Surety Bond Guarantee Program, 46528-46532 [2013-18530]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 78, Number 148 (Thursday, August 1, 2013)]
[Proposed Rules]
[Pages 46528-46532]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-18530]


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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. 78, No. 148 / Thursday, August 1, 2013 / 
Proposed Rules

[[Page 46528]]



SMALL BUSINESS ADMINISTRATION

13 CFR Part 115

RIN 3245-AG56


Surety Bond Guarantee Program

AGENCY: U.S. Small Business Administration.

ACTION: Proposed rule.

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

SUMMARY: This proposed rule would conform the regulations governing the 
Surety Bond Guarantee Program to certain provisions of the National 
Defense Authorization Act for Fiscal Year 2013 (NDAA), including the 
provisions that increase the contract amounts for which SBA is 
authorized to guarantee bonds, grant SBA the authority to partially 
deny liability under its bond guarantee, and prohibit SBA from denying 
liability based on material information that was provided as part of 
the guarantee application in the Prior Approval Program. In addition, 
changes are proposed with respect to the Quick Bond Guarantee 
Application and Agreement, the timeframes for taking certain actions 
related to claims, the dollar threshold for determining when a change 
in the Contract or bond amounts meets certain criteria or requires 
certain action, and the elimination of references to the provisions of 
the American Recovery and Reinvestment Act of 2009 (Recovery Act) that 
have expired.

DATES: Comments must be received on or before September 30, 2013.

ADDRESSES: You may submit comments, identified by RIN 3245-AG56, 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 Office 
of Surety Guarantees, 409 Third Street SW., Washington, DC 20416 or 
send an email to the Office of Surety Guarantees. 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: Barbara J. Brannan, Office of Surety 
Guarantees, 202-205-6545, email: Barbara.brannan@sba.gov.

SUPPLEMENTARY INFORMATION:
I. Background Information
    The U.S. Small Business Administration (SBA) guarantees bid, 
payment and performance bonds 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. SBA's guarantee is an agreement 
between a Surety and SBA that SBA will assume a certain percentage of 
the Surety's loss should a contractor default on the underlying 
contract. This proposed rule would make the following changes to the 
program:

A. Conform Regulations to NDAA

    This proposed rule would conform the regulations governing the 
Surety Bond Guarantee Program to the following changes enacted by the 
National Defense Authorization Act for Fiscal Year 2013, Public Law 
112-239, 126 Stat. 1632:
    (1) Increasing the contract amount for which SBA is authorized to 
guarantee bonds from $2 million to $6.5 million (as adjusted for 
inflation in accordance with 41 U.S.C. 1908);
    (2) increasing the contract amount for which SBA is authorized to 
guarantee bonds to $10 million with a Federal contracting officer's 
certification that the guarantee is necessary for the small business to 
obtain bonding;
    (3) authorizing SBA to deny liability under its bond guarantee in 
whole or in part within its discretion; and
    (4) prohibiting SBA from denying liability based on material 
information that was provided as part of the guarantee application in 
the Prior Approval Program.

B. Partial Subcontract

    The existing regulation, 13 CFR 115.13(a)(5), states that SBA will 
not guarantee bonds for Principals ``who are primarily brokers or who 
have effectively transferred control over the project to one or more 
subcontractors.'' Surety companies and agents have questioned the 
meaning of the phrase ``effectively transferred control over the 
project'', and SBA agrees that clearer guidance is needed to determine 
when the use of subcontractors becomes objectionable. SBA recognizes 
that many small general contractors may subcontract a high percentage 
of the work under a contract, and this is not necessarily 
objectionable. However, SBA does not want the subcontracting to result 
in the Principal--the Person primarily liable to complete the 
Contract--losing control over the project. In the most egregious cases, 
the Principal may be acting as a front for the subcontractor. This 
objectionable activity may not be discernible solely from the 
percentage of work subcontracted on a project. Although that is often a 
good indicator, SBA believes that control is also a function of who has 
responsibility for overseeing and managing the work performed under the 
Contract. Accordingly, SBA is proposing to revise the second sentence 
of this provision to clarify that, to be eligible for a bond guaranteed 
by SBA, the Principal must retain full responsibility for the oversight 
and management of the Contract, including any work performed by any 
subcontractor, and may not subcontract the full scope of the statement 
of work.

