Regulatory Reform Initiative: Streamlining Surety Bond Guarantee Program, 52844-52848 [2021-20401]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 86, Number 182 (Thursday, September 23, 2021)]
[Proposed Rules]
[Pages 52844-52848]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-20401]


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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. 86, No. 182 / Thursday, September 23, 2021 / 
Proposed Rules

[[Page 52844]]



SMALL BUSINESS ADMINISTRATION

13 CFR Part 115

RIN 3245-AH08


Regulatory Reform Initiative: Streamlining Surety Bond Guarantee 
Program

AGENCY: U.S. Small Business Administration.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Small Business Administration (SBA) is proposing to revise 
various regulations related to SBA's Surety Bond Guarantee (SBG) 
program because they are obsolete, unnecessary, ineffective, or 
burdensome. Additionally, SBA is proposing revisions to clarify and 
modernize certain regulations and conform them to industry standards. 
These proposed changes are in response to comments received from SBA's 
Advance Notice of Proposed Rulemaking that was published on June 3, 
2019.

DATES: Comments must be received on or before November 22, 2021.

ADDRESSES: You may submit comments, identified by RIN 3245-AH08, using 
any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Search for the rule by RIN 3245-AH08 and follow the instructions for 
submitting comments.
     Mail: Jermaine Perry, Management Analyst, Office of Surety 
Guarantees, U.S. Small Business Administration, 409 3rd Street SW, 8th 
Floor, Washington, DC 20416.
    SBA will post all comments on https://www.regulations.gov. If you 
wish to submit confidential business information (CBI) as defined in 
the User Notice at https://www.regulations.gov, please submit the 
information to Jermaine Perry, Management Analyst, Office of Surety 
Guarantees, U.S. Small Business Administration, 409 3rd Street SW, 8th 
Floor, Washington, DC 20416. Highlight the information that you 
consider to be CBI and explain why you believe this information should 
be held confidential. SBA will review the information and make the 
final determination as to whether to publish the information.

FOR FURTHER INFORMATION CONTACT: Jermaine Perry, Management Analyst, 
Office of Surety Guarantees at (202) 401-8275 or 
[email protected].

SUPPLEMENTARY INFORMATION:

A. General 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, authorized pursuant to part B of title IV of the Small 
Business Investment Act of 1958, 15 U.S.C. 694a et seq., 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. SBA is authorized to 
guarantee a Surety for a contract up to $6.5 million and, with the 
certification of a contracting officer of a Federal agency, up to $10 
million. For more information about SBA's Surety Bond Guarantee 
Program, see https://www.sba.gov/funding-programs/surety-bonds.
    This rulemaking addresses the regulations governing the Surety Bond 
Guarantee (SBG) Program codified in 13 CFR part 115. Subpart A contains 
provisions that apply to all surety bond guarantees, subpart B contains 
provisions that apply to the bond guarantees subject to prior approval 
by SBA, and subpart C contains provisions that apply to the bond 
guarantees that Preferred Surety Bond Sureties may issue under 
delegated authority.
    Federal agencies have an ongoing responsibility to ensure that the 
regulations they issue do not have an adverse economic impact on those 
affected by those rules. For example, under Executive Order 13563, 
Improving Regulation and Regulatory Review (January 18, 2011), agencies 
are obligated to conduct a retrospective review of their regulations to 
seek more affordable, less intrusive means to achieve policy goals, and 
to give careful consideration to the benefits and costs of their 
regulations. This executive order also requires agencies to review 
existing rules to remove outdated regulations that stifle job creation 
and make the U.S. economy less competitive.

