Are you a small construction, supply, or service business that bid on contracts? Having a difficult time opening the doors to bonding? SBA is here to help! Join this webinar to learn how surety bonds help small businesses win construction, supply, and service contracts.
You can register for the event at the SBA website here.
The Congressional Research Service (CRS) has recently updated its report on the SBA Surety Bond Guarantee Program. The report provides a nice overview and explanation of the program, its eligibility requirements, and how it operates, which should be of great interest to contractors who are seeking to pursue government projects, such as government construction projects, which often require bonding.
You can read the full report here:
On Thursday, June 27, 2019, the U.S. Small Business Administration (“SBA”) and the National Association of Surety Bond Producers (“NASBP”) will be holding a half-day surety bond workshop. Topics covered will include:
This event will be held at the Cleveland L. Dennard Conference Center, Atlanta Technical College, 1560 Metropolitan Parkway, SW from 8 a.m. – 1 p.m. ET.
Here is the official SBA event flyer: SBA Surety Bond Workshop Flyer
Registration is required, because seats are limited:
Click Here To Register or go to www.sba.gov/ga
What is a subcontractor?
The answer to this question seems obvious – a subcontractor is a contractor that contracts with the prime contractor to perform a scope of work on a construction project.
However, it is not always easy to distinguish a subcontractor from a materials supplier (sometimes referred to as a “materialman”). That distinction is important in the context of claims by lower-tier subcontractors or materials suppliers on payment bonds, such as those provided by prime contractors on federal and state public works projects. That is, a lower-tier subcontractor or materials supplier may not be entitled to recovery from a payment bond if its contract is with a materials supplier instead of a subcontractor. Therefore, identifying the role of the party with whom a contractor is contracting is a key task the prudent contractor will perform at the outset of a project.
This distinction is most important in the context of federal public works projects. For those projects, the Miller Act restricts claimants on payment bonds to those who had a contract with the prime contractor and those who had a contract with a subcontractor, provided that in the latter case the claimant provides notice to the prime contractor. In other words, if a firm has a contract with a materials supplier, as opposed to a subcontractor, the firm does not have entitlement to payment under the bond. Courts look at the “total relationship” between the parties to determine if the party in question is a subcontractor or materials supplier.
Courts have applied a balancing test to make this determination, with some factors weighing in favor of a subcontractor relationship and other factors weighing in favor of a materials supplier relationship.
Keep reading this article at: https://idahobusinessreview.com/2019/02/28/the-definition-of-a-subcontractor-and-why-it-matters/
United States Court of Appeals for the Federal Circuit recently held, in K-Con, Inc. v. Secretary of Army, that the bonding requirements under the Miller Act apply to federal government construction contracts, even when the bonding provisions were not part of the contract.
The Miller Act, as implemented at FAR 28.102-1, requires that before any contract of more than $150,000 is awarded for the construction, alteration, or repair of any public building or public work of the Federal Government, a person must furnish to the Government, performance and payment bonds, which become binding when the contract is awarded.
The Appeals Court cited a doctrine first articulated in G. L. Christian & Assocs. v. United States, 312 F.2d 418 (popularly known as the Christian Doctrine) in arriving at this decision.
Under the Christian Doctrine, a court may insert a clause into a government contract by operation of law if:
The court found that the Miller Act bonding requirements are mandatory, because FAR Sections 28.102-1 and 28.102-3 require the bonds and direct the insertion of the clauses into federal government construction contracts. The court further found that Miller Act bonding requirements are “deeply ingrained” in public procurement policy. The Miller Act bonding requirements were thus held to be incorporated into federal government construction contracts by operation of law, at the time the contracts were awarded, under the Christian Doctrine.
Keep reading this article at: https://www.jdsupra.com/legalnews/the-miller-act-applies-even-if-contract-34807
The U.S. Small Business Administration (SBA) has noted two important changes to its Surety Bond Guarantee (SBG) Program that will increase contract opportunities for small contractors, supporting them to grow their business operations. The changes became effective on September 20, 2017.
The changes have the effect of increasing the guarantee percentage in the Preferred Surety Bond Program from no more than 70 percent to no more than 90 percent. The SBA’s guarantee is now 90 percent if the original contract amount is $100,000 or less, or if the bond is issued to a small business that is owned and controlled by socially or economically disadvantaged individuals, veterans, service disabled veterans, or certified HUBZone and 8(a) businesses. All other guarantees are 80 percent.
In addition, the eligible contract amount for the Quick Bond Application (Quick Bond) increased to $400,000 from $250,000. The Quick Bond is a streamlined application process, with reduced paperwork requirements, that is used in the Prior Approval Program for smaller contract amounts. SBA’s review and approval requires minimal time, allowing small businesses to bid on and compete for contracting opportunities without delay.
Through its SBG Program, consisting of the Prior Approval and the Preferred Surety Bond Programs, the SBA guarantees bid, payment and performance bonds for contracts that do not exceed $6.5 million, and up to $10 million with a federal contracting officer’s certification. The SBA’s guarantee encourages the surety company to issue a bond that it would not otherwise provide for a small business.
For more information on the SBA’s Surety Bond Guarantee Program, visit www.sba.gov/surety-bonds.
