Capitol Hill Update

Congress is now on its annual August recess and some might say that is a good thing given all that transpired over the course of the last month, such as the fight over raising the debt ceiling and Standard & Poor’s downgrade of the U.S credit rating. Though Members might be out in their respective districts, NASBP continues to meet with staff on Capitol Hill to advocate on behalf of the surety product.

Just last month, NASBP and SFAA met with Congressional staff regarding H.R. 2357, the “Fighting Fraud in Transportation Act of 2011.” The bill requires property brokers and freight forwarders to furnish a bond, proof of trust, or other security in order to obtain a license. The legislative intent is to assure the financial responsibility of the licensee, and the bond or funds in trust must be available to pay claims against a broker or freight forwarder that fails to pay freight charges under its contracts, agreements, or arrangements. H.R. 2357 contains several provisions to are problematic to the surety industry, such as increasing the bond requirement from $10,000 to $100,000, requiring sureties to publish on its website all claim payments and submit a copy to the Federal Motor Carrier Safety Administration (FMCSA), and an annual audit of sureties’ claims from a public accounting firm. Hill Staff requested that NASBP and SFAA provide comments regarding our concerns with the bill and has indicated during meetings that H.R. 2357 will likely to be included in the Transportation Reauthorization Act, which could be introduced when Congress returns in September.

NASBP and SFAA also met with the Representative Bobby Rush’s (D-IL) staff to discuss H.R. 2424, legislation that makes permanent the reforms adopted during the economic stimulus package to the U.S. Small Business Administration (SBA) Bond Guarantee Program by increasing the bond guarantee from $2 million to $5 million and up to $10 million in some cases and providing the SBA Administrator discretion to determine the Program’s liabilities. Senator Ben Cardin (D-MD) has made multiple attempts to attach this language on several small business bills over the course of the last two sessions of Congress. NASBP and SFAA support these reforms and have also advocated for additional reforms, including increasing the guarantee to sureties, lowering the fees assessed to sureties and contractors, and combining the Preferred and Prior Approval Program into one unified Program.

H.R. 2424 also prohibits contract bundling for construction contracts below $65 million, amends the Small Business Act by increasing the small business participation goal from 23% to 25%, raises the limit for contracts set aside for small businesses to $500,000, modifies the SBA’s Disadvantaged Business Development Program by increasing the personal net worth threshold to $1.5 million, and strengthens the Minority Business Development Agency (MBDA) through a series of steps including providing technical and contracting assistance to qualified minority businesses. During the meeting, NASBP and SFAA addressed several provisions in the bill, such as contract bundling, which we believe requires more specificity regarding how those contracts would be unbundled and suggested that MBDA include a bonding assistance program to be integrated with the SBA’s Small Business Development Centers (SBDCs), which are located throughout the country. H.R. 2424 has several committee referrals including the Small Business, Ways and Means, Financial Services and Oversight and Government Reform. Senator Tom Udall (D-NM) introduced a similar piece of legislation, S. 1334, in the Senate in July.

DC Green Building Act of 2006

Recently, NASBP and SFAA were contacted by the District of Columbia’s Department of the Environment about language that appeared in the DC Green Building Act of 2006. The Department was in the process of proposing rules to the DC Council and sought our input concerning Section 6 of the Act. As you may recall, Section 6 of the Act requires that any party applying for a construction permit provide security, in the form of cash, a letter of credit, or a “performance bond,” which may be forfeited to the District and deposited in the Green Building Fund if the building fails to meet LEED (Leadership in Energy and Environmental Design) verification requirements. Since the passage of the Act, NASBP has sent multiple letters to the DC Council expressing our concerns that the Act incorrectly applies the term “performance bond“ to function more in the manner of a license or compliance bond, which typically guarantees compliance with a law or a code. The Department of the Environment requested that we provide a list of concerns with the performance bond requirement in Section 6, because they are in the process of writing Regulations for the Act.

Subsequent to our meeting with the Department, NASBP and SFAA were invited to attend a meeting of the DC Council’s Committee on the Environment, Public Works, and Transportation, where they conducted a workshop to address the surety industry’s concern about the performance bond requirement. NASBP viewed this as a positive step for the industry. The DC Council seems to have recognized surety industry concerns, and the Council may be willing to make changes during the proposed rule-making process. NASBP will keep you apprised of any developments on this issue.