Office of Surety Guarantees

Surety Bond Guarantee

Program

24 March 2011

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Mission

Provide surety bond guarantees for small businesses in direct partnership with surety companies and their agents. (The program was established to help small businesses obtain bonds who otherwise would not be able to obtain them in the traditional commercial marketplace.)

Office of Surety Guarantees

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SBA guarantees between 70 and 90% of the costs a surety company incurs if the small business defaults, in order to encourage surety companies to provide bonds to small businesses.

Office of Surety Guarantees

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Process

• When a small business requires a surety bond as a condition of bidding on, or receiving a contract award, the small business must contact a surety company or bond agent authorized to represent the surety company.

• A list of surety companies and agents who participate in the SBA Surety Bond Guarantee Program are provided at www.sba.gov/osg

– Small businesses who are having a problem obtaining a surety bond should contract one of these surety companies or agents.

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Small Business Program Participation Requirements

• Applicant must be a small business as defined by the proper NAICS Code.(business, together with its affiliates, must be small for

the primary industry in which it is engaged.)

• Contract must require a bond.

• Public or private contract or subcontract cannot exceed $2 million.

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2 Program Components

» Prior Approval Program - 1971

» Preferred Program - 1988

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Prior Approval Bond Program: Under the Prior Approval Program, all proposed bond guarantees from surety companies are reviewed and approved by SBA personnel in the Denver and Seattle Area Offices.

Denver: 721 19 Street, Suite 400

Denver, CO 80202303-844-2607

Seattle:2401 4th Avenue, Suite 450

Seattle, WA 98121206-553-0961

Office of Surety Guarantees

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SBA guarantee - 80% or 90% of the bond amount (reasonable, allowable/allocable costs incurred by the surety company following default of the contractor).

90% - of the loss incurred if contract is $100K or less, or small business is owned and controlled by socially and economically disadvantaged individuals, a HUBZone small business concern, or small business is owned and controlled by Veterans or Service–disabled Veterans.

80% - of the loss incurred if the contract is greater than $100K, and small business is not owned and controlled by socially and economically disadvantaged individuals, is not a HUBZone small business concern, or small business concern owned and controlled by Veterans or Service-disabled Veterans.

Each claim for reimbursement submitted by surety company is reviewed and approved by HQ claims specialists.

Prior Approval Bond Program:

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Office of Surety Guarantees

Prior Approval Program Surety Companies participating in the Prior Approval Program:

Aegis Security Insurance Company, PA

American Contractors Indemnity Company, CA

American Safety Insurance Company, CA

Bankers Insurance Company, FL

Contractors Bonding & Insurance Company, GA

Financial Pacific Insurance Company, CA

Great American Insurance Company of New York, OH

Hartford Fire Insurance Company, CT

The Guarantee Company of North America, IL

Ullico Casualty Insurance Company, Wash, DC

West Bend Mutual Insurance Company, WI

Western Insurance Company, NV

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Office of Surety Guarantees

Preferred Program:

Surety companies are authorized to issue bond guarantees without SBA prior approval. SBA guarantees

the Surety Company up to 70% of the bond amount, reimbursing the surety for reasonable, allowable/allocable costs. Claims are submitted to HQ and a limited review is performed.

Each surety is subject to an on-site audit by an independent contractor at least once every three years.

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Office of Surety Guarantees

Preferred Program: Surety Companies participating in the Preferred Surety Bond Program:

Great American Insurance Company, OH

SureTec Insurance Company, TX

The Travelers Companies, MN

U.S. Specialty Insurance Company, CA

CNA/Western Surety Company, IL

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Office of Surety Guarantees

Participating Surety Company requirements: (Prior Approval & Preferred)

Must be identified on the U.S. Treasury Department list of acceptable sureties.

Must comply with all regulatory requirements specified in Code of Federal Regulations Part 115, Subparts A,B and C.

Must agree to use standards generally accepted by the surety industry in underwriting bond applications.

Note: Preferred Companies must retain in-house underwriting approval authority, and have anunderwriting limitation of at least $2 million on the Department of Treasury list of approved sureties.

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Office of Surety Guarantees

Fees

SBA charges the small business .729% of the contract price for the bond guarantee.

SBA charges the surety company 26% of the fee the surety company charges the small business.

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Office of Surety Guarantees

Bond Activity Trend

Bonds & Surety Company Participation

[ Five new Surety Companies in past 12 months]

Fiscal Year

'03 '04 '05 '06 '07 '08 '09 '10

# of Bonds Issued: 9,103

7,803

5,796 5,214 5,809 6,050 6,135 8,330

Participating Sureties: 16 17 14 10 12 12 12 16

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Bonds At A Glance

(1) # of Active Bonds - 4,629

(2) Potential Bond

Liability - $1.86 b

(3) Claims Reserve - $53 m

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South Carolina SB Demographics - Construction Small Business– 308

8(a) Certified Construction Firms – 33HUBZone – 52

VO & SDVO – 91WOB – 81

North Carolina SB Demographics – ConstructionSmall Business – 605

8(a) Certified Construction Firms – 49HUBZone – 128

VO & SDVO – 144WOB - 185

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South Carolina AgentsServing South Carolina

Barbour Group, LLCWestminster, MD

866-876-9610www.thebarbourgroup.com

 Construction Bonds Inc.

Fairfax, VA703-934-1000

www.sbabonds.com 

JW Bond Consultants, Inc.Pipersville, PA888-592-6631

www.jwsuretybonds.com 

McCartha, Cobb & Associates, Inc.1407 Calhoun St.

Columbia, SC 29201803-799-3474

www.mccartha-cobb.com 

Wells Fargo Insurance ServicesRaleigh, NC

919-334-2605http://wfis.wellsfargo.com

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Agents / Producers are Key!- Today we have 250 Agents – Need more!

No Agents reside in 8 States and 6 Territories:

• Idaho American Samoa• Iowa Micronesia• Mississippi North Mariana Islands• North Dakota• Rhode Island• South Dakota Puerto Rico • Vermont Virgin Islands• Wyoming

(www.sba.gov/osg)

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New Agent Needs User ID & Passwordto Access e-Application

– 2 Steps –

# 1 Surety identifies agent in writing as authorized representative of the Surety

# 2 Agent certifies that information submitted electronically is accurate and complete

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Electronic Interface

• Prior Approval Program: • Application can be completed electronically by small

business and agent. (System prints out forms automatically.)

(Training is available in person & via Ready Talk Conference Call.)

• Application – small business & surety company information sent to Denver or Seattle Offices.

• Preferred Program:• (SBA prior approval not req’d)• Limited electronic information:

» Small business name» Bond amount» NAICS Code» Obligee» Prime / Sub,…

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Office of Surety Guarantees

www.sba.gov/osgFrank LalumiereDirector, OSG

409 Third Street S.W.Washington, D.C.

20416(202) 205-6540(202) 401-8275

MIKE O’NEILL – South Carolina District Office(803) 253-3116

john.oneill@sba.gov MITCH DEMAILLE – North Carolina District Office

(704) 344-6590 x6590stephen.demaille@sba.gov