Surety Bond Guarantee Program-Quick Bond Application and Agreement, 41663-41666 [2012-17104]

Download as PDF 41663 Rules and Regulations Federal Register Vol. 77, No. 136 Monday, July 16, 2012 This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. Prices of new books are listed in the first FEDERAL REGISTER issue of each week. SMALL BUSINESS ADMINISTRATION 13 CFR Part 115 RIN 3245–AG39 Surety Bond Guarantee Program— Quick Bond Application and Agreement Small Business Administration. Final rule. AGENCY: ACTION: The Small Business Administration (SBA) is issuing this final rule to amend its Surety Bond Guarantee (SBG) rules to implement a streamlined application process in the Prior Approval Program for contract amounts not exceeding $250,000. This rule also makes minor administrative changes to the SBG Program regulations to, among other things, clarify the procedures for submitting application forms and paying fees, and deletes an obsolete reference to a form. DATES: This rule is effective August 15, 2012. FOR FURTHER INFORMATION CONTACT: Ms. Barbara Brannan, Office of Surety Guarantees, U.S. Small Business Administration, 409 Third Street SW., Washington, DC 20416; 202–205–6545, email: barbara.brannon@sba.gov. SUPPLEMENTARY INFORMATION: SUMMARY: wreier-aviles on DSK5TPTVN1PROD with RULES I. Background Information Through the Surety Bond Guarantee (SBG) Program, SBA guarantees bid, payment, and performance bonds for contracts up to $2 million for small and emerging contractors who cannot obtain bonds through regular commercial surety channels. SBA’s guarantee provides the incentive needed for sureties to bond these contractors, giving them greater access to contracting opportunities. The SBG Program consists of the Prior Approval Program and the Preferred Surety Bond (PSB) Program. In the Prior Approval Program, VerDate Mar<15>2010 14:23 Jul 13, 2012 Jkt 226001 Sureties must apply to SBA for each bond guarantee and must receive SBA approval before issuing bonds. Sureties in the PSB Program can issue SBA guaranteed bonds without SBA’s prior approval. On February 6, 2012, SBA published a notice of proposed rulemaking with request for comments in the Federal Register to implement a streamlined application process in the Prior Approval Program for contract amounts not exceeding $250,000, and to make other minor administrative changes to the SBG Program regulations, including clarifying the procedures for submitting application forms and paying fees, and deleting an obsolete reference to a form. See 77 FR 5721. The comment period was open until April 6, 2012, and SBA received three comments, two from trade associations and one from a contract bond underwriter. All submitters expressed support for the proposed rule, observing that it is consistent with industry practice, and two commenters commended SBA for its efforts to reduce the paperwork burden on contractors and sureties. The trade associations believe that the streamlined process will reduce costs associated with the SBG Program, which may lead to greater participation. One submitter offered suggestions for program enhancements, including changes to the current fee structure and to the notice requirements related to changes in the contract amount. These suggestions are outside the scope of this rule; however, SBA will take them into consideration in the context of any future program review. Under this new streamlined process involving contracts not exceeding $250,000, the Surety will use the new Quick Bond Guarantee Application and Agreement, SBA Form 990A, which consolidates two of the forms currently used in the SBG Program—SBA Form 990, Surety Bond Agreement and SBA Form 994, Application for Surety Bond Guarantee Assistance. The new process complements the existing industry practice of offering a streamlined bond application for smaller contract amounts. In addition, under this new process, SBA will not require the Principal to complete and submit two other forms for these small contract amounts, including SBA Form 994F; Schedule of Work in Process, and SBA Form 413; Personal Financial Statement. PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 Instead, to mitigate any risk associated with these smaller contract amounts, the new SBA Form 990A requires the Principal to provide a list of the three largest contracts completed in the last 5 years. This final rule also sets forth the circumstances under which SBA Form 990A cannot be used. This final rule also makes other changes to the existing SBG Program rules, including clarifying that SBA Form 990 or SBA Form 990A must be submitted to and approved by SBA prior to the Surety’s execution of the bond (except for bonds issued under surety bonding lines). With respect to the rules regarding surety bonding lines, this final rule removes the reference to SBA Form 994C as this form is no longer used. In addition, with this final rule, SBA is making minor and technical modifications to clarify that Sureties and Principals may make fee payments through electronic means. The Department of Treasury has directed that payments be made by electronic funds transfer when cost-effective, practicable, and consistent with statutory authority. See 31 CFR 206.4. The final rule makes minor changes to the language in 13 CFR 115.32(b) and 115.32(d) to provide Sureties and Principals with the flexibility to make these payments electronically, conforming these provisions to the Department of Treasury’s requirements. II. Section-by-Section Analysis Section 115.10. This section amends the definition of the term ‘‘Prior Approval Agreement’’ to add the ‘‘Quick Bond Guarantee Application and Agreement (SBA Form 990A)’’ to the agreements into which a Prior Approval Surety may enter with SBA. No changes have been made to this provision as proposed. Section 115.30(d)(1). SBA amends this paragraph to clarify that, where the Surety Bond Guarantee Agreement (SBA Form 990) is used, it must be approved before the Prior Approval Surety executes a Bid or a Final Bond, except in the case of a bonding line under § 115.33(d). This is consistent with 13 CFR 115.19(f), which provides that SBA may deny liability under its guarantee if the Surety executes the bond prior to the date of SBA’s guarantee. SBA is also amending this paragraph to clarify that the applicable guarantee fees must be paid