C. Quick Bond

    The proposed rule would revise the regulations governing the Quick 
Bond Guarantee Application and Agreement. Under 13 CFR 
115.30(d)(2)(ii)(C), the Quick Bond Application and Agreement (SBA Form 
990A) may not be used for any contract that includes a warranty/
maintenance period exceeding 12 months. However, the definition of 
Contract in 13 CFR 115.10 allows for the Contract to include a 
maintenance agreement of 2 years or less (for

[[Page 46529]]

defective workmanship or materials only), and also allows, with SBA's 
written approval, for longer maintenance agreements and broader 
coverage. SBA has reassessed the need for this exclusion, and is 
proposing to delete the 12 month warranty/maintenance exclusion from 13 
CFR 115.30(d)(2)(ii)(C).
    In addition, under 13 CFR 115.30(d)(2)(ii)(D), SBA Form 990A may 
not be used if the contract includes a provision for liquidated damages 
that exceed $250 per day. The proposed rule would increase to $1,000 
per day the amount of liquidated damages subject to the exclusion. SBA 
received suggestions from the surety industry for this increase, which 
is consistent with industry standards for a streamlined application 
process.
    By making the above changes, the Agency hopes to encourage greater 
use of the Quick Bond Guarantee Application and Agreement.

D. Increasing Certain Dollar Thresholds

    The rule proposes to amend the following provisions to change the 
dollar threshold for determining when a change in the Contract or bond 
amounts may result in denial of liability or requires certain action. 
Currently, these provisions provide that the thresholds are met when 
the Contract or bond amount changes by 25% or $50,000, whichever is 
less. This formula means that the $50,000 threshold is always the 
lesser amount for contracts that are greater than $200,000, and the 
average amount of a Contract is now approximately twice this amount, or 
$400,000. In addition, for some of the provisions, the $50,000 
threshold has not changed since 1989. Further, SBA would expect the 
average contract amount to increase with the recent increase in the 
maximum contract amount to $6.5 million. Thus, SBA is proposing to 
update the dollar threshold to $100,000 for the following provisions:
    (1) Under 13 CFR 115.19(c)(1), SBA is relieved of liability if the 
Surety has committed a material breach of one or more terms or 
conditions of its agreement with SBA. A material breach is considered 
to have occurred if such breach (or such breaches in the aggregate) 
causes an increase in the Contract amount or in the bond amount of at 
least 25% or $50,000. The proposed rule would increase the dollar 
threshold to $100,000.
    (2) Under 13 CFR 115.19(d), SBA is relieved of liability if the 
Surety has committed a substantial violation of SBA regulations, which 
is defined in part as a violation which causes an increase in the bond 
amount of at least 25% or $50,000 in the aggregate. The proposed rule 
would increase the dollar threshold to $100,000.
    (3) Under 13 CFR 115.19(e)(2), SBA is relieved of liability if the 
Surety agrees to or acquiesces in any material alteration in the terms, 
conditions, or provisions of the bond. For a Prior Approval Surety, 
such alteration includes any increase in the bond amount of at least 
25% or $50,000. The proposed rule would increase the dollar threshold 
to $100,000.
    (4) Under 13 CFR 115.32(d), a Prior Approval Surety must notify SBA 
of any increases or decreases in the Contract or bond amount that 
aggregate 25% or $50,000 as soon as the Surety acquires knowledge of 
the change, and also must obtain SBA's prior written approval of an 
increase in the original bond amount as a result of a single change 
order of at least 25% or $50,000. The proposed rule would increase 
these dollar thresholds to $100,000.
    (5) Under 13 CFR 115.67(a), a PSB Surety must pay the additional 
fees due from the Principal and the Surety on increases aggregating 25% 
of the contract or bond amount or $50,000. The proposed rule would 
increase the dollar threshold to $100,000.