On Monday, the U.S. District Court for the District of Columbia ruled that bonding companies can be held liable for treble damages under the False Claims Act for issuing surety bonds to construction companies that falsely claim to be a Service-Disabled Veteran-Owned Small Business (SDVOSB).
In a novel reverse False Claims Act case, whistleblower Andrew Scollick alleged that the bonding companies “knew or should have known” the construction companies were shell companies acting as a front for larger non-veteran owned entities violating the government’s contracting requirements.
A reverse false claim action can occur when defendants knowingly make a false statement in order to avoid having to pay the government when payment is otherwise due in violation of 31 U.S.C. § 3729(a)(1)(G) (reverse false claims). See United States ex. rel. Scollick v. Narula, Case No: 14-cv-01339-RCL (District Court, District of Columbia. July 31, 2017).
Under the Miller Act, government construction contractors must post bid bonds, performance bonds, and payment bonds that guarantee that the contractor will perform the work according to the terms of the contract. In this case, the contract terms required that the construction be performed by a SDVOSB entity. Michael Kohn, of Kohn, Kohn & Colapinto, who represents the whistleblower, argued that given their role in providing a surety bond to the contractor the bonding companies would know whether the invoicing being billed against the contract is being performed by a SDVOSB. The district court agreed and found that a “reverse false claims” violation occurred because the bonding company knew or should have known that the construction organization was not a SDVOSB and the act of issuing surety bonds furthered the fraud. As a result, the bonding companies were held legally obligated to return to the government funds the bonding company knew to be paid to contractor firms fraudulently posing as SDVOSBs. Being held liable under the False Claims Act means that treble damages will be awarded for every dollar up to the amount of the bond that the government paid out under each contract.
Because of the substantial dollar amounts involved, it is not all that uncommon for contractors to falsify service-disabled veteran status. Holding bonding companies liable when they have reason to know of the fraud could have an immense impact on stamping out such contract fraud. “Holding bonding companies liable for treble damages in these types of case will have a huge impact on preventing fraud in government contracts and will help ensure these contracts go to disabled veteran-owned companies as intended,” said Kohn.
The Scollick case alleges that two of the largest surety bonding companies, Hanover Insurance Company and Hudson Insurance Company, knowingly bonded dozens of Veteran Administration construction contracts totaling more than $12.5 million with the knowledge that the bonded contractors did not qualify as service-disabled, veteran-owned small businesses.
“Payment and performance bonds required.” Those words can signal a giant dead end for some contractors who would like to bid on public work or large private projects but haven’t yet waded into the bonding world. However, the bonding process doesn’t have to be mysterious or sweat-inducing as long as companies are equipped with the right information.
The most common types of construction bonds are performance and payment bonds, which are kinds of surety bonds. A payment bond guarantees the owner that the contractor will pay all the supplier and subcontractor bills associated with the project, and the performance bond is the owner’s assurance the project will be completed in a timely manner and with high quality.
Those who have bumped into bonding requirements on past jobs might have seen a “bid bond” requirement. This is a bond that guarantees the owner that the contractor will be able to meet the requirements of the contract for the amount of the submitted bid. But if a company has bonding capability for performance and payment bonds, these aren’t usually a problem to secure.
Keep reading this article at: http://www.constructiondive.com/news/the-dotted-line-how-to-navigate-the-3-cs-of-construction-bonding/413514/
The U.S. Small Business Administration’s Surety Bond Guarantee Program helps small business get bonded. If you wish to learn about this program, you are invited to participate in a free, live webinar on Thursday, April 17, 2014 from 10:00 to 11:00 am EDT.
This webinar is ideal for small businesses with:
The webinar will cover Contract Bonds, including:
The webinar also will provide complete information about SBA’s Surety Bond Guarantee Program, including:
Advance registration is required. Please register online at http://events.sba.gov/eventmanagement/EventRegistration.aspx?id=9a6d088f-24b1-e311-abc5-02bfa56e2a24
Date: Thursday, April 17, 2014
Time: 10:00 am – 11 am
Internet: https://connect16.uc.att.com/sba/meet/?ExEventID=87462470 (copy the link into your browser to attend).
Phone: 888-858-2144 and then enter meeting code 7462470# to connect by phone.
Prepare in advance for the conference at: https://connect16.uc.att.com/sba/Prepare
For more information please contact Ms. Melanie Bryant at 404-331-0100, ext. 603 or melanie.bryant@sba.gov.
In a rule (79 Fed. Reg. 2084) scheduled to go into effect on Feb. 12, 2014, the Small Business Administration (SBA) is modifying its Surety Bond Guarantee Program to incorporate certain provisions of the National Defense Authorization Act of Fiscal Year 2013 (NDAA). This includes provisions that increase the contract amounts for which SBA is authorized to guarantee bonds, grant SBA the authority to partially deny liability under its bond guarantee, and prohibit SBA from denying liability based on material information that was provided as part of the guarantee application in the Prior Approval Program.
The rule also makes changes to the Quick Bond Guarantee Application and Agreement, the timeframes for taking certain actions related to claims, and the dollar threshold for determining when a change in the Contract or bond amounts meets certain criteria or requires certain action. Finally, the final rule eliminates references to the provisions of the American Recovery and Reinvestment Act of 2009 (Recovery Act) that has expired.
The new rule can be downloaded here: 79 Fed. Reg. 2084