in accordance with 13 CFR 115.32. E:\FR\FM\16JYR1.SGM 16JYR1 wreier-aviles on DSK5TPTVN1PROD with RULES 41664 Federal Register / Vol. 77, No. 136 / Monday, July 16, 2012 / Rules and Regulations No changes have been made to this provision as proposed. Section 115.30(d)(2). This new provision implements a streamlined application process for bond guarantees for contracts that do not exceed $250,000. Under this new process, applicants use a new form, the ‘‘Quick Bond Guarantee Application and Agreement (SBA Form 990A)’’ in place of SBA Form 990 and SBA Form 994. This new provision requires that the Quick Bond Guarantee Application and Agreement (SBA Form 990A) be submitted to and approved by SBA before the Surety executes the Bid or Final Bond. This provision also requires that the guarantee fees be paid in accordance with 13 CFR 115.32. This provision also sets forth six circumstances under which this streamlined application process may not be used. No changes have been made to this provision as proposed. Section 115.32(b). SBA amends the fourth sentence of this provision to add the requirement that the Principal’s fee be remitted to SBA with the new SBA Form 990A, just as it is required to be submitted with SBA Form 990. In addition, SBA is making minor modifications to the rule as proposed to give the Sureties and the Principals the flexibility to pay the fee electronically through the Pay.gov Web site managed by the U.S. Department of Treasury’s Financial Management Service. These modifications include deleting the word ‘‘together’’ in the sentence to avoid any suggestion that the payment must be made by a paper check that is attached to the SBA Form 990, and deleting the phrase ‘‘by the Surety’’ to clarify that the payment may be made by either the Surety or the Principal. By deleting the word ‘‘together’’, SBA does not intend to change the requirement that the Principal’s fee be remitted before the guarantee application may be approved. Section 115.32(c). SBA amends this paragraph to clarify that the requirements regarding the guarantee fee paid by the Surety apply to the new SBA Form 990A, just as they apply to the SBA Form 990. No changes have been made to this provision as proposed. Section 115.32(d)(1). SBA is deleting the words ‘‘Supplemental Form 990’’ from this paragraph to make it clear that this provision applies to bond guarantees approved under the new SBA Form 990A in addition to SBA Form 990. SBA is also adding a sentence to provide that, in notifying SBA of any increase or decrease in the Contract or bond amount, the Surety must use the same form that it used in applying for the original bond guarantee. No changes VerDate Mar<15>2010 14:23 Jul 13, 2012 Jkt 226001 have been made to this provision as proposed. Section 115.32(d)(2). SBA is making minor modifications to the rule as proposed by revising this provision to give Principals and Sureties the flexibility to remit the required fees electronically through the Pay.gov Web site. The modifications include deleting the word ‘‘check’’ throughout the provision. Section 115.33(d). SBA is eliminating references to the ‘‘Surety Bond Guarantee Review Update (SBA Form 994C)’’ throughout this provision because the form is no longer used. No changes have been made to this provision as proposed. Compliance With Executive Orders 12866, 12988, 13132, and 13563, 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 final rule does not constitute a significant regulatory action under Executive Order 12866. This final 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 the purposes of Executive Order 13132, SBA has determined that this final 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 final rule has no federalism implications warranting preparation of a federalism assessment. Executive Order 13563 For the purposes of Executive Order 13563, SBA discussed implementing a streamlined application process with several surety industry associations and surety company representatives. The final application reflects the feedback received from these sources, particularly the incorporation of best practices used throughout the surety industry. SBA also solicited public comments as part PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 of the standard rule making process. Those comments are described above. Paperwork Reduction Act, 44 U.S.C. Ch 35 SBA has determined that this final rule imposes additional reporting and recordkeeping requirements under the Paperwork Reduction Act, 44 U.S.C. chapter 35. SBA included a request for comments on the Quick Bond Guarantee Application and Agreement (SBA Form 990A) in the proposed rule that was published in the Federal Register on February 6, 2012 at 77 FR 5721. The agency received three comments in response to this request during the 60-day comment period. All of the submitters expressed support for this streamlined bond guarantee application process, including the belief that it would reduce the burden on sureties and small business contractors. SBA has not modified this information collection; it is the same as described in the proposed rule. As required by law, SBA has submitted SBA Form 990A to the Office of Management and Budget (OMB) for review and approval. The information submitted to OMB for review is available at https:// www.reginfo.gov/public/jsp/PRA/ praDashboard.jsp. A summary description of this information collection, the respondents, and the estimate of the annual hour burden resulting from this new process is provided below. Included in the estimate is the time for reviewing instructions, searching existing data sources, gathering the data needed, and completing and reviewing the responses. Title: Quick Bond Surety Guarantee Application and Agreement (SBA Form 990A). Description: The Quick Bond Surety Guarantee Application and Agreement is a combination application and bond guarantee agreement that would be used in the Prior Approval Program for contract amounts that do not exceed $250,000. It is a streamlined alternative to the existing surety bond application and agreement, the SBA Forms 990 and 994 (OMB Control Number 3245–0007). The information would be used to evaluate whether the applicant small business meets the program eligibility criteria and the likelihood that it will successfully complete performance on the contract. OMB Control Number: New Collection. Description of and Estimated Number of Respondents. This proposed new collection would be submitted by small businesses seeking to obtain a bond in order to bid or perform on a contract, E:\FR\FM\16JYR1.SGM 16JYR1 Federal Register / Vol. 77, No. 136 / Monday, July 16, 2012 / Rules and Regulations and by surety companies and their agents or representatives. Based on the current volume of bonds for contracts up to $250,000, SBA estimates that approximately 500 small businesses and 13 Prior Approval Sureties would submit this streamlined application and agreement form. Estimated Response Time: It is estimated that each applicant would require approximately 5 minutes to complete the proposed new form. Estimated Number of Responses: 4,450. This number is based on SBA’s projection of program activity during Fiscal Year 2012. Total Estimated Annual Hour Burden: 369 hours. Estimated Annual Cost Burden: $18,941. 