B. Comments Received in Response to Advance Notice of Proposed 
Rulemaking

    On June 3, 2019, SBA published an Advance Notice of Proposed 
Rulemaking (ANPRM) in the Federal Register (84 FR 25496) seeking input 
from the public in identifying regulations under the SBG Program that 
affected parties believed should be repealed, replaced, or modified 
because they are obsolete, unnecessary, ineffective, or burdensome. SBA 
also solicited comments from the public on how SBA can improve the 
surety bond products, procedures, forms, and reporting requirements of 
the SBG Program. The comment period ended on August 2, 2019. SBA has 
reviewed the 54 comments submitted by the public in response. After 
considering these comments and reviewing the regulations in 13 CFR part 
115, SBA is proposing that the regulations identified below in the 
section-by-section analysis be revised.

C. Section-by-Section Analysis

    Section 115.10. Under the current definition of ``Contract'' in 
this section, a Contract may include a maintenance agreement that is 
ancillary to a Contract for which SBA is guaranteeing the bond 
(``ancillary maintenance agreement''). SBA is proposing to clarify the 
definition for these ancillary maintenance agreements and to also 
expand the definition of Contract to include stand-alone maintenance 
agreements.
    Under the current definition, SBA will guarantee the bond for a 
maintenance agreement if the agreement is for 2 years or less and 
covers defective workmanship or materials only. It has been SBA's long-
standing interpretation that the maintenance agreement must be 
ancillary to the Contract for which SBA is guaranteeing the bond and 
may not cover defective workmanship or materials that is covered by a 
manufacturer's warranty. The current definition also provides that, 
with SBA's written approval, the term of a maintenance agreement can be

[[Page 52845]]

