The Leaderboard Magazine recently contacted three industry experts, Ken Simonson, Lawrence LeClair and Lenore Marema (bios below) on the future of the surety bond industry.
Part III: The Security in Bonding Act
LeClair said an important bill for the surety bond industry, the Security in Bonding Act, will likely have to be reintroduced in the new session of Congress. The bill was passed by the House in the current session of Congress, but has stalled in the Senate’s Homeland Security and Governmental Affairs Committee.
The bill sets standards for assets pledged to back individual surety bonds on federal construction projects. The assets are to be obligations such as U.S. Treasury notes and other public debt instruments unconditionally guaranteed by the federal government. The bill is designed to address instances of fraud and abuse by providers of individual surety bonds. Such bonds are provided by an individual, for example, rather than by a licensed bonding company.
House approval in the next Congress shouldn’t be a problem based on the success of the 2012 bill, LeClair said, but he noted that there will be several new members on the Senate committee on Homeland Security and Governmental Affairs where the bill will likely be referred.
In the next session of Congress, the NASBP and SFAA will be seeking legislation to exempt the Miller Act from inflation adjustments so small businesses will be protected on smaller jobs. The act currently requires bonding on projects over $150,000, but inflation adjustments could push the minimum to $200,000 in the future. With such a change, projects below that amount would not have to be covered by bonds, and subcontractors and suppliers would not be protected from a general contractor’s nonpayment.
The NASBP also is hopeful the legislative reconciliation process for the National Defense Authorization Act will include raising the contract size guaranteed by the U.S. Small Business Administration from $2 million to $6.5 million, LeClair said. END
Ken Simonson is the Chief Economist for The Associated General Contractors of America in Arlington, Va.
Lawrence LeClair is Director of Government Relations for the National Association of Surety Bond Producers in Washington, D.C.
Lenore Marema is Vice President of Government Affairs for the Surety & Fidelity Association of America in Washington, D.C.