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 nonprofit enterprises, and small local governments. Pursuant to 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 impact on a substantial number of small entities. Within the meaning of RFA, SBA certifies that this final rule will not have a significant economic impact on a substantial number of small entities. There are 13 Sureties that currently participate in the SBA Prior Approval Program, and no part of this final 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, SBA amends 13 CFR part 115 as follows: PART 115—SURETY BOND GUARANTEE 1. The authority citation for part 115 continues to read as follows: wreier-aviles on DSK5TPTVN1PROD with RULES ■ 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. § 115.10 [Amended] 2. In § 115.10 amend the definition of ‘‘Prior Approval Agreement’’ by adding ■ VerDate Mar<15>2010 14:23 Jul 13, 2012 Jkt 226001 ‘‘or Quick Bond Guarantee Application and Agreement (SBA Form 990A)’’ after ‘‘(SBA Form 990)’’. ■ 3. Amend § 115.30 by revising paragraph (d) to read as follows: § 115.30 Submission of Surety’s guarantee application. * * * * * (d) Prior Approval Agreement. To apply for a bond guarantee, a Prior Approval Surety must submit one of the following forms: (1) Surety Bond Guarantee Agreement (SBA Form 990). A Prior Approval Surety may complete and submit a Surety Bond Guarantee Agreement (SBA Form 990) to SBA for each Bid Bond or Final Bond, and this Form must be approved by SBA prior to the Surety’s Execution of the bond, except in the case of a surety bonding line approved by SBA under § 115.33(d). The guarantee fees owed in connection with Final Bonds must be paid in accordance with § 115.32. (2) Quick Bond Guarantee Application and Agreement (SBA Form 990A)—(i) General procedures. Except as provided in paragraph (d)(2)(ii) of this section, a Prior Approval Surety may complete and submit the Quick Bond Guarantee Application and Agreement (SBA Form 990A) to SBA for each Bid Bond or Final Bond, and this Form must be approved by SBA prior to the Surety’s Execution of the bond. SBA Form 990A is a streamlined application form that may be used only for contract amounts that do not exceed $250,000 at the time of application. The guarantee fees owed in connection with Final Bonds must be paid in accordance with § 115.32. (ii) Exclusions. SBA Form 990A may not be used under the following circumstances: (A) The Principal has previously defaulted on any contract or has had any claims or complaints filed against it with any court or administrative agency; (B) Work on the Contract commenced before a bond is Executed; (C) The time for completion of the Contract or the warranty/maintenance period exceeds 12 months; (D) The Contract includes a provision for liquidated damages that exceed $250 per day; (E) The Contract involves asbestos abatement, hazardous waste removal, demolition, or timber sales; or (F) The bond would be issued under a surety bonding line approved under § 115.33. ■ 4. Amend § 115.32 as follows: ■ a. Revise the fourth sentence of paragraph (b) to read as follows; PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 41665 b. Revise the second sentence of paragraph (c) to read as follows; ■ c. Amend the second sentence of paragraph (d)(1) by removing the words ‘‘(Supplemental Form 990)’’ and add a new sentence at the end of paragraph (d)(1) to read as follows; and ■ d. Revise paragraph (d)(2) to read as follows. ■ § 115.32 Fees and Premiums. * * * * * (b) * * * The Principal’s fee is rounded to the nearest dollar, and is to be remitted to SBA with the form submitted under either § 115.30(d)(1) or (2). (c) * * * Subject to § 115.18(a)(4), the Surety must pay SBA a guarantee fee on each guaranteed bond (other than a Bid Bond) within 60 calendar days after SBA’s approval of the Prior Approval Agreement. * * * (d) * * * (1) * * * In notifying SBA of any increase or decrease in the Contract or bond amount, the Surety must use the same form (SBA Form 990 or SBA Form 990A) that it used in applying for the original bond guarantee. (2) Increases; fees. The payment for the increase in the Principal’s guarantee fee, which is computed on the increase in the Contract amount, is due upon notification of the increase in the Contract or bond amount under this paragraph (d). If the increase in the Principal’s fee is less than $40, no payment is due until the total amount of increases in the Principal’s fee equals or exceeds $40. The Surety’s payment of the increase in the Surety’s guarantee fee, computed on the increase in the bond Premium, must be submitted to SBA within 60 calendar days of SBA’s approval of the Prior Approval Agreement, unless the amount of such increased guarantee fee is less than $40. When the total amount of increase in the guarantee fee equals or exceeds $40, the Surety must remit the fee within 60 calendar days. * * * * * ■ 5. Amend § 115.33 by revising paragraphs (d)(1) and (d)(2) to read as follows: § 115.33 Surety bonding line. * * * * * (d) * * * (1) Bid Bonds. Within 15 business days after the Execution of any Bid Bonds under a bonding line, the Surety must submit a ‘‘Surety Bond Guarantee Underwriting Review’’ (SBA Form 994B) to SBA for approval. If the Surety fails to submit the form within this time period, SBA’s guarantee of the bond will be void from its inception unless SBA E:\FR\FM\16JYR1.SGM 16JYR1 41666 Federal