Posts Tagged ‘National Association of Surety Bond Producers’
H.R. 3534, titled “The Security in Bonding Act of 2011″, was introduced last week by U.S. Representative Richard Hanna (R-NY). This legislation would amend title 31, United States Code, to revise requirements related to assets pledged by a surety and is designed to provide extra protection to construction industry subcontractors and suppliers that work on federal projects. The bill is co-sponsored by U.S. Representative Mick Mulvaney (R-SC), chairman of the Contracting and Workforce Subcommittee, and Congressman Hanna, who serves on the House Small Business Committee.
The Security in Bonding Act of 2011 will protect small businesses and taxpayers by providing needed strength and support to the surety bonding process while removing opportunities for fraud. Currently, the federal government allows contractors to provide surety bonds from individuals who secure their obligations under the surety bond with a pledge of their assets. This new law will close a loophole that allowed shady businesses to use inadequate assets to back the surety bond. The lack of oversight on “personal” sureties has led to numerous cases where the assets pledged to back the surety bond were fake and/or insufficient.
Among the bill’s key elements:
- The bill requires non-corporate sureties to pledge specific and secure assets as required from others providing collateral to the federal government.
- The bill requires those assets be held by a government entity to ensure payments can be made in the event they are needed.
- The bill allows the government to ensure payment of subcontractors and suppliers.
Both Congressman Mulvaney and Congressman Hanna believe small business must be protected and the surety bond loopholes must be closed.
“The Security in Bonding Act will protect the construction industry from bad practices that hurt their bottom line and hinder their ability to grow and create jobs,” stated Congressman Hanna. “I spent more than 30 years in the industry and saw first-hand the damage that can occur when inadequate bonding was secured for a project. It hurts everyone, particularly the small business suppliers and subcontractors that provide goods and services – yet risk not being paid for their work.
“This common-sense fix will strengthen the integrity of the bonding process. The construction industry has been one of the hardest hit sectors since the beginning of the economic downturn. This legislation provides more certainty and security for small businesses that deserve to get paid for their work. These companies should focus on how to expand and create jobs – rather than worry about whether or not they will get paid,” he added.
And according to Chairman Mulvaney, “The inability of government contracting officers to determine the real value of non-corporate surety bonds has caused significant harm to small businesses and taxpayers. This legislation will increase transparency and restore the faith of long-overlooked subcontractors and suppliers—who no longer have to fear they will not receive payments they are owed. The Security in Bonding Act will cut down on fraud and abuse in the non-corporate surety market, providing more certainty for the thousands of businesses that contract with the federal government.”The “Security in Bonding Act” is supported and commended by the NASBP and SFAA.