longer than 2 years for defective workmanship or materials or cover 
something other than defective workmanship or materials if the 
agreement is ancillary to the Contract for which SBA is guaranteeing a 
bond, is performed by the same Principal, and is customarily required 
in the relevant trade or industry.
    For clarity, SBA is proposing to modify the existing definition by 
expressly applying the following requirements to all ancillary 
maintenance agreements: (1) The agreement must be ancillary to a 
Contract for which SBA is guaranteeing a bond; (2) the agreement must 
be performed by the same Principal; and (3) the agreement may only 
cover defective workmanship or materials that are not covered by a 
manufacturer's warranty. With SBA's prior written approval, the 
agreement covering defective workmanship or materials may be for a term 
longer than 2 years, or the agreement may cover something other than 
defective workmanship or materials, if such agreement is customarily 
required in the relevant trade or industry.
    SBA received a comment in response to the ANPRM that requested that 
SBA consider expanding the definition of Contract to include stand-
alone maintenance contracts. The commenter stated that bonds for stand-
alone maintenance contracts are commonly written and that excluding 
these types of bonds from SBA's surety bond guarantee program seems 
unjustified. SBA agrees that it can offer a bond guarantee for these 
types of agreements and is proposing to create a new category under the 
definition of Contract to include them, provided that the stand-alone 
maintenance agreement: (1) Is entered into in connection with a 
Contract for which a bond was not required; (2) only covers defective 
workmanship or materials that are not covered by a manufacturer's 
warranty; (3) is entered into with the same Principal; and (4) covers a 
period of 3 years or less that begins immediately after the Contract is 
complete and was executed prior to the completion of the Contract. With 
SBA's prior written approval, the agreement may cover a period longer 
than 3 years if such agreement is customarily required in the relevant 
trade or industry.
    SBA also received a comment suggesting that SBA reorganize the 
definition of ``Contract'' so that it is shorter and broken into 
several parts. SBA agrees that it would help to clarify the definition 
by reorganizing it into several parts and is proposing to do so.
    Section 115.12. Under section 411(a)(1)(B) of the Small Business 
Investment Act of 1958, SBA may guarantee a surety bond for a total 
work order or contract amount that is greater than $6,500,000 (as 
adjusted for inflation under 41 U.S.C. 1908), but not exceeding 
$10,000,000, if a Contracting Officer (CO) of a Federal agency 
certifies that such a guarantee is necessary. Paragraph (e)(3) of 
section 115.12 currently requires the CO's certification to include a 
statement that the small business is experiencing difficulty obtaining 
a bond and that an SBA bond guarantee would be in the best interests of 
the Government. SBA received a comment in response to the ANPRM stating 
that requiring the CO to make this statement creates the appearance of 
partiality, and as a result, COs are refusing to provide the 
certification on behalf of qualified small businesses. The statute does 
not require the CO to make this statement and SBA does not want to 
impose requirements that are not mandated by the statute that make it 
more difficult for small businesses to obtain these contracts. SBA is, 
therefore, proposing to streamline paragraph (e)(3) to remove the 
requirement of this statement and require only that the CO certify that 
the guarantee is necessary, which as noted above is the standard set 