Register / Vol. 77, No. 136 / Monday, July 16, 2012 / Rules and Regulations determines otherwise upon a showing that a valid reason exists why the timely submission was not made. (2) Final Bonds. Within 15 business days after the Execution of any Final Bonds under a bonding line, the Surety must submit a Surety Bond Guarantee Underwriting Review (SBA Form 994B) and a Surety Bond Guarantee Agreement (SBA Form 990) to SBA for approval. If the surety fails to submit these forms within the time period or the guarantee fees are not paid in accordance with § 115.32, SBA’s guarantee of the bond will be void from its inception unless SBA determines otherwise upon a showing that the Contract is not in default and a valid reason exists why the timely submission was not made. * * * * * Dated: July 2, 2012. Karen G. Mills, Administrator. [FR Doc. 2012–17104 Filed 7–13–12; 8:45 am] BILLING CODE 8025–01–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 97 [Docket No. 30849; Amdt. No. 3485] Standard Instrument Approach Procedures, and Takeoff Minimums and Obstacle Departure Procedures; Miscellaneous Amendments Federal Aviation Administration (FAA), DOT. ACTION: Final rule. AGENCY: This rule establishes, amends, suspends, or revokes Standard Instrument Approach Procedures (SIAPs) and associated Takeoff Minimums and Obstacle Departure Procedures for operations at certain airports. These regulatory actions are needed because of the adoption of new or revised criteria, or because of changes occurring in the National Airspace System, such as the commissioning of new navigational facilities, adding new obstacles, or changing air traffic requirements. These changes are designed to provide safe and efficient use of the navigable airspace and to promote safe flight operations under instrument flight rules at the affected airports. DATES: This rule is effective July 16, 2012. The compliance date for each SIAP, associated Takeoff Minimums, and ODP is specified in the amendatory provisions. wreier-aviles on DSK5TPTVN1PROD with RULES SUMMARY: VerDate Mar<15>2010 14:23 Jul 13, 2012 Jkt 226001 The incorporation by reference of certain publications listed in the regulations is approved by the Director of the Federal Register as of July 16, 2012. ADDRESSES: Availability of matter incorporated by reference in the amendment is as follows: For Examination— 1. FAA Rules Docket, FAA Headquarters Building, 800 Independence Avenue SW., Washington, DC 20591; 2. The FAA Regional Office of the region in which the affected airport is located; 3. The National Flight Procedures Office, 6500 South MacArthur Blvd., Oklahoma City, OK 73169 or 4. The National Archives and Records Administration (NARA). For information on the availability of this material at NARA, call 202–741–6030, or go to: https://www.archives.gov/ federal_register/ code_of_federal_regulations/ ibr_locations.html. Availability—All SIAPs are available online free of charge. Visit nfdc.faa.gov to register. Additionally, individual SIAP and Takeoff Minimums and ODP copies may be obtained from: 1. FAA Public Inquiry Center (APA– 200), FAA Headquarters Building, 800 Independence Avenue SW., Washington, DC 20591; or 2. The FAA Regional Office of the region in which the affected airport is located. FOR FURTHER INFORMATION CONTACT: Richard A. Dunham III, Flight Procedure Standards Branch (AFS–420) Flight Technologies and Programs Division, Flight Standards Service, Federal Aviation Administration, Mike Monroney Aeronautical Center, 6500 South MacArthur Blvd., Oklahoma City, OK 73169 (Mail Address: P.O. Box 25082 Oklahoma City, OK 73125) telephone: (405) 954–4164. SUPPLEMENTARY INFORMATION: This rule amends Title 14, Code of Federal Regulations, Part 97 (14 CFR part 97) by amending the referenced SIAPs. The complete regulatory description of each SIAP is listed on the appropriate FAA Form 8260, as modified by the National Flight Data Center (FDC)/Permanent Notice to Airmen (P–NOTAM), and is incorporated by reference in the amendment under 5 U.S.C. 552(a), 1 CFR part 51, and § 97.20 of Title 14 of the Code of Federal Regulations. The large number of SIAPs, their complex nature, and the need for a special format make their verbatim publication in the Federal Register expensive and impractical. Further, PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 airmen do not use the regulatory text of the SIAPs, but refer to their graphic depiction on charts printed by publishers of aeronautical materials. Thus, the advantages of incorporation by reference are realized and publication of the complete description of each SIAP contained in FAA form documents is unnecessary. This amendment provides the affected CFR sections and specifies the types of SIAP and the corresponding effective dates. This amendment also identifies the airport and its location, the procedure and the amendment number. The Rule This amendment to 14 CFR part 97 is effective upon publication of each separate SIAP as amended in the transmittal. For safety and timeliness of change considerations, this amendment incorporates only specific changes contained for each SIAP as modified by FDC/P–NOTAMs. The SIAPs, as modified by FDC P–NOTAM, and contained in this amendment are based on the criteria contained in the U.S. Standard for Terminal Instrument Procedures (TERPS). In developing these changes to SIAPs, the TERPS criteria were applied only to specific conditions existing at the affected airports. All SIAP amendments in this rule have been previously issued by the FAA in a FDC NOTAM as an emergency action of immediate flight safety relating directly to published aeronautical charts. The circumstances which created the need for all these SIAP amendments requires making them effective in less than 30 days. Because of the close and immediate relationship between these SIAPs and safety in air commerce, I find that notice and public procedure before adopting these SIAPs are impracticable and contrary to the public interest and, where applicable, that good cause exists for making these SIAPs effective in less than 30 days. Conclusion The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) Is not a ‘‘significant regulatory action’’ under Executive Order 12866; (2) is not a ‘‘significant rule’’ under DOT regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will E:\FR\FM\16JYR1.SGM 16JYR1

