SBA given authority to approve higher bonds for disasters

The Small Business Administration’s Office of Surety Guarantees typically assists contractors in securing needed surety bonds up to $2 million. A new law gives the SBA the authority to approve surety bonds up to $5 million when applicable for individual contracts or other orders that are directly related to major disasters.

The SBA is implementing this final rule in response to the Small Business Disaster Response and Loan Improvements Act of 2008, which was passed as a result of the administration’s inability to respond appropriately to the 2005 hurricane disaster. The act’s primary goal is to ensure the SBA would be better prepared to deal with future disasters.

According to the new rule,

For products or services procured under non-Federal Contracts or Orders up to $5,000,000, SBA may issue a bond guarantee if the products will be manufactured or the services will be performed in a major disaster area identified in the Federal Emergency Management Agency (FEMA) Web site.

The purpose of this rule is to expedite the rebuilding process following a major disaster. This development essentially makes the bonding process easier for contractors working on projects that will cost between $2 million and $5 million.

The SBA is given the additional capacity to approve a surety bond for $10 million when a federal contract or order is requested by the Head of Agency involved in disaster reconstruction efforts. This overall extension of the SBA’s bonding capacity will only be valid within the 12 months that follow the disaster.

The SBA will not be held accountable for costs related to any insurance or indemnification requirements in the bonded contract.

For further information on these changes:
Ms. Barbara J. Brannan, Office of Surety Guarantees
202-205-6545
[email protected]