E. Reducing Certain Timeframes

    With the wide-spread use of electronic processing of claims and 
payments, SBA believes that the timeframes for taking the following 
actions could be reduced:
    (1) Under 13 CFR 115.17(b), the Surety is required to pursue all 
possible sources of salvage and recovery, and SBA is entitled to its 
guaranteed percentage of all salvage and recovery. Currently, 13 CFR 
115.17(b)(2) requires the Surety to reimburse or credit SBA with its 
share within 90 days of receipt of any recovery by the Surety; the 
proposed rule would reduce this timeframe to 45 days. Similarly, the 
proposed rule would reduce the timeframe for the Surety to pay SBA its 
share of any settlement amount under 13 CFR 115.36(a)(3) from 90 days 
to 45 days.
    (2) Under 13 CFR 115.35(c)(4) and 115.70(a), SBA pays its share of 
the loss to both the Prior Approval Surety and the PSB Surety within 90 
days of receipt of the requisite information. The proposed rule would 
reduce this timeframe to 45 days.
    In addition, under 13 CFR 115.35(c)(1) and 115.70(a), both the 
Prior Approval Surety and the PSB Surety must submit to SBA a claim for 
reimbursement for losses paid by the Surety within 1 year from the time 
of each disbursement. The proposed rule would reduce this timeframe to 
90 days. This reduction would facilitate SBA's ability to review and 
verify the claim without unnecessary delay.

II. Section-by-Section Analysis

    Section 115.10. SBA is proposing to revise the definition of 
``Applicable Statutory Limit'' to include the maximum amounts of any 
Contract or Order for which SBA is authorized by the NDAA to guarantee, 
or commit to guarantee, a Bid Bond, Payment Bond, Performance Bond, or 
Ancillary Bond. The statutory limits set by the NDAA are: (1) $6.5 
million (as adjusted for inflation in accordance with 41 U.S.C. 1908); 
and (2) $10 million if a contracting officer of a Federal agency 
certifies that such guarantee is necessary. In addition, SBA is 
proposing to include a reference in the definition to the maximum 
amounts of any Contract or Order when SBA guarantees the bond in 
connection with a procurement related to a major disaster pursuant to 
section 12079 of Public Law 110-246. Under this provision, which was 
enacted on June 18, 2008, the maximum amounts are (1) $5 million, and 
(2) $10 million on Federal Contracts or Orders at the request of the 
Head of any Federal agency involved in reconstruction efforts in 
response to a major disaster. The authority to guarantee bonds under 
this provision is 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 does not expect this 
authority to be often used, given NDAA's increase in the maximum 
amounts for any Contract or Order up to $6.5 million (and $10 million 
if a Federal contracting officer certifies that such guarantee is 
necessary) and the requirement that funds be appropriated in advance 
specifically for guaranteeing bonds related to a major disaster.
    Section 115.12(b). SBA is proposing to delete the reference to the 
``Contract Bonds'' section of the current ``Manual of Rules, Procedures 
and Classifications of the Surety Association of America'', and to 
replace this reference with two specific types of bonds, Commercial and 
Fidelity bonds, that are not eligible for an SBA guarantee.
    Section 115.12(e)(3). SBA is proposing to delete this provision in 
its entirety, as it relates to requirements imposed by the Recovery Act 
that expired on September 30, 2010.
    Section 115.12(e)(4). SBA is proposing to renumber this provision 
as (e)(3), and to revise this provision to reflect the authority to 
guarantee bonds on Federal Contracts or Orders greater

[[Page 46530]]

