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U.S. House Small Business Committee Will Mark Up Individual Surety Bill - Updated

Thursday, February 27, 2014  
The U.S House Small Business Committee has scheduled a mark up on Wednesday, March 5 on several of the contracting bills pending before the Committee. H.R. 776, The Security in Bonding Act is on the agenda for mark up, but it remains to be seen whether the entire bill will be marked up. This is legislation that SFAA and NASBP have sought to require that the security that stands behind every federal contractor’s obligations to the federal government be governed by the same rules. There should be either a corporate surety bond in place from a company approved by the U.S. Treasury or assets with readily identifiable value pledged and relinquished to the federal government while the construction project is ongoing. H.R. 776 also would increase the maximum bond guarantee to sureties in the Preferred Surety Program of the Small Business Administration (SBA) from 70% to 90%.

Some of the Republican Members initially saw the 90% bond guarantee as an expansion of a federal program that increases risk and cost to the government that is not funded. These Members still supported the individual surety provisions. Most recently, however, the minority staff suggested that the SBA Bond Guarantee Program should be reviewed to see if it was still necessary and effective, and if needed, the program should not be fixed piecemeal. The House Committee staff had Frank Lalumiere from the SBA Bond Guarantee Program in a briefing session recently conducted for the Committee staff regarding the bills that will be marked up on March 5, the result of which is that the provisions of the 90% bonding guarantee provisions from H.R. likely will be included in the mark up.

The Small Business Committee has limited legislative jurisdiction, but broad oversight authority to conduct hearings on topics that impact small businesses. The SBA Bond Guarantee Program is within their legislative authority so that it makes sense for the Committee to mark up the increase in the bond guarantee. The individual surety provisions, however, fall under the legislative jurisdiction of the House Judiciary Committee, which passed the individual surety provisions last year. The bill has bipartisan support again this year but has not moved in Judiciary this year. At this point, we believe that the House Small Business Committee will not mark up the individual surety provisions in H.R. 776.

H.R 2751, The Commonsense Construction Contracting Act (CCCA), also will be marked up. The CCCA would ban the use of reverse auctions for construction services so agencies would be required to use one of the other statutorily approved contracting processes, such as sealed bid procurement or a negotiated procurement. The bill prohibits the use of reverse auctions when a construction services contract is suitable for award to a small business or when the procurement is made using a small business program. Representative Richard Hanna (R-NY) is the bill sponsor of both H.R. 776 and H.R. 2751.

Provisions on contract bundling and the federal agency goals for small business participation also will be included in the mark up. After much study on the issue of unbundling of federal contracts so that small business can participate to a greater extent, the Committee staff has concluded that transparency and accountability issues must be addressed before any effective substantive change can be made to the law. The federal agencies have a different way of defining and reporting contract bundling. Some agencies let large contracts and claim that they do not engage in contract bundling. Some agencies report contracts as being bundled that are not bundled. Upon further examination, the agency let the exact same contact multiple times. The provisions that will be marked up deal with data quality from the agencies.

The goal for small business participation in agency contracts will be increased to 25% for prime contractors and 40% for subcontractors, but these increased participation rates will become effective only after the regulations are in place from the procurement reforms contained in the fiscal 2014 National Defense Authorization Act (NDAA), enacted last December. The NDAA included legislation from the House Small Business Committee to permit general contractors to count small businesses in all tiers of a project towards meeting the small business participation requirements. Prior law allowed prime contractors to count only small businesses that are first tier subcontractors. Congress gave the SBA 18 months from the date of enactment to develop regulation to implement this provision.

In the last several years, the House Small Business Committee has worked with the Armed Services Committee to have contracting provisions important to small businesses included in the annual NDAA. It is the staff’s intent to once again urge that the above provisions coming out of the March 5 mark up be included in the fiscal 2015 NDAA later this year.


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