Topics of Interest to the Surety Industry
January 2017 - As part of its continuing increased communications activities, SFAA has partnered with Governing Institute to create a handbook for public officials to learn about and understand the value and critical nature of surety and fidelity bonds. The Guide will serve as a powerful educational tool for public officials at all levels, from Congress to local school boards, from the GSA to local procuring agencies. According to Governing, “Contract, commercial and fidelity bonds each serve a critical risk management and public policy function” and are “protection that government entities and businesses shouldn’t bypass – the potential consequences are just too great to shirk this responsibility.” The Governing Institute is a well-respected thought leader that advances better government and is relied on by public officials across the country.
The Guide can be found at http://www.governing.com/guidetobonds and on the SFAA website http://www.surety.org/page/Handbook. Governing will distribute the handbook to 15,000 members of the Governing audience electronically and mail hard copies to 350 targeted public officials.
Governing also will be running a promotional ad in the February issue of Governing magazine and promoting the Guide via web ads. Attached is the magazine ad. The Guide will be promoted in the following upcoming Governing newsletters: Finance on 1/25/2017, and GOVERNING Daily on 1/27, 2/1 and 2/1.
SFAA will have 250 copies of the printed handbook for use in lobbying and educational meetings.
The Guide is broken into sections for Contract, Commercial and Fidelity and is designed to allow excerpts to be taken and used in various ways. The Guide is structured with “cautionary tales” and positive quotations from public officials of how bonds benefited them and their constituents. For example, in the commercial surety section:
"SURETY BONDS TEND TO BE OUR QUICKEST MEANS OF RECOURSE AND
REMEDY IN THE CASE OF A DEFAULT BY A COMPANY ON ITS
OBLIGATIONS. WE CAN GET THAT MONEY TO CONSUMERS QUICKLY
BECAUSE A SURETY BOND IS WRITTEN IN OUR FAVOR UNDER THE TERMS
THAT WE REQUIRE."
RAY GRACE, COMMISSIONER OF BANKS, NORTH CAROLINA
SFAA members are encouraged to link the Guide to their websites and use it in whole or in part for promotion and education.
Thank you to the SFAA Board of Directors and Communications Advisory Committee for the support of this relationship and publication.
Lynn M. Schubert
April 2010 FASB Multiemployer Pension Plan Liability- Exposure Draft
June 2010 FASB Revenue Recognition - Exposure Draft
08/30/2010 Miller Act Bond Threshold increased to $150,000 for performance bonds
Helping Contractors Grow:
Surety Bonding for New & Emerging Contractors
According to the U.S. Census Bureau, the value of construction put in place, excluding single-family residential construction, was about $918 billion in 2014. However, a contractor’s ability to secure some of that work, especially in the public sector, may be limited if he or she is unable to obtain a bid, performance, and payment bond. Fortunately, the surety industry is reaching out to new and emerging contractors to help them obtain their first bond, increase bonding capacity, and ultimately become better businesses. The ability to obtain surety bonds gives these contractors the support and resources they need to increase their contracting opportunities, compete for market share, and grow.
Most surety companies issue surety bonds through surety bond producers. The first step toward establishing surety capacity is to contact a professional surety bond producer who:
A list of professional surety bond producers is available through the Web site of the National Association of Surety Bond Producers (NASBP).
Before a contractor can obtain a bond, he or she undergoes an extensive prequalification process called underwriting to enable the surety to capture a clear picture of the company.
A surety company must be satisfied that the contractor runs a well-managed, profitable enterprise, keeps promises, deals fairly, and performs obligations in a timely manner. Underwriters use financial statements and business plans, among other factors, to help determine a contractor’s surety capacity. Other criteria include:
Programs for New & Emerging Contractors
The surety industry is steadfast in its commitment to help new and emerging contractors obtain their first bond and increase their bondability. Many surety companies have developed programs especially for these contractors.
Model Contractor Development Program
The Surety & Fidelity Association of America (SFAA) and its members work to ensure that bonds are available and accessible to qualified contractors through the Model Contractor Development Program (MCDP). SFAA launched the program, which is implemented by local surety associations, state and local governments, and other organizations nationally, to:
Educate new and emerging contractors about surety bonds and assist them in becoming bondable;
Identify resources available for obtaining a first bond through federal, state, and local programs;
Provide assistance and referrals for obtaining appropriate accounting, project management, and financing expertise;
Assist with increasing bond capacity; and
Offer networking, outreach, advocacy, and policy development.
The program guides new and emerging contractors on what they need to do to qualify for surety bonds and provides resources - such as educational seminars - and access to expertise, including lenders, surety professionals, and accountants, to help these contractors develop stronger businesses.
The program also provides contractors with valuable assistance in the actual bonding process. In most instances, this is done through the establishment of peer review programs that team surety professionals with the contractors to review areas of potential bonding denial and identify factors that would make the contractor bondable. The team then develops a strategy to address the denial factors, including referring the contractor to specialized project management, accounting, or finance assistance, if needed. The surety professional then helps the contractor identify bonding for subsequent projects.
For more information about the Model Contractor Development Program, contact The Surety & Fidelity Association of America at (202) 463-0600 or visit the SFAA Web site. The Model Contractor Development Program is located in the Development and Diversity section.
Information & Education
Surety Information Office (SIO)
SIO’s resources are especially helpful to new and emerging contractors. CD and print materials include:
Additional information is available on the SIO Web site. To order materials, visit SIO’s online store or contact SIO at (202) 686-7463 or email@example.com.
