[Code of Federal Regulations]
[Title 13, Volume 1]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 13CFR115.12]

[Page 176-177]
 
                TITLE 13--BUSINESS CREDIT AND ASSISTANCE
 
                CHAPTER I--SMALL BUSINESS ADMINISTRATION
 
PART 115--SURETY BOND GUARANTEE--Table of Contents
 
          Subpart A--Provisions for All Surety Bond Guarantees
 
Sec. 115.12  General program policies and provisions.

    (a) Description of Surety Bond Guarantee Programs. SBA guarantees 
Sureties participating in the Surety Bond Guarantee Programs against a 
portion of their Losses incurred and paid as a result of a Principal's 
breach of the terms of a Bid Bond, Final Bond or Ancillary Bond, on any 
eligible Contract. In the Prior Approval Program, the Surety must obtain 
SBA's approval before a guaranteed bond can be issued. In the PSB 
Program, selected Sureties may issue, monitor, and service SBA 
guaranteed bonds without further SBA approval.
    (b) Eligibility of bonds. Bid Bonds and Final Bonds are eligible for 
an SBA guarantee if they are executed in connection with an eligible 
Contract and are of a type listed in the ``Contract Bonds'' section of 
the current Manual of Rules, Procedures and Classifications of the 
Surety Association of America (100 Wood Avenue South, Iselin, New Jersey 
08830). Ancillary Bonds may also be eligible for SBA's guarantee. A 
Performance Bond must not prohibit a Surety from performing the Contract 
upon default of the Principal.
    (c) Expiration of Bid Bond Guarantee. A Bid Bond guarantee expires 
120 days after Execution of the Bid Bond, unless the Surety notifies SBA 
in writing before the 120th day that a later expiration date is 
required. The notification must include the new expiration date.

[[Page 177]]

    (d) Guarantee agreement. The terms and conditions of SBA's bond 
guarantee agreements, including the guarantee percentage, may vary from 
Surety to Surety, depending on past experience with SBA. If the 
guarantee percentage is not fixed by the Investment Act, it is 
determined by OSG after considering, among other things, the rating or 
ranking assigned to the Surety by recognized authority, and the Surety's 
Loss rate, average Contract amount, average bond penalty per guaranteed 
bond, and ratio of Bid Bonds to Final Bonds, all in comparison with 
other Sureties participating in the same SBA Surety Bond Guarantee 
Program (Prior Approval or PSB) to a comparable degree. Any guarantee 
agreement under this part is made exclusively for the benefit of SBA and 
the Surety, and does not confer any rights (such as a right of action 
against SBA) or benefits on any other party.
    (e) Amount of Contract--(1) Statutory ceiling. The amount of the 
Contract to be bonded must not exceed $2,000,000 in face value at the 
time of the bond's Execution.
    (2) Aggregation of Contract amounts. The amounts of two or more 
Contracts for a ``single project'' are aggregated to determine the 
Contract amount unless the Contracts are to be performed in phases and 
the prior bond is released before the beginning of each succeeding 
phase. A bond may be considered released even if the warranty period it 
is covering has not yet expired. For purposes of this paragraph, a 
``single project'' means one represented by two or more Contracts of one 
Principal or its Affiliates with one Obligee or its Affiliates for 
performance at the same location, regardless of job title or nature of 
the work to be performed.
    (3) Service and supply contracts. A service or supply Contract 
covering more than a 1 year period is eligible for an SBA guaranteed 
bond if neither the annual Contract amount nor the penal sum of the bond 
exceeds $2,000,000 at any time.
    (f) Transfers or sales by Surety. Sureties must not sell or 
otherwise transfer their files or accounts, whether before or after a 
default by the Principal has occurred, without the prior written 
approval of SBA. A violation of this provision is grounds for 
termination from participation in the program. This provision does not 
apply to the sale of an entire business division, subsidiary or 
operation of the Surety.

[61 FR 3271, Jan. 31, 1996, as amended at 66 FR 30804, June 8, 2001]