FY 2010 was a banner year for the U.S. Small Business Administration’s (SBA) Surety Bond Guarantee Program. During the year, SBA guaranteed over 8,300 bonds, 36 % greater than FY 2009. The dollar value of the bonded contracts was over $4 billion, 44% above the previous year. FY 2010 was the fourth consecutive year in which the number of bonds and the dollar value of the bonded contracts increased significantly from the previous year. Compared to 2006, the number of bonds was 60% greater in 2010. In addition to increasing the bond volume, SBA admitted six new surety companies, five in the Prior Approval Program and one in the Preferred Program. SBA also increased the number of participating bond producers by over 20%.

Three new Rules were published in the Federal Register in Fiscal Year 2010, one Final Rule and two Proposed Rules. The Final Rule was published on August 11, 2010 and permanently adopts the small business size standard that was implemented in the American Recovery and Reinvestment Act. In short, a business is small if it, together with its affiliates, meets the size standard that corresponds to the North American Industry Classification System (NAICS) code for the primary industry in which the business, together with its affiliates, is engaged. The first Proposed Rule was published on April 26, 2010 and implements provisions of the Small Business Disaster Response and Loan Improvements Act of 2008. Under this regulatory change, SBA is authorized to guarantee bonds on contracts up to $5 and $10 million that are related to a major national disaster. For non-Federal contracts, SBA can guarantee a bond on a contract up to $5 million, if the services will be performed or products manufactured within the disaster area. For a Federal contract, the contract performance site may be outside the disaster area, but the contract must directly assist the disaster recovery efforts. The contract size may go up to $10 million at the request of the Head of the Federal Agency overseeing the disaster recovery efforts. This rule went Final on January 14, 2011 and becomes effective on 14 February 2011. The second Proposed Rule was published on October 15, 2010 and revises the definition of “contract” in 13 CFR Part 115 in order to permit SBA to issue bid and performance bond guarantees on Timber Sale contracts. This Rule is expected to go Final not later than February 28, 2011.

The author of this article is Frank Lalumiere, the Director of the Office of Surety Guarantees with the United States Small Business Administration. He may be reached at frank.lalumiere@sba.gov.