forth in the statute. SBA is also proposing to update the manner in 
which this certification may be submitted to SBA by providing that it 
may be either express mailed to SBA, Office of Surety Guarantees, 409 
Third Street SW, Washington, DC 20416, or submitted by email to 
[email protected], along with additional information that identifies 
the small business and the contract.
    Section 115.14. Paragraph (a) of this section provides that, if one 
of the six events listed in paragraph (a) occurs under an SBA-
guaranteed bond, the Principal and its Affiliates lose eligibility for 
further SBA bond guarantees. One such event, described in paragraph 
(a)(3), is when the Surety has established a claim reserve for an SBA-
guaranteed bond of at least $1,000, an amount which was set by the SBG 
Program in 1996. In response to the ANPRM, SBA received 2 comments, 
including one from the trade association that represents surety 
companies, stating that the $1,000 threshold is too low. SBA has 
considered the purpose of this provision, which is to exclude 
Principals that have demonstrated an unacceptable financial risk under 
a current SBA-guaranteed bond from receiving future SBA bond 
guarantees. SBA agrees that the $1,000 claim reserve threshold no 
longer reflects a degree of financial risk that should trigger the 
Principal's ineligibility for future SBA bond guarantees. After 
evaluating several factors, including inflation since 1996, the 
increase in the maximum contract amount for which SBA can issue a bond 
guarantee (from $1,250,000 in 1996 to $6,500,000 today), and historical 
claim reserve data, SBA proposes to increase the amount of the claim 
reserve that would result in the Principal and its Affiliates losing 
eligibility for further SBA bond guarantees from at least $1,000 to at 
least $10,000.
    Sections 115.19 and 115.64. Under Sec.  115.19(f)(1)(ii), SBA is 
relieved of liability under the bond guarantee if the bond was executed 
``after the work under the Contract had begun'' unless the Surety 
submitted, and SBA executed, SBA Form 991, ``Surety Bond Guarantee 
Agreement Addendum'' with the evidence and certifications required by 
Sec.  115.19(f)(1)(ii). Paragraph (f)(2)(i) currently provides that 
work under a contract is considered to have begun when a Principal 
``takes any action at the job site which would have exposed the Surety 
to liability under applicable law had a bond been Executed (or 
approved, if the Surety is legally bound by such approval) at the 
time.'' In addition, under 13 CFR 115.64, a Surety participating in the 
Preferred Surety Bond Program (PSB Surety) is prohibited from executing 
or approving a bond ``after commencement of work under a contract'' 
unless the Surety obtains written approval from the Director of Office 
of Surety Guarantees (OSG). To apply for such approval, the Surety must 
submit a completed SBA Form 991 with the evidence and certifications 
required under section 115.19(f)(1)(ii).
    In response to the ANPRM, SBA received a comment requesting that 
SBA clarify what constitutes ``commencement of work'' under section 
115.64. SBA agrees and is proposing to amend both sections 
115.19(f)(2)(i) and 115.64 to clarify that work under a contract is 
considered to have begun or commenced when the contractor takes any 
action related to the contract or bond that would have exposed its 
Surety to liability under applicable law had a bond been executed (or 
approved, if the Surety is legally bound by such approval) at the time. 
The work would not have to occur ``at the job site'' to find that work 
has begun or commenced under the contract. For example, work would be 
deemed to have begun or commenced when the contractor takes any 
financial action that would be typically covered

