In his first action as Chairman of the Contracting and Workforce Subcommittee, U.S. Representative Richard Hanna introduced legislation to help ensure subcontractors and suppliers who provide services to the federal government will be paid for their work.
The Security in Bonding Act of 2013 would protect small businesses and taxpayers by strengthening the bonding process and removing opportunities for fraud and abuse. The federal government allows contractors to provide bonds from individuals who secure their obligations under the bond with a pledge of assets.
This bill is co-sponsored by Small Business Committee Chairman Sam Graves (R-MO).
The Security in Bonding Act of 2013 closes a loophole that allowed unscrupulous businesses to offer inadequate assets to back a bond. The lack of oversight on non-corporate sureties has resulted in a number of documented cases where assets pledged to back the bond have been illusory or insufficient.
Among the highlights of the bill:
- Requires non-corporate sureties to pledge specific and secure assets as required from others providing collateral to the federal government
- Requires those assets be held by a government entity to ensure payments can be made in the event they are needed.
- Allows the government to ensure payment of subcontractors and suppliers.
- Raises the guarantee on the Small Business Administration Surety Bond Guarantee program from 70 percent to 90 percent. This change would help more small businesses get bonding at no extra cost to the government, because the program charges fees to participate and has successfully functioned running a surplus.
Rep. Hanna and Chairman Graves say it's time to close the loophole and protect honest small businesses.
"The Security in Bonding Act will protect the construction industry from bad practices that hurt their bottom line and hinder their ability to grow and create jobs," Rep. Hanna said. "I've seen first-hand the damage that can occur when inadequate bonding was secured for a project. It hurts everyone, particularly the small business suppliers and subcontractors that provide goods and services - yet risk not being paid for their work.
"This common-sense fix will strengthen the integrity of the bonding process. It provides more certainty and security for small businesses that deserve to get paid for their work. These companies should focus on how to expand and create jobs -- rather than worry about whether or not they will get paid."
"I applaud Rep. Hanna's common sense reforms regarding bonding," Chairman Graves said. "These reforms help in three ways -- first, small businesses will have greater access to prime contracts; second, small construction subcontractors who perform in accordance with their contracts can rest assured they will be paid; and third, taxpayer investments in construction projects will be better protected."