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Mr. HANNA. Madam Speaker, I introduced H.R. 3534 with my colleague, Mr. Mulvaney from South Carolina, to address an issue in the construction industry I know all too well: surety bonding.
Bonding is not something most people think about, but it was a daily reality in my business. The concept is simple. Contractors on a Federal construction project are required to post assets prior to entering a contract to prove that they are capable of paying their subcontractors and downstream paying their suppliers for work. It indicates that a contractor is capable of successfully completing a project and is supposed to protect taxpayers and small businesses downstream in the event of failure or nonpayment.
The business of bonding is predicted on a zero failure rate. The assets pledged to back a project must be real, easily convertible to cash, and held by the contracting officer for the duration of the project--and most are. Unfortunately, a loophole in these laws has been exploited. It has resulted in a number of cases where assets pledged to back a bond issued by an individual surety have been insufficient or illusory. This has left small businesses and taxpayers without sufficient payment remedies, and in the case of one Colorado woman, nearly put her out of business.
A single stock or private residence, which is subject to huge changes in value or may have an existing first mortgage, are quite simply not acceptable assets to back multimillion-dollar projects. Madam Speaker, the Security in Bonding Act will remedy this problem by requiring individual sureties to pledge solely those assets described in contracting laws as ``eligible obligations.'' Further, it would require them to be placed in custody of the Federal Government just as they would using a corporate surety or posting an asset in lieu of corporate surety. This loophole is putting small businesses and workers and the taxpayer at risk. It is time to close this loophole and restore the integrity of the bonding process.
H.R. 3534 would ensure that if an individual surety bond is furnished for a Federal construction project, that small businesses and subcontractors providing goods and services on that contract will not need to worry about the integrity of their payment revenue. This bill provides the surety that small businesses need and subcontractors and citizens deserve from the Federal Government. Without it, good jobs and our limited taxpayer dollars will continue to be at risk.
In closing, I would like to extend a personal thanks to Chairman Lamar Smith for his leadership in advancing this legislation and for allowing me to join him during the committee's proceedings.
Madam Speaker, I urge my colleagues to support this legislation.
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