[[Page 52846]]

under the bond, such as purchasing supplies that will be used to 
complete the contract.
    Section 115.30. SBA proposes to revise the introductory language of 
paragraph (d)(2) to increase the maximum amount of the contracts for 
which a Prior Approval Surety would be permitted to use the Quick Bond 
Guarantee Application and Agreement (SBA Form 990A) (Quick Bond 
Application) from $400,000 to $500,000. SBA received eight comments to 
the ANPRM suggesting this change. In response to these comments, SBA 
conducted a risk assessment, considered factors such as the increasing 
average contract value, and considered the potential decrease in 
overall application burden on small businesses. In particular, SBA 
notes that, during Fiscal Years 2015 through 2019, the average default 
rate for contracts for which a Quick Bond Application was used was 
2.53%, while the average default rate for contracts for which the SBA 
Form 990 was used was 5.66%. SBA has determined, therefore, that 
increasing the maximum contract value for using the Quick Bond 
Application would minimally increase program risk while reducing costs 
to Sureties and small businesses by $36,343 per year.\1\ In addition to 
reducing costs, SBA hopes that this change would result in the 
additional benefit of increasing overall access to the SBG Program.
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    \1\ SBA data indicates that about 742 bonds per year are issued 
for contracts which are in an amount between $400,000 and $500,000, 
and these contracts would be eligible for the Quick Bond Application 
if the proposed rule is adopted. Assuming a reduction in time for 
the Surety of 1 hour (with each hour valued at $48.98 per hour, 
which is based on the median hourly wage for an insurance sales 
agent of $24.49 plus 100 percent for benefits and overhead (from 
https://www.bls.gov/ooh/sales/insurance-sales-agents.htm, retrieved 
August 6, 2020)) in preparing the application by using SBA Form 
990A, the estimated annual savings to Sureties and small businesses 
would be $36,343.
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    SBA is also proposing to allow this streamlined form to be used in 
additional circumstances. Paragraph (d)(2)(ii) lists the circumstances 
under which the Quick Bond Application may not be used. Under paragraph 
(d)(2)(ii)(D), the Quick Bond Application may not be used if the 
contract includes a provision for liquidated damages that exceeds 
$1,000 per day. SBA received eight comments to the ANPRM stating that 
the $1,000 limitation on liquidated damages was restrictive and 
inconsistent with current industry standards. Five commenters requested 
that the maximum amount of liquidated damages be set at $2,500. SBA 
agrees and proposes to revise paragraph (d)(2)(ii)(D) to increase the 
amount of liquidated damages from a maximum of $1,000 per day to $2,500 
per day in accordance with current industry standards.
    In addition, paragraph (d)(2)(ii)(E) provides that the Quick Bond 
Application may not be used for demolition contracts. SBA received five 
comments to the ANPRM requesting that SBA remove this exclusion, with 
one commenter arguing that the exclusion of all demolition contracts is 
too broad and another contending that removing this exclusion would 
bring the SBG Program more in line with similar fast track programs 
offered in the surety industry. After considering the comments, SBA 
proposes to remove demolition contracts from the list of categories 
that are excluded from using the Quick Bond Application. SBA expects 
that Sureties would, in their underwriting, ensure that the Principal 
has obtained any permit that is required for demolition pursuant to 
Federal, State or local law. If adopted, SBA will provide further 
guidance on the underwriting of demolition contracts in its Standard 
Operating Procedures.
    Sections 115.32 and 115.67. Paragraph (d) of section 115.32 governs 
when a Prior Approval Surety must notify SBA of any increase or 
decrease in the contract or bond amount. It also governs when any 
increase or decrease in the Principal and Surety fees that results from 
a change in the contract amount must be remitted to SBA by the 
Principal or Surety or will be refunded by SBA. In addition, for the 
PSB Program, sections 115.67(a) and (b) govern when any increase or 
decrease in the Principal and Surety fees resulting from a change in 
the contract amount must be remitted or will be refunded or adjusted. 
Currently, the payment for any increase in either the Principal's or 
the Surety's fee is due to SBA when the total amount of the change in 
that fee equals or exceeds $40, and any decrease in the fee is refunded 
to the Principal or rebated/adjusted to the Surety by SBA when the 
total amount of the change in the fee equals or exceeds $40.
    In response to the ANPRM, SBA received four comments stating that 
the $40 threshold for remittance of the fees is not aligned with 
industry standards and causes additional burden and increased 
processing costs on small businesses and their Sureties and agents. One 
commenter stated that the industry standard for remitting and refunding 
bond premium charges is $250 and a second commenter stated that the 
industry standard is between $200 and $300. SBA evaluated the process 
and determined that it would improve efficiencies and reduce 
administrative costs to increase the threshold amount from $40 to $250 
for both remitting and refunding, or rebating (or adjusting), changes 
in the fee amounts. Thus, SBA proposes to revise sections 115.32(d) and 
115.67 to increase the threshold amount for when an increase in the 
Principal or Surety fee would be due, or for when SBA would refund or 
rebate/adjust any decrease in these fees, from $40 to $250.
    Section 115.33. Under this section, SBA may approve a surety 
bonding line for a Prior Approval Surety under which the Surety may 
execute multiple bonds for a specified small business. SBA is proposing 
to revise paragraph (d)(1), which addresses the form that must be 
submitted for a Bid Bond executed under a bonding line, to remove the 
reference to SBA Form 994B, ``Surety Bond Guarantee Underwriting 
Review'', and replace it with SBA Form 990, ``Surety Bond Guarantee 
Agreement''. SBA Form 990 is the agreement between SBA and the Surety 
for SBA's guarantee of the bond and is, therefore, the appropriate form 
for Sureties to submit for SBA approval of a bond under a bonding line. 
There is no need to separately refer to SBA Form 994B in this 
regulation because that form, as the Surety indicates in its 
certification in SBA Form 990, is submitted with SBA Form 990 as a 
supporting document. In addition, for Final Bonds executed under a 
bonding line, paragraph (d)(2) of this section currently states that 
the Surety is to submit both SBA Forms 990 and 994B to SBA for 
approval. For consistency and for the same reasons described above, SBA 
is proposing to remove the reference to SBA Form 994B in paragraph 
(d)(2).