The Surety & Fidelity Association of America (SFAA)
SFAA offers many useful tools and education materials for new and emerging contractors including:
For more information, contact SFAA at (202) 463-0600 or visit the SFAA Web site.
National Association of Surety Bond Producers (NASBP).
To find a professional surety bond producer, go to the NASBP Web site. For more information, contact NASBP at (202) 686-3700 or firstname.lastname@example.org.
Ongoing Programs at State and Local Levels
Small Business Development Centers (SBDCs) provide technical assistance to contractors in many locales. Similarly, local educational institutions may offer workshops and other educational opportunities to small businesses. To find out if programs are available in your area, contact your local surety association by visiting SIO’s online LSA Directory. To learn more about Small Business Development Centers, visit the Small Business Administration (SBA) Web site.
The Minority Business Development Agency (MBDA) is the only federal entity created specifically to foster the creation, growth, and expansion of minority-owned businesses in the United States. Through an agreement with The Surety & Fidelity Association of America (SFAA), the MBDA provides resources to minority-owned firms to enhance their access to bonding and educate them on how to become bondable or increase their bonding capacity. To learn more, visit the MBDA Web site.
Bonding Support Programs
Many federal, state, and local governments have developed or are developing bonding support programs for new and emerging contractors. Surety companies, SFAA, and local surety associations around the country have assisted with several programs that provide technical assistance, surety bonding, and working capital loan assistance services to new and emerging contractors.
For more information on possible bonding support programs in your area, visit the Development & Diversity section on the SFAA Web site or contact SFAA at (202) 463-0600.
Bond Guarantee Programs
SBA Surety Bond Guarantee Program
For more than 30 years, the U.S. Small Business Administration’s (SBA) Surety Bond Guarantee (SBG) program has helped small and emerging contractors who have the knowledge and skills necessary for success, but lack the combination of experience and financial strength to obtain bonds through regular commercial channels. SBA guarantees bid, performance, and payment bonds issued by surety companies to small and emerging contractors and reimburses the surety a percentage of loss if the contractor defaults. This government guarantee allows sureties to write bonds for contractors who would not otherwise meet their minimum standards - thus providing small and emerging contractors with contracting opportunities for which they would not otherwise qualify.
The SBA Office of Surety Guarantees (OSG) administers the SBG program as a partnership between the federal government and the surety industry. For more information on SBA programs, visit SBA’s Web site or call (202) 205-6540.
Some states, including Florida, Louisiana, Mississippi, Ohio, and Tennessee, have established surety bond guarantee programs modeled after the SBA program. To learn whether surety bond guarantee programs are offered in your state, contact your local surety association.
Mentor-Protégé & Training Programs
AGC Stempel Program
The Stempel Plan is a mentor-protégé program implemented through Associated General Contractors of America (AGC) chapters nationally to build effective working relationships between leaders of mature established companies and new and emerging contractors. The mentor focuses on developing the protégé’s business plan and implementing actions necessary to help the protégé become a successful businessperson and contractor. Building on its origins with the AGC Oregon-Columbia Chapter’s work with the Port of Portland mentor program, the plan has since become a national model for several agencies and organizations. For more information, visit www.agc-oregon.org/.
Other Mentor-Protégé and Training Programs
Many states have established mentor-protégé programs to improve emerging contractor participation in transportation-related projects. Programs may provide opportunities for new and emerging contractors to hone their business skills through close work with established contractors. Some programs are designed to increase minority participation in state highway construction projects or transportation-related contracts. Other programs aim to elevate the volume of projects emerging contractors are capable of bidding on and profitably performing.
To learn whether mentor-protégé programs are offered in your state, contact your state Department of Transportation.
For more information about
surety bonding, please contact the:
Surety Information Office
1828 L St. NW, Suite 720
Washington, DC 20036-5104
(202) 686-7463 | Fax (202) 686-3656
www.sio.org | email@example.com
The Surety Information Office (SIO) is the information source on contract surety bonds in public and private construction. SIO offers brochures and CDs and can provide speakers, write articles, and answer questions on contract surety bonds. SIO is supported by The Surety & Fidelity Association of America (SFAA) and the National Association of Surety Bond Producers (NASBP). All materials may be accessed at www.sio.org.
The Surety & Fidelity
Association of America
1101 Connecticut Avenue, NW, Suite 800
Washington, DC 20036
(202) 463-0600 | Fax (202) 463-0606
www.surety.org | firstname.lastname@example.org
The Surety & Fidelity Association of America (SFAA) is a District of Columbia non-profit corporation whose members are engaged in the business of suretyship worldwide. Member companies collectively write the majority of surety and fidelity bonds in the United States. SFAA is licensed as a rating or advisory organization in all states, as well as in the District of Columbia and Puerto Rico, and it has been designated by state insurance departments as a statistical agent for the reporting of fidelity and surety experience. SFAA represents its member companies in matters of common interest before various federal, state, and local government agencies.
of Surety Bond Producers
1828 L St. NW, Suite 720
Washington, DC 20036-5104
(202) 686-3700 | Fax (202) 686-3656
www.nasbp.org | email@example.com
The National Association of Surety Bond Producers (NASBP) is the international organization of professional surety bond producers and brokers. NASBP represents more than 5,000 personnel who specialize in surety bonding; provide performance and payment bonds for the construction industry; and issue other types of surety bonds, such as license and permit bonds, for guaranteeing performance. NASBP’s mission is to strengthen professionalism, expertise, and innovation in surety and to advocate its use worldwide.