Agencies

[Federal Register Volume 77, Number 136 (Monday, July 16, 2012)]
[Rules and Regulations]
[Pages 41663-41666]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-17104]



========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 
Prices of new books are listed in the first FEDERAL REGISTER issue of each 
week.

========================================================================


Federal Register / Vol. 77, No. 136 / Monday, July 16, 2012 / Rules 
and Regulations

[[Page 41663]]



SMALL BUSINESS ADMINISTRATION

13 CFR Part 115

RIN 3245-AG39


Surety Bond Guarantee Program--Quick Bond Application and 
Agreement

AGENCY: Small Business Administration.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Small Business Administration (SBA) is issuing this final 
rule to amend its Surety Bond Guarantee (SBG) rules to implement a 
streamlined application process in the Prior Approval Program for 
contract amounts not exceeding $250,000. This rule also makes minor 
administrative changes to the SBG Program regulations to, among other 
things, clarify the procedures for submitting application forms and 
paying fees, and deletes an obsolete reference to a form.

DATES: This rule is effective August 15, 2012.

FOR FURTHER INFORMATION CONTACT: Ms. Barbara Brannan, Office of Surety 
Guarantees, U.S. Small Business Administration, 409 Third Street SW., 
Washington, DC 20416; 202-205-6545, email: barbara.brannon@sba.gov.

SUPPLEMENTARY INFORMATION: 