Compliance With Executive Orders 12866, 12988, 13132, and 13563, the 
Congressional Review Act (5 U.S.C. 801-808), 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 has determined that this 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. This action does 
not have preemptive effect or retroactive effect.

[[Page 52847]]

Executive Order 13132
    This rule does not have federalism implications as defined in 
Executive Order 13132. It 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, as specified in the Executive Order. As 
such it does not warrant the preparation of a Federalism Assessment.
Executive Order 13563
    Executive Order 13563, Improving Regulation and Regulatory Review 
(January 18, 2011), requires agencies to adopt regulations through a 
process that involves public participation, and to the extent feasible, 
base regulations on the open exchange of information and perspectives 
from affected stakeholders and the public as a whole. As discussed 
above, this proposed rule is based in part on the significant number of 
comments SBA received in response to a request for input from the 
public on the ANPRM published in the Federal Register in June 2019.
Congressional Review Act, 5 U.S.C. 801-808
    The Office of Management and Budget has determined that this is not 
a major rule under 5 U.S.C. 804(2).
Paperwork Reduction Act, 44 U.S.C., Ch. 35
    SBA has determined that this proposed rule would not impose new 
reporting or recordkeeping requirements under the Paperwork Reduction 
Act. However, the rule would require a minor revision to SBA Form 990A, 
Quick Bond Application, to conform to the change in 13 CFR 115.30 
increasing the maximum amount of the contracts for which a Prior 
Approval Surety may use this streamlined application. Revising the form 
to change the amount from $400,000 to $500,000 will not have any impact 
on the burden for this information collection, which is currently 
approved under OMB Control Number 3245-0378. SBA will submit a request 
to OMB to make the non-substantive change if the proposed increase is 
finalized.
Regulatory Flexibility Act, 5 U.S.C. 601-612
    When an agency issues a proposed rule, the Regulatory Flexibility 
Act (RFA) requires the agency to ``prepare and make available for 
public comment an initial regulatory flexibility analysis'' which will 
``describe the impact of the proposed rule on small entities.'' (5 
U.S.C. 603(a)). However, section 605 of the RFA allows an agency to 
certify a rule, in lieu of preparing an analysis, if the proposed 
rulemaking is not expected to have a significant economic impact on a 
substantial number of small entities.
    In the ANPRM (84 FR 25496), SBA solicited comments from the public 
to identify which of SBA's regulations relating to the SBG program 
should be repealed, replaced, or modified because they are obsolete, 
unnecessary, ineffective, or burdensome. SBA also solicited comments 
from the public on how SBA can improve the surety bond products, 
procedures, forms, and reporting requirements of the SBG Program. SBA's 
proposed revisions in response to comments received are consistent with 
these goals and with increasing the consistency of these regulations 
with industry standards.
    Under 13 CFR 115.11, Sureties participating in SBA's SBG Program 
must be a corporation listed by the U.S. Treasury as eligible to issue 
bonds in connection with Federal procurement contracts. There are 256 
Treasury-listed Sureties, of which 41 are program partners in the SBG 
Program. SBA estimates that 12 of these 41 Surety companies are small 
under SBA's size standards. In addition, most small businesses that 
receive an SBA-guaranteed bond operate within the 236220 NAICS industry 
code (Commercial and Institutional Building Construction). According to 
the U.S. Census Bureau, there are a total of 38,079 small business 
companies that operate within the 236220 NAICS code, and SBA provided 
guarantees in 2017 for 1,602 of these small businesses. Even if the 
number of entities that may be affected by this proposed rule is 
considered significant, SBA has determined that the economic impact on 
these entities would not be substantial. The proposed rules would 
repeal, replace, or modify obsolete or outdated SBG Program 
requirements that will have the effect of reducing the burden on 
Sureties and small businesses that receive bonds under the SBG Program. 
In addition, SBA anticipates that the proposed rules would streamline 
outdated procedures and increase small business access to bond 
guarantees. Further, the proposed rule would reduce costs \2\ to 
Sureties and small businesses receiving an SBA-guaranteed bond while 
any costs of adjustment to revisions are de minimis. Thus, SBA does not 
expect that this rule would have a significant economic impact on its 
program participants. Accordingly, the Administrator of the SBA hereby 
certifies that this proposed rule would not have a significant economic 
impact on a substantial number of small entities.
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    \2\ An example is the reduction in cost mentioned in the 
analysis of Sec.  115.30.
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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 proposes to amend 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; and Pub. L. 110-246, Sec. 12079, 122 Stat. 1651.

0
2. Amend Sec.  115.10 by revising the definition of ``Contract'' to 
read as follows:


Sec.  115.10   Definitions.

* * * * *
    Contract means a written obligation of the Principal, including an 
Order, requiring the furnishing of services, supplies, labor, 
materials, machinery, equipment or construction.
    A Contract:
    (1) Must not prohibit a Surety from performing the Contract upon 
default of the Principal;
    (2) Does not include a permit, subdivision contract, lease, land 
contract, evidence of debt, financial guarantee (e.g., a contract 
requiring any payment by the Principal to the Obligee, except for 
contracts in connection with bid and performance bonds for the sale of 
timber and/or other forest products, such as biomass, that require the 
Principal to pay the Obligee), warranty of performance or efficiency, 
warranty of fidelity, or release of lien (other than for claims under a 
guaranteed bond); and
    (3) May include a maintenance agreement under the following 
circumstances:
    (i) The maintenance agreement is ancillary to a Contract for which 
SBA is guaranteeing a bond, is performed by the same Principal, is for 
a period of 2 years or less, and only covers defective workmanship or 
materials that are not covered by a manufacturer's warranty. With SBA's 
prior written approval, the agreement may cover a period longer than 2 
years, or cover something other than defective workmanship or 
materials, if a longer period or something other than defective 
workmanship or materials is

