NASBP Focal Point – January 14, 2021

Today, the Federal Acquisition Regulation (FAR) Council, which includes the Department of Defense (DoD), the General Services Administration (GSA), and the National Aeronautics and Space Administration (NASA), issued its rule on FAR Case 2017-003 implementing Section 874 of the National Defense Authorization Act (NDAA) for Fiscal Year 2016. Specifically, the new rule requires individual sureties to use only “eligible obligations,” as defined in 31 CFR Part 223, as collateral for their obligations to the federal agencies and to deposit such assets in the care and custody of the federal government.  The FAR change goes into effect on February 16, 2021. Specifically, the rule requires individual sureties to support their bond obligations with stable U.S.-backed securities as specified in 31 CFR part 225 and requires the Department of the Treasury, Bureau of the Fiscal Service to review those assets to ensure they meet established eligibility requirements.

Dating back to 2011, NASBP’s top federal legislative priority was to pursue the enactment of legislation to foreclose abuses allowed under then existing federal regulations by unscrupulous persons who place worthless surety bonds on federal construction contracts and have cost taxpayers and businesses millions of dollars over the last three decades. NASBP worked with the late Congressman Richard Hanna (R-NY-22^nd), a former construction contractor, to sponsor and champion the bi-partisan legislation, requiring unregulated, non-corporate sureties to pledge specific and secure assets and place them in the care and custody of the federal government. Throughout the years, a concerted advocacy effort by NASBP, in partnership with other surety and trade organizations, secured the support of the legislation. Indeed, Edward Gallagher, general counsel at The Surety & Fidelity Association of America (SFAA) partnered with NASBP, sharing his expertise in the subject and helping to craft the Hanna bill. This bill was ultimately included in the House of Representatives’ version of the NDAA for Fiscal Year 2016 and in the final NDAA Conference Report, with the support of Senators Rob Portman (R-OH) and Mazie Hirono (D-HI).

In 2010, NASBP’s CEO Mark McCallum and SFAA’s Gallagher co-authored “The Importance of Surety Bond Verification,” bringing to light the long history of fraudulent bonds and the harm suffered by public owners, contractors, and subcontractors. In 2016, McCallum was selected as a Top 25 Industry Newsmaker by Engineering News-Record in recognition of, “Putting an End to Individual Surety Fraud.”

The U.S. Chamber of Commerce and the Bipartisan Policy Center launched a new coalition today, tying passage of a prospective infrastructure package to the Fourth of July. The new push comes as the incoming Biden administration and the Democratic control in both Houses of Congress are hoping to pass a huge, likely bipartisan infrastructure deal this year. According to the Chamber, nearly 150 trade groups, unions, and other stakeholders have already signed on to the “Build by the Fourth of July” campaign, including North America’s Building Trades Unions, the National Wildlife Federation, the American Association of State Highway and Transportation Officials, and the National Association of Home Builders.

On Thursday, March 25, NASBP and SFAA will hold their first joint Legislative Fly-In. Due to COVID-19, the fly-in will be held virtually. So, while there will be no need to travel in order to participate, registration is required. Your participation as a surety advocate is critical to ensure federal policymakers on Capitol Hill understand the significant role bonds play to advance public works infrastructure projects.

NASBP’s consultant will be scheduling the appointments with the congressional offices. If you haven’t participated in a fly-in in the past, take this opportunity to make March 25 your first fly-in! Direct any questions to Larry LeClair, NASBP’s Director of Government Relations, and register today!

In order to track which states are in session, NASBP has updated its legislative session calendar for 2021. The calendar shows the 2021 legislative session dates, whether the states plan to meet virtually or in person, the current governors/mayor, and the legislative coposition by party for the states and DC. Similar to last year, this proposed calendar is subject to change due to concerns over COVID-19.

As a reminder, NASBP provides its membership online access to a series of interactive maps that highlight local legislative activity, bonding thresholds, and other valuable information across the United States.

Two maps, in particular, have been updated recently.

First, the comment letters map now includes a letter to the General Services Administration (GSA) that NASBP submitted at the end of last year in response to the FAR Council seeking comment on whether the information collection requirement included in 9000-0001, Standard Form 28, Affidavit of Individual Surety is necessary. Given that this requirement was intended to be superseded by FAR Case 2017-003, Individual Sureties under Section 874 of the FY 2016 National Defense Authoriation Act, it is NASBP’s recommendation that FAR Council implement FAR Case 2017-003. (See above breaking news.) Once implemented, NASBP suggest that the FAR Council then create the necessary reporting requirement that will mitigate instances where individual surety bonds are accepted with worthless assets or with assets that are beyond the control of contracting officials.

Additionally, the P3 Authorizing Statutes map has been updated to reflect new state P3 laws that were enacted in 2020, including in Florida, Maryland, Mississippi, Missouri, Virginia, and Washington.