I. Background Information

    Through the Surety Bond Guarantee (SBG) Program, SBA guarantees 
bid, payment, and performance bonds for contracts up to $2 million for 
small and emerging contractors who cannot obtain bonds through regular 
commercial surety channels. SBA's guarantee provides the incentive 
needed for sureties to bond these contractors, giving them greater 
access to contracting opportunities. The SBG Program consists of the 
Prior Approval Program and the Preferred Surety Bond (PSB) Program. In 
the Prior Approval Program, Sureties must apply to SBA for each bond 
guarantee and must receive SBA approval before issuing bonds. Sureties 
in the PSB Program can issue SBA guaranteed bonds without SBA's prior 
approval.
    On February 6, 2012, SBA published a notice of proposed rulemaking 
with request for comments in the Federal Register to implement a 
streamlined application process in the Prior Approval Program for 
contract amounts not exceeding $250,000, and to make other minor 
administrative changes to the SBG Program regulations, including 
clarifying the procedures for submitting application forms and paying 
fees, and deleting an obsolete reference to a form. See 77 FR 5721. The 
comment period was open until April 6, 2012, and SBA received three 
comments, two from trade associations and one from a contract bond 
underwriter. All submitters expressed support for the proposed rule, 
observing that it is consistent with industry practice, and two 
commenters commended SBA for its efforts to reduce the paperwork burden 
on contractors and sureties. The trade associations believe that the 
streamlined process will reduce costs associated with the SBG Program, 
which may lead to greater participation. One submitter offered 
suggestions for program enhancements, including changes to the current 
fee structure and to the notice requirements related to changes in the 
contract amount. These suggestions are outside the scope of this rule; 
however, SBA will take them into consideration in the context of any 
future program review.
    Under this new streamlined process involving contracts not 
exceeding $250,000, the Surety will use the new Quick Bond Guarantee 
Application and Agreement, SBA Form 990A, which consolidates two of the 
forms currently used in the SBG Program--SBA Form 990, Surety Bond 
Agreement and SBA Form 994, Application for Surety Bond Guarantee 
Assistance. The new process complements the existing industry practice 
of offering a streamlined bond application for smaller contract 
amounts. In addition, under this new process, SBA will not require the 
Principal to complete and submit two other forms for these small 
contract amounts, including SBA Form 994F; Schedule of Work in Process, 
and SBA Form 413; Personal Financial Statement. Instead, to mitigate 
any risk associated with these smaller contract amounts, the new SBA 
Form 990A requires the Principal to provide a list of the three largest 
contracts completed in the last 5 years. This final rule also sets 
forth the circumstances under which SBA Form 990A cannot be used.
    This final rule also makes other changes to the existing SBG 
Program rules, including clarifying that SBA Form 990 or SBA Form 990A 
must be submitted to and approved by SBA prior to the Surety's 
execution of the bond (except for bonds issued under surety bonding 
lines). With respect to the rules regarding surety bonding lines, this 
final rule removes the reference to SBA Form 994C as this form is no 
longer used. In addition, with this final rule, SBA is making minor and 
technical modifications to clarify that Sureties and Principals may 
make fee payments through electronic means. The Department of Treasury 
has directed that payments be made by electronic funds transfer when 
cost-effective, practicable, and consistent with statutory authority. 
See 31 CFR 206.4. The final rule makes minor changes to the language in 
13 CFR 115.32(b) and 115.32(d) to provide Sureties and Principals with 
the flexibility to make these payments electronically, conforming these 
provisions to the Department of Treasury's requirements.

II. Section-by-Section Analysis

    Section 115.10. This section amends the definition of the term 
``Prior Approval Agreement'' to add the ``Quick Bond Guarantee 
Application and Agreement (SBA Form 990A)'' to the agreements into 
which a Prior Approval Surety may enter with SBA. No changes have been 
made to this provision as proposed.
    Section 115.30(d)(1). SBA amends this paragraph to clarify that, 
where the Surety Bond Guarantee Agreement (SBA Form 990) is used, it 
must be approved before the Prior Approval Surety executes a Bid or a 
Final Bond, except in the case of a bonding line under Sec.  115.33(d). 
This is consistent with 13 CFR 115.19(f), which provides that SBA may 
deny liability under its guarantee if the Surety executes the bond 
prior to the date of SBA's guarantee. SBA is also amending this 
paragraph to clarify that the applicable guarantee fees must be paid in 
accordance with 13 CFR 115.32.

[[Page 41664]]

No changes have been made to this provision as proposed.
    Section 115.30(d)(2). This new provision implements a streamlined 
application process for bond guarantees for contracts that do not 
exceed $250,000. Under this new process, applicants use a new form, the 
``Quick Bond Guarantee Application and Agreement (SBA Form 990A)'' in 
place of SBA Form 990 and SBA Form 994. This new provision requires 
that the Quick Bond Guarantee Application and Agreement (SBA Form 990A) 
be submitted to and approved by SBA before the Surety executes the Bid 
or Final Bond. This provision also requires that the guarantee fees be 
paid in accordance with 13 CFR 115.32. This provision also sets forth 
six circumstances under which this streamlined application process may 
not be used. No changes have been made to this provision as proposed.
    Section 115.32(b). SBA amends the fourth sentence of this provision 
to add the requirement that the Principal's fee be remitted to SBA with 
the new SBA Form 990A, just as it is required to be submitted with SBA 
Form 990. In addition, SBA is making minor modifications to the rule as 
proposed to give the Sureties and the Principals the flexibility to pay 
the fee electronically through the Pay.gov Web site managed by the U.S. 
Department of Treasury's Financial Management Service. These 
modifications include deleting the word ``together'' in the sentence to 
avoid any suggestion that the payment must be made by a paper check 
that is attached to the SBA Form 990, and deleting the phrase ``by the 
Surety'' to clarify that the payment may be made by either the Surety 
or the Principal. By deleting the word ``together'', SBA does not 
intend to change the requirement that the Principal's fee be remitted 
before the guarantee application may be approved.
    Section 115.32(c). SBA amends this paragraph to clarify that the 
requirements regarding the guarantee fee paid by the Surety apply to 
the new SBA Form 990A, just as they apply to the SBA Form 990. No 
changes have been made to this provision as proposed.
    Section 115.32(d)(1). SBA is deleting the words ``Supplemental Form 
990'' from this paragraph to make it clear that this provision applies 
to bond guarantees approved under the new SBA Form 990A in addition to 
SBA Form 990. SBA is also adding a sentence to provide that, in 
notifying SBA of any increase or decrease in the Contract or bond 
amount, the Surety must use the same form that it used in applying for 
the original bond guarantee. No changes have been made to this 
provision as proposed.
    Section 115.32(d)(2). SBA is making minor modifications to the rule 
as proposed by revising this provision to give Principals and Sureties 
the flexibility to remit the required fees electronically through the 
Pay.gov Web site. The modifications include deleting the word ``check'' 
throughout the provision.
    Section 115.33(d). SBA is eliminating references to the ``Surety 
Bond Guarantee Review Update (SBA Form 994C)'' throughout this 
provision because the form is no longer used. No changes have been made 
to this provision as proposed.