than $6.5 million, but not exceeding $10 million, upon a signed 
certification of a Federal contracting officer.
    Section 115.12(e)(5). SBA is proposing to renumber this provision 
as (e)(4), to revise the introductory paragraph to clarify that this 
paragraph implements an alternative statutory authority for 
guaranteeing bonds for procurements related to a major disaster, and to 
delete paragraph (B)(iii) of this provision, as it relates to 
requirements imposed by the Recovery Act that expired on September 30, 
2010.
    Section 115.13(a)(5). SBA is proposing to revise this provision to 
clarify that, to be eligible for a bond guaranteed by SBA, the 
Principal must retain full responsibility for the oversight and 
management of the Contract, including any work performed by any 
subcontractor, and may not subcontract the full scope of the statement 
of work.
    Section 115.17(b)(2). SBA is proposing to reduce the time frame 
allowed for a Surety to reimburse or credit SBA for salvage and 
recovery from 90 days to 45 days after the Surety receives any salvage 
and recovery.
    Section 115.19. SBA is proposing to revise the introductory 
paragraph of this provision to conform it to current law by deleting 
the time frame reference required by the Recovery Act, which has 
expired, and by inserting the relevant requirements of the NDAA, 
including the authority of SBA to deny liability, in whole or in part, 
within its discretion if any of the circumstances in paragraphs (a) 
through (h) of this section exist, and the prohibition on denying 
liability based on material information that was provided as part of 
the guarantee application in the Prior Approval Program. SBA is also 
proposing to amend section 115.19(c)(1) by increasing the dollar 
threshold for determining whether the Surety has committed a material 
breach of one or more terms or conditions of its Prior Approval or PSB 
Agreement from $50,000 to $100,000. In addition, SBA is proposing to 
amend section 115.19(d) by increasing the dollar threshold for 
determining whether the Surety has committed a substantial violation of 
SBA regulations from $50,000 to $100,000, and proposing to amend 
section 115.19(e)(2) by increasing the dollar threshold for determining 
whether a Prior Approval Surety has agreed to or acquiesced in any 
material alternation in the terms, conditions, or provisions of the 
bond from $50,000 to $100,000. In each of these sections, the phrase 
``whichever is less'' is being added after the $100,000 to clarify the 
meaning of this requirement.
    Section 115.30(d)(2). Under the current 13 CFR 115.30(d)(2)(ii)(C), 
the Quick Bond Application and Agreement (SBA Form 990A) may not be 
used for any contract where the time for completion of the Contract or 
the warranty/maintenance period exceeds 12 months. SBA is proposing to 
delete the phrase ``or the warranty/maintenance period'' from this 
provision. In addition, under current 115.30(d)(2)(ii)(D), SBA Form 
990A may not be used for any contract that includes a provision for 
liquidated damages that exceed $250 per day. SBA is proposing to 
increase the allowable liquidated damages provision from $250.00 per 
day to $1,000.00 per day.
    Section 115.31(d). SBA is proposing to revise the final sentence of 
this provision by basing the example on the current statutory limit of 
$6.5 million.
    Section 115.32(d). SBA is proposing to amend this provision by 
changing the dollar threshold for determining when the Prior Approval 
Surety must notify SBA of the change and/or obtain SBA's approval from 
at least $50,000 to $100,000. The phrase ``whichever is less'' is being 
added to clarify the meaning of this requirement.
    Section 115.35(c)(1). SBA is proposing to reduce the time frame 
allowed for a Prior Approval Surety to submit a claim to SBA from one 
year to 90 days after the Surety pays the claim. In addition, the title 
of the SBA Form 994H, ``Default Report, Claim for Reimbursement and 
Record of Administrative Action,'' is being changed to ``Default 
Report, Claim for Reimbursement and Report of Recoveries,'' to reflect 
the current version of the form. This form is used to process 
recoveries, and adding ``Recoveries'' to the title of the form promotes 
its proper use.
    Section 115.35(c)(4). SBA is proposing to reduce the time frame for 
SBA to pay a claim submitted by a Surety in the Prior Approval Program 
from 90 days to 45 days after receipt of the requisite information.
    Section 115.36(a)(3). SBA is proposing to reduce the time frame 
allowed for a Surety to reimburse SBA its share of a settlement from 90 
days to 45 days after receipt.
    Section 115.67(a). SBA is proposing to increase the dollar 
threshold for determining when a PSB Surety must present checks for 
additional fees due from the Principal and the Surety from $50,000 to 
$100,000. The phrase ``whichever is less'' is being added to clarify 
the meaning of this requirement.
    Section 115.69. This provision currently provides that SBA will 
reimburse a PSB Surety for the guaranteed portion of payments the 
Surety makes to avoid or attempt to avoid an Imminent Breach of the 
terms of a Contract, and that the PSB Surety does not need SBA approval 
to make Imminent Breach payments. It also provides that the aggregate 
of the payments by SBA cannot exceed 10% of the Contract amount, unless 
SBA finds that a greater payment is necessary and reasonable. For 
payments that exceed 10% of the Contract amount, SBA is proposing to 
revise this provision to give the PSB Surety the opportunity to request 
SBA to approve the amount prior to the Surety making the Imminent 
Breach payment. SBA will approve such payment if SBA finds that the 
payment is necessary and reasonable. If the Surety does not request 
prior SBA approval for such payments, SBA may refuse to reimburse the 
Surety if SBA finds that the payment that exceeds 10% of the Contract 
amount was not necessary and reasonable.
    Section 115.70(a). SBA is proposing to reduce the time frame 
allowed for a PSB Surety to submit a claim to SBA from one year to 90 
days after the Surety pays the claim. SBA is also proposing to reduce 
the time frame for SBA to pay a claim submitted by a Surety in the PSB 
Program from 90 days to 45 days after receipt of the requisite 
information. 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 
proposed rule does not constitute a significant regulatory action under 
Executive Order 12866.

