[Federal Register Volume 75, Number 79 (Monday, April 26, 2010)]
[Proposed Rules]
[Pages 21521-21523]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-9434]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 75, No. 79 / Monday, April 26, 2010 /
Proposed Rules
[[Page 21521]]
SMALL BUSINESS ADMINISTRATION
13 CFR Part 115
RIN 3245-AF77
Surety Bond Guarantee Program; Disaster and Miscellaneous
Amendments
AGENCY: Small Business Administration.
ACTION: Proposed rule.
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SUMMARY: This Proposed Rule would implement the authority provided by
the Small Business Disaster Response and Loan Improvements Act of 2008
for issuing surety bond guarantees for contracts and orders related to
a major disaster. The Proposed Rule would also clarify that the Small
Business Administration (SBA) does not cover any costs related to any
insurance or indemnification requirements in the bonded contract.
DATES: Comments must be received on or before May 26, 2010.
ADDRESSES: You may submit comments, identified by RIN 3245-AF77 by any
of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: Office of Surety Guarantees, Suite 8600, 409 Third
Street, SW., Washington, DC 20416.
Hand Delivery/Courier: Office of Surety Guarantees, 409
Third Street, SW., Washington, DC 20416.
SBA will post all comments on www.regulations.gov. If you wish to
submit confidential business information (CBI) as defined in the User
Notice at www.regulations.gov, please submit the information to Ms.
Barbara Brannan, Special Assistant, Office of Surety Guarantees, 409
Third Street, SW., Washington, DC 20416 or send an e-mail to
[email protected]. Highlight the information that you consider to
be CBI and explain why you believe SBA should hold this information as
confidential. SBA will review the information and make the final
determination whether it will publish the information.
FOR FURTHER INFORMATION CONTACT: Ms. Barbara J. Brannan, Office of
Surety Guarantees, 202-205-6545, e-mail: [email protected].
SUPPLEMENTARY INFORMATION:
I. Background Information
SBA guarantees a portion of bid, payment and performance bonds on
contracts up to $2 million for small and emerging contractors who
cannot obtain Surety bonds through regular commercial channels. SBA's
guarantee gives Sureties an incentive to provide bonding for small
businesses and thereby assists small businesses in obtaining greater
access to contracting opportunities. The Proposed Rule includes four
proposed revisions to 13 CFR 115. Three of the four revisions would
implement the authority granted to the Agency in Sec. 12079 of
subtitle B of title XII of Public Law 110-246. The fourth revision
would clarify that SBA does not cover any costs related to any
insurance or indemnification requirements in the bonded contract.
Section 12079 of Public Law 110-246 sets forth the bonding
thresholds for any procurement related to a major disaster. For
Contracts and Orders, as defined in 13 CFR 115.10, related to a major
disaster, a new provision would be added to SBA regulations, 13 CFR
115.12(e)(5), to authorize SBA to approve, under certain conditions, an
SBA bond guarantee on an individual Contract or Order up to $5,000,000
at the time of bond execution. For products or services procured under
non-Federal Contracts or Orders up to $5,000,000, an SBA bond guarantee
may be issued if the products will be manufactured or the services will
be performed in the major disaster area identified in the Federal
Emergency Management Agency (FEMA) Web site. SBA finds that the
manufacturing of any products or the performance of any services in the
disaster area will assist recovery efforts in the disaster area by
generating economic activity and that, therefore, these procurements
are reasonably related to the major disaster.
For products or services procured under a Federal Contract or Order
up to $5,000,000, an SBA bond guarantee may be issued if: (a) The
products will be manufactured or the services will be performed in the
major disaster area identified in the FEMA Web site; or (b) the
products will be manufactured or the services will be performed outside
the major disaster area and the products or services will directly
assist in the recovery efforts in the major disaster area. The SBA bond
guarantee may be issued on a Federal Contract or Order that meets one
of the above two conditions up to $10,000,000 at the request of the
Head of the Agency involved in disaster reconstruction efforts.
In addition, SBA believes that recovery efforts after a major
disaster will generally continue for the first 12 months after the
disaster is declared. Accordingly, the Proposed Rule provides that
SBA's authority to guarantee bonds in the amounts authorized by Public
Law 110-246 for a particular disaster would apply only during the 12
months following the disaster declaration unless SBA extends, in its
discretion, the authority for such disaster. SBA will publish a notice
of any extension in the Federal Register.
This new bond authority is also subject to the availability of
funds appropriated in advance specifically to carry out Sec. 12079 of
Public Law 110-246. In accordance with the new authority, the
definition of Applicable Statutory Limit set forth in 13 CFR 115.10
would be revised, and a new definition for Head of Agency would be
added to 13 CFR 115.10.