Compliance With Executive Orders 12866, 12988, 13132, and 13563, 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 
final rule does not constitute a significant regulatory action under 
Executive Order 12866. This final 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 the purposes of Executive Order 13132, SBA has determined that 
this final 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 final rule has no 
federalism implications warranting preparation of a federalism 
assessment.

Executive Order 13563

    For the purposes of Executive Order 13563, SBA discussed 
implementing a streamlined application process with several surety 
industry associations and surety company representatives. The final 
application reflects the feedback received from these sources, 
particularly the incorporation of best practices used throughout the 
surety industry. SBA also solicited public comments as part of the 
standard rule making process. Those comments are described above.

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

    SBA has determined that this final rule imposes additional 
reporting and recordkeeping requirements under the Paperwork Reduction 
Act, 44 U.S.C. chapter 35. SBA included a request for comments on the 
Quick Bond Guarantee Application and Agreement (SBA Form 990A) in the 
proposed rule that was published in the Federal Register on February 6, 
2012 at 77 FR 5721. The agency received three comments in response to 
this request during the 60-day comment period. All of the submitters 
expressed support for this streamlined bond guarantee application 
process, including the belief that it would reduce the burden on 
sureties and small business contractors. SBA has not modified this 
information collection; it is the same as described in the proposed 
rule. As required by law, SBA has submitted SBA Form 990A to the Office 
of Management and Budget (OMB) for review and approval. The information 
submitted to OMB for review is available at https://www.reginfo.gov/public/jsp/PRA/praDashboard.jsp.
    A summary description of this information collection, the 
respondents, and the estimate of the annual hour burden resulting from 
this new process is provided below. Included in the estimate is the 
time for reviewing instructions, searching existing data sources, 
gathering the data needed, and completing and reviewing the responses.
    Title: Quick Bond Surety Guarantee Application and Agreement (SBA 
Form 990A).
    Description: The Quick Bond Surety Guarantee Application and 
Agreement is a combination application and bond guarantee agreement 
that would be used in the Prior Approval Program for contract amounts 
that do not exceed $250,000. It is a streamlined alternative to the 
existing surety bond application and agreement, the SBA Forms 990 and 
994 (OMB Control Number 3245-0007). The information would be used to 
evaluate whether the applicant small business meets the program 
eligibility criteria and the likelihood that it will successfully 
complete performance on the contract.
    OMB Control Number: New Collection.
    Description of and Estimated Number of Respondents. This proposed 
new collection would be submitted by small businesses seeking to obtain 
a bond in order to bid or perform on a contract,

[[Page 41665]]

and by surety companies and their agents or representatives. Based on 
the current volume of bonds for contracts up to $250,000, SBA estimates 
that approximately 500 small businesses and 13 Prior Approval Sureties 
would submit this streamlined application and agreement form.
    Estimated Response Time: It is estimated that each applicant would 
require approximately 5 minutes to complete the proposed new form.
    Estimated Number of Responses: 4,450. This number is based on SBA's 
projection of program activity during Fiscal Year 2012.
    Total Estimated Annual Hour Burden: 369 hours.
    Estimated Annual Cost Burden: $18,941.

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 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 
impact on a substantial number of small entities. Within the meaning of 
RFA, SBA certifies that this final rule will not have a significant 
economic impact on a substantial number of small entities. There are 13 
Sureties that currently participate in the SBA Prior Approval Program, 
and no part of this final 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, SBA amends 13 CFR part 115 
as follows:

PART 115--SURETY BOND GUARANTEE

0
1. The authority citation for part 115 continues 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.


Sec.  115.10  [Amended]

0
2. In Sec.  115.10 amend the definition of ``Prior Approval Agreement'' 
by adding ``or Quick Bond Guarantee Application and Agreement (SBA Form 
990A)'' after ``(SBA Form 990)''.

0
3. Amend Sec.  115.30 by revising paragraph (d) to read as follows:


Sec.  115.30  Submission of Surety's guarantee application.