[[Page 52848]]

customarily required in the relevant trade or industry; or
    (ii) The maintenance agreement is stand-alone and is entered into 
in connection with a Contract for which a bond was not required and 
only covers defective workmanship or materials that are not covered by 
a manufacturer's warranty. The agreement must cover a period of 3 years 
or less that begins immediately after the Contract is complete and must 
be executed prior to the completion of the Contract. It must also be 
entered into with the same Principal that completed the Contract. With 
SBA's prior written approval, the agreement may cover a period longer 
than 3 years if a longer period is customarily required in the relevant 
trade or industry.
* * * * *
0
3. Amend Sec.  115.12 by revising paragraph (e)(3) to read as follows:


Sec.  115.12   General program policies and provisions.

* * * * *
    (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 that the SBA 
guarantee is necessary. The certification must be either express mailed 
to SBA, Office of Surety Guarantees, 409 Third Street SW, Washington, 
DC 20416 or sent by email to [email protected], and include the 
following additional information:
    (i) Name, address and telephone number of the small business;
    (ii) Offer or Contract number and brief description of the 
contract; and
    (iii) Estimated Contract value and date of anticipated award 
determination.
* * * * *


Sec.  115.14  [Amended]

0
4. In paragraph (a)(3), remove ``$1000'' and add in its place 
``$10,000''.
0
5. In Sec.  115.19, revise paragraph (f)(2)(i) to read as follows:


Sec.  115.19   Denial of liability.

* * * * *
    (f) * * *
    (2)(i) For purposes of paragraph (f)(1)(ii) of this section, work 
under a Contract is considered to have begun when a Principal takes any 
action related to the contract or bond that would have exposed its 
Surety to liability under applicable law had a bond been Executed (or 
approved, if the Surety is legally bound by such approval) at the time.
* * * * *


Sec.  115.30  [Amended]

0
6. Amend Sec.  115.30 as follows:
0
a. In paragraph (d)(2), remove ``$400,000'' and add in its place 
``$500,000'';
0
b. In paragraph (d)(2)(ii)(D), remove ``$1,000'' and add in its place 
``$2,500''; and
0
c. In paragraph (d)(2)(ii)(E), remove the term ``demolition,''.


Sec.  115.32  [Amended]

0
7. In Sec.  115.32(d), remove ``$40'' wherever it appears and add in 
its place ``$250.''


Sec.  115.33  [Amended]

0
8. Amend Sec.  115.33 by:
0
a. In paragraph (d)(1), removing the phrase ``a ``Surety Bond Guarantee 
Underwriting Review'' (SBA Form 994B)'' and adding in its place the 
phrase ``a ``Surety Bond Guarantee Agreement'' (Form 990)''; and
0
b. In paragraph (d)(2), removing the phrase ``a Surety Bond Guarantee 
Underwriting Review (SBA Form 994B) and'' in the first sentence, and 
removing the phrase ``these forms'' in the second sentence and adding 
in its place the phrase ``this form.''
0
9. Amend Sec.  115.64 by adding a sentence at the end of the section to 
read as follows:


Sec.  115.64   Timeliness requirement.

    * * * For purposes of this section, work has commenced under a 
Contract when a Principal takes any action related to the contract or 
bond that would have exposed its Surety to liability under applicable 
law had a bond been Executed (or approved, if the Surety is legally 
bound by such approval) at the time.


Sec.  115.67  [Amended]

0
10. In Sec.  115.67, remove ``$40'' wherever it appears and add in its 
place ``$250.''

Isabella Casillas Guzman,
Administrator.
[FR Doc. 2021-20401 Filed 9-22-21; 8:45 am]
BILLING CODE 8026-03-P