.

* * * * *
    Applicable Statutory Limit means the maximum amount of any Contract 
or Order for which Sec.  411(a) of the Small Business Investment Act, 
as amended from time to time, or other law, authorizes SBA to 
guarantee, or commit to guarantee, a Bid Bond, Payment Bond, 
Performance Bond, or Ancillary Bond.
* * * * *
    Head of Agency means in the case of a cabinet department, the 
Secretary; and in the case of an independent commission, board, or 
agency, the Chair or Administrator; or any person to whom the 
Secretary, Chair, or Administrator has directly delegated the authority 
to request SBA to guarantee bonds on Contracts or Orders in excess of 
$5,000,000.
* * * * *
    3. In Sec.  115.12, add paragraph (e)(5) to read as follows:

[[Page 21523]]

Sec.  115.12  General program policies and provisions.

* * * * *
    (e) * * *
    (5) Guarantee authority for Contracts and Orders related to a major 
disaster area. Subject to the availability of funds appropriated in 
advance specifically for the purpose of guaranteeing bonds for any 
Contract or Order related to a major disaster, SBA may guarantee bonds 
on any Contract or Order under the following terms and conditions:
    (i) The Contract or Order does not exceed $5,000,000 at the time of 
bond execution, and:
    (A) For products or services procured under a Federal Contract or 
Order, the products will be manufactured or the services will be 
performed in the major disaster area identified in the Federal 
Emergency Management Agency (FEMA) Web site at https://www.fema.gov, or 
the products will be manufactured or the services will be performed 
outside the major disaster area and the products or services will 
directly assist in the recovery efforts in the major disaster area; or
    (B) For products or services procured under any other Contract or 
Order, the products will be manufactured or the services will be 
performed in the major disaster area identified in the FEMA Web site at 
https://www.fema.gov;
    (ii) At the request of the Head of the Agency involved in 
reconstruction efforts in response to a major disaster, SBA may 
guarantee bonds on Federal Contracts or Orders in excess of $5,000,000, 
but not more than $10,000,000;
    (iii) The restrictions set forth in Sec.  115.12(e)(3) do not apply 
to the guarantees issued under this paragraph (e)(5); and
    (iv) A guarantee may be issued under this paragraph (e)(5) for any 
Contract or Order for which an offer is submitted or an award is made 
within 12 months from the date an area is designated a major disaster 
area in the Federal Register. SBA may, at its discretion, extend this 
time period for any particular disaster, and will publish a notice of 
the extension in the Federal Register.
* * * * *
    4. Amend Sec.  115.16 as follows:
    a. Remove the word ``and'' at the end of paragraph (f)(3);
    b. Remove the punctuation ``.'' at the end of paragraph (f)(4); and
    c. Add paragraph (f)(5) to read as follows:


Sec.  115.16  Determination of Surety's Loss.

* * * * *
    (f) * * *
    (5) Any costs that arise from the Principal's failure to secure and 
maintain insurance coverage required by the Contract or Order, or any 
costs that result from any claims or judgments that exceed the amount 
of any insurance coverage required by the Contract or Order, as well as 
any costs that arise as a result of any agreement by the Principal in 
the Contract or Order to indemnify the Obligee or any other Persons.

Karen G. Mills,
Administrator.
[FR Doc. 2010-9434 Filed 4-23-10; 8:45 am]
BILLING CODE 8025-01-P