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 determines that this proposed rule has no federalism

[[Page 46531]]

implications warranting preparation of a federalism assessment.

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

    SBA has determined that this proposed rule imposes no 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. 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. Consequently, this rule does not 
meet the substantial number of small businesses criterion anticipated 
by the Regulatory Flexibility Act.

List of Subjects in 13 CFR Part 115

    Claims, Reporting and recordkeeping requirements, Small businesses, 
Surety bonds.

    For the reasons cited above, the Small Business Administration 
proposes to amend 13 CFR part 115 as follows:

PART 115--SURETY BOND GUARANTEE

0
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; and Pub. L. 110-246, Sec. 12079, 122 Stat. 1651.

0
2. In Sec.  115.10, revise the definition of ``Applicable Statutory 
Limit'' to read as follows:


Sec.  115.10  Definitions.

* * * * *
    Applicable Statutory Limit means the maximum amount, set forth 
below, of any Contract or Order for which SBA is authorized to 
guarantee, or commit to guarantee, a Bid Bond, Payment Bond, 
Performance Bond, or Ancillary Bond:
    (1) $6.5 million (as adjusted for inflation in accordance with 41 
U.S.C. 1908);
    (2) $10 million if a contracting officer of a Federal agency 
certifies, in accordance with section 115.12(e)(3), that such guarantee 
is necessary; or
    (3) if SBA is guaranteeing the bond in connection with a 
procurement related to a major disaster pursuant to section 12079 of 
Public Law 110-246, see section 115.12(e)(4).
* * * * *
0
3. Amend Sec.  115.12 as follows:
0
(a) Revise paragraph (b) to read as set forth below;
0
(b) Remove paragraph (e)(3);
0
(c) Redesignate paragraph (e)(4) as paragraph (e)(3);
0
(d) In redesignated paragraph (e)(3), revise the heading and first 
sentence as set forth below;
    (e) Redesignate paragraph (e)(5) as paragraph (e)(4) and revise the 
heading and introductory paragraph as set forth below;
    (f) In redesignated paragraph (e)(4), remove paragraph (B)(iii) and 
redesignate paragraph (B)(iv) as paragraph (B)(iii).
    The additions and revisions read as follows:


Sec.  115.12  General program policies and provisions.

* * * * *
    (b) Eligibility of bonds. Bid Bonds and Final Bonds are eligible 
for an SBA guarantee if they are executed in connection with an 
eligible Contract, as defined in Sec.  115.10, Definitions. Commercial 
and Fidelity bonds are not eligible for SBA guarantees. Ancillary Bonds 
may also be eligible for SBA's guarantee. A performance bond must not 
prohibit a Surety from performing the Contract upon default of the 
Principal. * * *
* * * * *
    (e) * * *
    (3) Federal Contracts or Orders in excess of $6,500,000 (as 
adjusted for inflation in accordance with section 1908 of title 41, 
United States Code). SBA is authorized to guarantee bonds on Federal 
Contracts or Orders greater than $6,500,000 (as adjusted for inflation 
in accordance with 41 U.S.C. 1908), but not exceeding $10,000,000, upon 
a signed certification of a Federal contracting officer. * * *
* * * * *
    (4) Alternative authority to guarantee bonds 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, as an alternative to the authority otherwise set 
forth in this Part, guarantee bonds on any Contract or Order under the 
following terms and conditions:
* * * * *
0
4. Amend Sec.  115.13 paragraph (a)(5) by revising the second sentence 
and adding a third sentence to read as follows:


Sec.  115.13  Eligibility of Principal

    (a) * * *
    (5) * * * SBA will not guarantee bonds for Principals who are 
primarily brokers. In addition, the Principal must retain full 
responsibility for the oversight and management of the Contract, 
including any work performed by any subcontractor, and may not 
subcontract the full scope of the statement of work.
* * * * *
0
5. Amend Sec.  115.17 paragraph (b)(2) by removing ``90 days'' and 
adding ``45 days'' in its place.
0
6. Amend Sec.  115.19 as follows:
0
(a) Revise the introductory paragraph as set forth below;
0
(b) Remove ``$50,000'' wherever it appears in paragraphs (c)(1), (d), 
and (e)(2) and add in its place ``$100,000, whichever is less.''