In addition, the Proposed Rule would clarify that SBA does not
cover any costs related to any insurance or indemnification
requirements in the bonded contract. As insurance and indemnification
requirements may appear in Contracts, SBA is proposing to add a new
paragraph (5) to Sec. 115.16(f) to clarify that SBA excludes the
following from the losses covered by the SBA guarantee: (1) Any costs
that arise from the Principal's failure to secure and maintain
insurance coverage required by the Contract or Order; (2) any costs
that result from any claims or judgments that exceed the amount of any
insurance coverage required by the Contract or Order; and (3) any costs
that arise from any agreement by the Principal in the Contract or Order
to indemnify the Obligee or any other Persons.
II. Section by Section Analysis
Section 115.10. SBA is proposing to revise the definition of the
term, ``Applicable Statutory Limit'' to reflect
[[Page 21522]]
that the maximum amount of any Contract or Order for which the Agency
may issue a surety bond guarantee may be set by statutory provisions
other than Sec. 411(a) of the Small Business Investment Act, such as
by Sec. 12079 of Public Law 110-246. SBA is also proposing to add a
new definition for ``Head of Agency'' to implement Sec. 12079(b) of
Public Law 110-246.
Section 115.12(e)(5). SBA is proposing to add a new provision
relating to the new surety bond guarantee authority provided under
Sec. 12079 of Public Law 110-246 for Contracts and Orders related to a
major disaster area. This new authority would apply to an individual
Contract or Order up to $5,000,000 at the time of bond execution. For
products or services procured under non-Federal Contracts or Orders up
to $5,000,000, an SBA bond guarantee may be issued if the products will
be manufactured or the services will be performed in the major disaster
area identified in the FEMA Web site. For products or services procured
under a Federal Contract or Order up to $5,000,000, an SBA bond
guarantee may be issued if: (a) The products will be manufactured or
the services will be performed in the major disaster area identified in
the FEMA Web site; or (b) the products are manufactured or the services
are performed outside the major disaster area and the products or
services will directly assist in the recovery efforts in the major
disaster area. The SBA bond guarantee may be issued on a Federal
Contract or Order that meets one of the above two conditions up to
$10,000,000 at the request of the Head of the Agency involved in
disaster reconstruction efforts.
In addition, this provision would apply to a Contract or Order for
which an offer is submitted or award made within 12 months from the
date an area is designated a major disaster area as identified in the
FEMA Web site at http://www.fema.gov. SBA may, at its discretion,
extend this time period for any particular disaster. SBA expects that
it would consider extending the time period only where efforts to
recover from the major disaster were still underway one year after its
occurrence. SBA will publish a notice of any extension in the Federal
Register. The new bond authority is also expressly conditioned on the
appropriation of funds in advance.
Section 115.16(f). SBA is proposing to add a new paragraph (5) to
clarify that SBA does not cover any costs related to any insurance or
indemnification requirements in the bonded contract. As insurance and
indemnification requirements may appear in Contracts, SBA is proposing
to clarify that the following costs are excluded from the losses
covered by the SBA guarantee: (1) Any costs that arise from the
Principal's failure to secure and maintain insurance coverage required
by the Contract or Order; (2) any costs that result from any claims or
judgments that exceed the amount of any insurance coverage required by
the Contract or Order; and (3) any costs that arise from any agreement
in the Contract or Order by the Principal to indemnify the Obligee or
any other Persons.
Compliance With Executive Orders 12866, 12988, and 13132, the Paperwork
Reduction Act (44 U.S.C. Ch. 35), and the Regulatory Flexibility Act (5
U.S.C. 601-612) Executive Order 12866
The Office of Management and Budget (OMB) has determined that this
rule does not constitute a significant regulatory action under
Executive Order 12866. This rule is also not a major rule under the
Congressional Review Act.
Executive Order 12988
This action meets applicable standards set forth in Sections 3(a)
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize
litigation, eliminate ambiguity, and reduce burden. The action does not
have retroactive or preemptive effect.
Executive Order 13132
For purposes of Executive Order 13132, SBA has determined that the
rule will not have substantial, direct effects on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government. Therefore, for the purpose of Executive Order 13132,
Federalism, SBA has determined that this Proposed Rule has no
federalism implications warranting preparation of a federalism
assessment.
Paperwork Reduction Act, 44 U.S.C., Ch. 35
SBA has determined that this Proposed Rule does not impose
additional reporting or recordkeeping requirements under the Paperwork
Reduction Act, 44 U.S.C., Chapter 35.