* * * * *
    (d) Prior Approval Agreement. To apply for a bond guarantee, a 
Prior Approval Surety must submit one of the following forms:
    (1) Surety Bond Guarantee Agreement (SBA Form 990). A Prior 
Approval Surety may complete and submit a Surety Bond Guarantee 
Agreement (SBA Form 990) to SBA for each Bid Bond or Final Bond, and 
this Form must be approved by SBA prior to the Surety's Execution of 
the bond, except in the case of a surety bonding line approved by SBA 
under Sec.  115.33(d). The guarantee fees owed in connection with Final 
Bonds must be paid in accordance with Sec.  115.32.
    (2) Quick Bond Guarantee Application and Agreement (SBA Form 
990A)--(i) General procedures. Except as provided in paragraph 
(d)(2)(ii) of this section, a Prior Approval Surety may complete and 
submit the Quick Bond Guarantee Application and Agreement (SBA Form 
990A) to SBA for each Bid Bond or Final Bond, and this Form must be 
approved by SBA prior to the Surety's Execution of the bond. SBA Form 
990A is a streamlined application form that may be used only for 
contract amounts that do not exceed $250,000 at the time of 
application. The guarantee fees owed in connection with Final Bonds 
must be paid in accordance with Sec.  115.32.
    (ii) Exclusions. SBA Form 990A may not be used under the following 
circumstances:
    (A) The Principal has previously defaulted on any contract or has 
had any claims or complaints filed against it with any court or 
administrative agency;
    (B) Work on the Contract commenced before a bond is Executed;
    (C) The time for completion of the Contract or the warranty/
maintenance period exceeds 12 months;
    (D) The Contract includes a provision for liquidated damages that 
exceed $250 per day;
    (E) The Contract involves asbestos abatement, hazardous waste 
removal, demolition, or timber sales; or
    (F) The bond would be issued under a surety bonding line approved 
under Sec.  115.33.

0
4. Amend Sec.  115.32 as follows:
0
a. Revise the fourth sentence of paragraph (b) to read as follows;
0
b. Revise the second sentence of paragraph (c) to read as follows;
0
c. Amend the second sentence of paragraph (d)(1) by removing the words 
``(Supplemental Form 990)'' and add a new sentence at the end of 
paragraph (d)(1) to read as follows; and
0
d. Revise paragraph (d)(2) to read as follows.


Sec.  115.32  Fees and Premiums.

* * * * *
    (b) * * * The Principal's fee is rounded to the nearest dollar, and 
is to be remitted to SBA with the form submitted under either Sec.  
115.30(d)(1) or (2).
    (c) * * * Subject to Sec.  115.18(a)(4), the Surety must pay SBA a 
guarantee fee on each guaranteed bond (other than a Bid Bond) within 60 
calendar days after SBA's approval of the Prior Approval Agreement. * * 
*
    (d) * * *
    (1) * * * In notifying SBA of any increase or decrease in the 
Contract or bond amount, the Surety must use the same form (SBA Form 
990 or SBA Form 990A) that it used in applying for the original bond 
guarantee.
    (2) Increases; fees. The payment for the increase in the 
Principal's guarantee fee, which is computed on the increase in the 
Contract amount, is due upon notification of the increase in the 
Contract or bond amount under this paragraph (d). If the increase in 
the Principal's fee is less than $40, no payment is due until the total 
amount of increases in the Principal's fee equals or exceeds $40. The 
Surety's payment of the increase in the Surety's guarantee fee, 
computed on the increase in the bond Premium, must be submitted to SBA 
within 60 calendar days of SBA's approval of the Prior Approval 
Agreement, unless the amount of such increased guarantee fee is less 
than $40. When the total amount of increase in the guarantee fee equals 
or exceeds $40, the Surety must remit the fee within 60 calendar days.
* * * * *

0
5. Amend Sec.  115.33 by revising paragraphs (d)(1) and (d)(2) to read 
as follows:


Sec.  115.33  Surety bonding line.

* * * * *
    (d) * * *
    (1) Bid Bonds. Within 15 business days after the Execution of any 
Bid Bonds under a bonding line, the Surety must submit a ``Surety Bond 
Guarantee Underwriting Review'' (SBA Form 994B) to SBA for approval. If 
the Surety fails to submit the form within this time period, SBA's 
guarantee of the bond will be void from its inception unless SBA

[[Page 41666]]

determines otherwise upon a showing that a valid reason exists why the 
timely submission was not made.
    (2) Final Bonds. Within 15 business days after the Execution of any 
Final Bonds under a bonding line, the Surety must submit a Surety Bond 
Guarantee Underwriting Review (SBA Form 994B) and a Surety Bond 
Guarantee Agreement (SBA Form 990) to SBA for approval. If the surety 
fails to submit these forms within the time period or the guarantee 
fees are not paid in accordance with Sec.  115.32, SBA's guarantee of 
the bond will be void from its inception unless SBA determines 
otherwise upon a showing that the Contract is not in default and a 
valid reason exists why the timely submission was not made.
* * * * *

    Dated: July 2, 2012.
Karen G. Mills,
Administrator.
[FR Doc. 2012-17104 Filed 7-13-12; 8:45 am]
BILLING CODE 8025-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.