01-14445. Surety Bond Guarantee Program

AGENCY:

Small Business Administration (SBA).

ACTION:

Direct final rule.

SUMMARY:

SBA revises our Surety Bond Guarantee Program rules to conform them to two recently-enacted statutory changes. First, the law increases the eligible contract amount from $1.25 million to $2 million. Second, the law extends the authorization period of the Pilot Preferred Surety Bond (PSB) Program from September 30, 2000 to September 30, 2003.

DATES:

The rule will become effective on August 7, 2001. Unless adverse comment is received by July 9, 2001. If an adverse comment is received, SBA will publish a timely withdrawal of the rule in the Federal Register.

ADDRESSES:

Send written comments to Barbara Brannan, Special Assistant, Office of Surety Guarantees, U.S. Small Business Administration, 409 3rd Street, SW, Washington, DC 20416.

FOR FURTHER INFORMATION CONTACT:

Robert J. Moffitt, Associate Administrator, Office of Surety Guarantees, [phone].

SUPPLEMENTARY INFORMATION:

This direct final rule implements provisions of section 805 of the Small Business Reauthorization Act of 2000 (Act), Public Law 106-554, 114 Stat. 2763A-653 (December 21, 2000), relating to SBA's Surety Bond Guarantee (SBG) Program. The Act increases the contract amount eligible for SBA-guaranteed bonding from $1.25 million to $2 million. This rule revises section 115.12(e) “Amount of contract” to effect that change and makes the necessary conforming changes to other relevant sections of SBA's SBG Program rules.

This Act also extends the duration of the Pilot Preferred Surety Bond (PSB) Program for an additional three years. The PSB Program is a pilot program in which SBA-selected sureties are authorized to issue, service and monitor surety bonds without SBA's prior approval. This rule revises section 115.61 to extend the duration of the Pilot PSB Program from September 30, 2000 to September 30, 2003.

This rule makes no changes to the current regulations other than those necessary to conform to the statute. SBA is publishing this regulation as a direct final rule because SBA believes the rule is non-controversial since it is merely conforming the rules to implement provisions of the Act that became effective on December 21, 2000. SBA believes that this rule will not elicit any significant adverse comments.

Compliance With Executive Orders 12866, 12988 and 13132, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork Reduction Act (44 U.S.C. CH. 35)

OMB has determined that this final rule does not constitute a “significant regulatory action” for purposes of Executive Order 12866. “Significant regulatory action” means any regulatory action that is likely to result in a rule that may have an annual effect on the economy of $100 million or more; does not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; does not materially alter the budgetary impact of entitlements, grants, user fees or loan programs or the rights and obligations thereof; and does not raise any novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in Executive Order 12866. In fiscal year 1999, SBA guaranteed 2,399 final bonds valued at $426.1 million, with an average contract amount of $177,602. In fiscal year 2000, SBA guaranteed 1,795 final bonds valued at $328.9 million, with an average contract amount of $183,247. For fiscal years 1999 and 2000, SBA guaranteed an aggregate of only seven (7) surety bond contracts in the former statutory maximum amount of $1.25 million. Based upon SBA's experience with, and its understanding of, the surety industry, SBA projects the guarantee of no more than 10 surety bond contracts in the new statutory maximum amount of $2.0 million per year. At most, this projection would result in an aggregate increase in guaranteed amount of less than $7.5 million each year (10 × $750,000 = $7.5 million). The extension of the PSB Program will result in no discernable effect on the economy. Neither of the statutory amendments implemented by this direct final rule raises any other significant regulatory action concerns.

SBA has determined that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601-612. This rule merely implements provisions of the Act increasing the maximum surety bond contract amount that can participate in the SBG Program and extending the authorization period of the PSB Program. This rule does not impose costs upon the businesses that might be affected by it. Therefore, it will not have an annual economic effect of $100 million or more, result in a major increase in costs or prices, or have a significant adverse effect on competition or the United States economy. Few of the small business contracting concerns participating in the SBG Program are projected to take advantage of the new statutory increase in the contract amount. This is a tiny fraction of the total of 13-16 million small business concerns in the United States. The rule contains no new information collections, recordkeeping requirements, or changes in forms.

For purposes of Executive Order 12988, SBA has determined that this final rule is drafted, to the extent practicable, in accordance with the standards set forth in Section 3 of the Order.

For purposes of Executive Order 13132, SBA has determined that this final rule will have no federalism implications.

For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA has determined that this final rule contains no new reporting or recordkeeping requirements.

List of Subjects in 13 CFR Part 115

• Claims
• Reporting and recordkeeping requirements
• Small businesses
• Surety bond

For the reasons set forth above, part 115 of Title 13, Code of Federal Regulations (CFR) is amended as follows:

PART 115—SURETY BOND GUARANTEES

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; 694b note, Pub. L. 106-554, 114 Stat. 2763A-653.

§§ 115.12, 115.19, 115.31, 115.60 and 115.68

[Amended]

2. Amend Sections 115.12(e)(1); 115.12(e)(3); 115.19(a); 115.31(d); 15.60(a)(1); and 115.68 by removing the “$1,250,000” each time it appears and inserting in its place “$2,000,000”.

§ 115.31

[Amended]

3. Revise the final sentence of section 115.31(d) to read “For example if a Contract amount increases to $2,100,000, SBA's share of the Loss under an 80% guarantee is limited to 76.1% [2,000,000 / 2,100,000 = 95.2% × 80% = 76.1%].”

§ 115.61

[Amended]

4. Amend section 115.61 by removing the year “2000” both times it appears and replacing it with the year “2003'.

Dated: May 24, 2001.

John Whitmore,

Acting Administrator.