Regulatory Flexibility Act, 5 U.S.C. 601-612
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601, requires
administrative agencies to consider the effect of their actions on
small entities, small non-profit enterprises, and small local
governments. Pursuant to the RFA, when an agency issues a rulemaking,
the agency must prepare a regulatory flexibility analysis which
describes the impact of the rule on small entities. However, section
605 of the RFA allows an agency to certify a rule, in lieu of preparing
an analysis, if the rulemaking is not expected to have a significant
economic impact on a substantial number of small entities. Within the
meaning of RFA, SBA certifies that this rule will not have a
significant economic impact on a substantial number of small entities.
There are approximately one dozen Sureties that participate in the SBA
program, and no part of this Proposed Rule would impose any significant
additional cost or burden on them.
List of Subjects in 13 CFR Part 115
Claims, Reporting and recordkeeping requirements, Small businesses,
Surety bonds.
For the reasons stated in the preamble, the Small Business
Administration proposes to amend 13 CFR Part 115 as follows:
PART 115--SURETY BOND GUARANTEE
1. The authority citation for part 115 is revised to read as
follows:
Authority: 5 U.S.C. app. 3; 15 U.S.C. 687b, 687c, 694a, 694b
note, Pub. L. 106-554; Pub. L. 108-447, Div K, Sec. 203; Pub. L.
110-246, Sec. 12079, 122 Stat. 1651; and Pub. L. 111-5, 123
Stat.115.
2. In Sec. 115.10, revise the definition of ``Applicable Statutory
Limit'' and add the definition of ``Head of Agency'' to read as
follows:
Sec. 115.10 Definitions.
* * * * *
Applicable Statutory Limit means the maximum amount of any Contract
or Order for which Sec. 411(a) of the Small Business Investment Act,
as amended from time to time, or other law, authorizes SBA to
guarantee, or commit to guarantee, a Bid Bond, Payment Bond,
Performance Bond, or Ancillary Bond.
* * * * *
Head of Agency means in the case of a cabinet department, the
Secretary; and in the case of an independent commission, board, or
agency, the Chair or Administrator; or any person to whom the
Secretary, Chair, or Administrator has directly delegated the authority
to request SBA to guarantee bonds on Contracts or Orders in excess of
$5,000,000.
* * * * *
3. In Sec. 115.12, add paragraph (e)(5) to read as follows:
[[Page 21523]]
Sec. 115.12 General program policies and provisions.
* * * * *
(e) * * *
(5) Guarantee authority for Contracts and Orders related to a major
disaster area. Subject to the availability of funds appropriated in
advance specifically for the purpose of guaranteeing bonds for any
Contract or Order related to a major disaster, SBA may guarantee bonds
on any Contract or Order under the following terms and conditions:
(i) The Contract or Order does not exceed $5,000,000 at the time of
bond execution, and:
(A) For products or services procured under a Federal Contract or
Order, the products will be manufactured or the services will be
performed in the major disaster area identified in the Federal
Emergency Management Agency (FEMA) Web site at http://www.fema.gov, or
the products will be manufactured or the services will be performed
outside the major disaster area and the products or services will
directly assist in the recovery efforts in the major disaster area; or
(B) For products or services procured under any other Contract or
Order, the products will be manufactured or the services will be
performed in the major disaster area identified in the FEMA Web site at
http://www.fema.gov;
(ii) At the request of the Head of the Agency involved in
reconstruction efforts in response to a major disaster, SBA may
guarantee bonds on Federal Contracts or Orders in excess of $5,000,000,
but not more than $10,000,000;
(iii) The restrictions set forth in Sec. 115.12(e)(3) do not apply
to the guarantees issued under this paragraph (e)(5); and
(iv) A guarantee may be issued under this paragraph (e)(5) for any
Contract or Order for which an offer is submitted or an award is made
within 12 months from the date an area is designated a major disaster
area in the Federal Register. SBA may, at its discretion, extend this
time period for any particular disaster, and will publish a notice of
the extension in the Federal Register.
* * * * *
4. Amend Sec. 115.16 as follows:
a. Remove the word ``and'' at the end of paragraph (f)(3);
b. Remove the punctuation ``.'' at the end of paragraph (f)(4); and
c. Add paragraph (f)(5) to read as follows:
Sec. 115.16 Determination of Surety's Loss.
* * * * *
(f) * * *
(5) Any costs that arise from the Principal's failure to secure and
maintain insurance coverage required by the Contract or Order, or any
costs that result from any claims or judgments that exceed the amount
of any insurance coverage required by the Contract or Order, as well as
any costs that arise as a result of any agreement by the Principal in
the Contract or Order to indemnify the Obligee or any other Persons.
Karen G. Mills,
Administrator.
[FR Doc. 2010-9434 Filed 4-23-10; 8:45 am]
BILLING CODE 8025-01-P