Sec.  115.19  Denial of liability.

    In addition to equitable and legal defenses and remedies under 
contract law, the Act, and the regulations in this part, SBA is 
relieved of liability in whole or in part within its discretion if any 
of the circumstances in paragraphs (a) through (h) of this section 
exist, except that SBA shall not deny liability on Prior Approval bonds 
based solely upon material information that was provided as part of the 
guarantee application.
* * * * *
0
7. Amend Sec.  115.30 as follows:
0
(a) In paragraph (d)(2)(ii)(C), remove the phrase ``or the warranty/
maintenance period'';
0
(b) In paragraph (d)(2)(ii)(D), remove ``$250'' and add ``$1,000'' in 
its place.
0
8. Amend Sec.  115.31 by revising the final sentence of paragraph (d) 
to read as follows:


Sec.  115.31  Guarantee Percentage.

* * * * *
    (d) * * * For example, if a contract amount increases to 
$6,800,000, SBA's share of the loss under an 80% guarantee is limited 
to 76.5% [6,500,000/6,800,000 = 95.6% x 80% = 76.5%].
* * * * *
0
9. Amend Sec.  115.32 paragraph (d) by removing ``$50,000'' and adding 
``$100,000, whichever is less'' in its place.

[[Page 46532]]

0
10. Amend Sec.  115.35 as follows:
0
(a) Revise paragraph (c)(1) as set forth below;
0
(b) In paragraph (c)(4), remove ``90 days'' and add ``45 days'' in its 
place.


Sec.  115.35  Claims for reimbursement of Losses.

* * * * *
    (c) Claim reimbursement requests. (1) Claims for reimbursement for 
Losses which the Surety has paid must be submitted (together with a 
copy of the bond, the bonded Contract, and any indemnity agreements) 
with the initial claim to OSG on a ``Default Report, Claim for 
Reimbursement and Report of Recoveries'' (SBA Form 994H), within 90 
days from the time of each disbursement. Claims submitted after 90 days 
must be accompanied by substantiation satisfactory to SBA. The date of 
the claim for reimbursement is the date of receipt of the claim by SBA, 
or such later date as additional information requested by SBA is 
received.
* * * * *
0
11. Amend Sec.  115.36 paragraph (a)(3) by removing ``90 days'' and 
adding ``45 days'' in its place.
0
12. Amend Sec.  115.67 paragraph (a) by removing ``$50,000'' and adding 
``$100,000, whichever is less'' in its place.
0
13. Revise Sec.  115.69 to read as follows:


Sec.  115.69  Imminent Breach.

    (a) No Prior Approval Requirement. SBA will reimburse a PSB Surety 
for the guaranteed portion of payments the Surety makes to avoid or 
attempt to avoid an Imminent Breach of the terms of a Contract covered 
by an SBA guaranteed bond. The aggregate of the payments by SBA under 
this section cannot exceed 10% of the Contract amount, unless the 
Administrator finds that a greater payment (not to exceed the 
guaranteed portion of the bond penalty) is necessary and reasonable. 
The PSB Surety does not need to obtain prior SBA approval to make 
Imminent Breach payments, except that the PSB Surety may request SBA to 
approve payments that exceed 10% of the Contract amount prior to the 
Surety making the payment. In no event will SBA make any duplicate 
payment under any provision of these regulations in this part.
    (b) Recordkeeping Requirement. The PSB Surety must keep records of 
payments made to avoid Imminent Breach.
0
14. Amend Sec.  115.70 paragraph (a) as follows:
0
(a) Remove the term ``1 year'' in the first sentence and add the term 
``90 days'' in its place; and
0
(b) Remove the term ``90 days'' in the third sentence and add ``45 
days'' in its place.

    Dated: July 26, 2013.
Karen G. Mills,
Administrator.
[FR Doc. 2013-18530 Filed 7-31-13; 8:45 am]
BILLING CODE 8025-01-P