E6-2679. Surety Bond Guarantee Program Fee

AGENCY:

Small Business Administration.

ACTION:

Notice of change to fee increase.

SUMMARY:

This notice amends the Federal Register notice published on September 28, 2005 regarding the guarantee fee charged under SBA's Surety Bond Guarantee (SBG) Program. Upon further review, and in the interest of mitigating the impact of the required fee increase on a single group (Surety companies), effective April 3, 2006, the following guarantee fees will be effective:

(1) The guarantee fee payable by Principals (small businesses) will be $7.29 per thousand dollars of the contract amount, in lieu of $6.00 per thousand dollars of the contract amount, as is currently required.

(2) The guarantee fee payable by Prior Approval Sureties and by Preferred Surety Bond (PSB) Sureties will be 26% of the bond premium, in lieu of 20% of the bond premium, as is currently required, or 32% of the bond premium as was announced in the prior Federal Register notice.

SBA has determined that the fee increases are necessary to supplement reserves in the SBG Program's revolving fund and offset unfunded program liabilities resulting from defaults under guaranteed bonds. SBA invites public comments on this fee change.

DATES:

Effective Date: This fee increase is effective on April 3, 2006.

Comment Period: The Agency must receive comments on or before March 27, 2006.

ADDRESSES:

You may submit comments by any of the following methods: Mail or Hand Delivery/Courier: Barbara Brannan, Special Assistant, U.S. Small Business Administration, Office of Surety Guarantees, 409 Third Street, SW., Washington, DC 20416; Fax [phone]; Email: [e-mail].

FOR FURTHER INFORMATION CONTACT:

Barbara Brannan, Special Assistant, Office of Surety Guarantees, [phone]; E-mail: [e-mail].

SUPPLEMENTARY INFORMATION:

Reserves in the SBG Program's revolving fund have declined significantly, and are currently not sufficient to cover projected, unfunded liabilities. An increase in fees is required to maintain the program. Initially, the required adjustment was to be covered by increasing the fees to Sureties from 20% of the bond premium, to 32% of the bond premium. This amounted to a 60% increase over the rate established in 1998.

Upon further review and analysis, distributing the required increase in fees among Surety companies and small businesses mitigates the impact that would otherwise fall on a single group (the Surety companies) and achieves a more balanced distribution of costs and benefits. In accordance with 13 CFR 115.32(b) and 115.66, the guarantee fee payable by Principals (small businesses) will be $7.29 per thousand dollars of the contract amount, in lieu of $6.00 per thousand dollars of the contract amount. The guarantee fee payable by Prior Approval Sureties addressed under 13 CFR 115.32(c) and Preferred Surety Bond (PSB) Sureties addressed under 13 CFR 115.66 will be 26% of the bond premium, in lieu of 20% of the bond premium.

The proposed increase in fees to Surety companies and small businesses will take effect on April 3, 2006.

SBA invites public comments on the above stated fee increase. Please clearly identify paper and electronic comments as “Public Comments on Fee Increases under the SBG Program,” and send them to the contact person listed in the ADDRESSES section of the preamble.

Authority: 13 CFR 115.32(b) and (c) and 115.66.

Frank Lalumiere,

Associate Administrator, Office of Surety Guarantees.