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Individual Sureties One Step Closer to Regulation

The U.S. House of Representatives recently approved, by voice vote, legislation that establishes clear standards for assets pledged by an individual surety on federal construction projects.H.R. 4435 and H.R. 776, an amendment to the National Defense Authorization Act (NDAA) for Fiscal Year 2015 requires an individual surety to pledge assets that:

  • consist of eligible obligations given as security instead of surety bonds; and
  • be submitted to the government official required to approve or accept the bond, who shall deposit the assets with a depository (the Secretary of the Treasury, a federal reserve bank, or a depository designated by the Secretary).

The National Association of Surety Bond Producers, The Surety & Fidelity Association of America and the American Subcontractors Association have long called for individual sureties to be held to regulatory standards and ensure the assets pledged by the individual surety are sufficient and valid.

Other provisions in the NDAA include:

  • increasing the Small Business Administration’s maximum surety bond guarantee from 70 percent to 90 percent;
  • limiting the use of reverse auctions for construction projects;
  • requiring consistent definitions and reporting of contract bundling among the agencies;
  • increasing the federal agency goal for small business participation as prime contractors from 23 percent to 25 percent, and setting a goal of not less than 40 percent participation as subcontractors; and
  • using qualification and price on design-build projects.

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