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U.S. House Small Business Committee Mark Up Includes Surety Bond Guarantee Increase

Thursday, March 13, 2014  

The U.S House Small Business Committee marked up several of its contracting bills today. Included in the markup was a provision from H.R. 776, The Security in Bonding Act, which would increase the maximum bond guarantee to sureties in the Preferred Surety Program (SBA Program) of the Small Business Administration (SBA) from 70% to 90%. The Committee did not include the individual surety provisions from H.R. 776 as the House Judiciary Committee has jurisdiction over this issue and the Judiciary Committee has not waived its jurisdiction. The SBA provision was marked up with a voice vote.

This is a change to the SBA Program that SFAA has worked with NASBP to achieve in Congress for last several years. While SFAA and its members would like a comprehensive overhaul of the SBA Program, this has not been possible recently in Congress. Rather, we have worked together to achieve some of the key changes that we believe are needed to make the SBA Program more economically feasible for corporate sureties and their bond producers to participate. . In 2012, we were successful in getting legislation passed in Congress that permanently raises the maximum amount of the bond that the SBA can guarantee from $2 million to $6.5 million and prevents the SBA from unraveling bond guarantees made with the SBA’s prior approval. Increasing the maximum bond guarantee would be an even more significant reform for SFAA members. The Committee markup today puts us on our way to enacting this reform in 2014.

H.R 2751, The Commonsense Construction Contracting Act (CCCA), also was 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. The CCCA was passed by a voice vote.

Under H.R. 4093, The Greater Opportunities for Small Business Act, the Committee voted to increase the goal for small business participation in agency contracts to 25% for prime contractors and 40% for subcontractors. In the Committee’s discussion on the markup of this bill, it was noted that for the first time since 2005, the federal government will meet the current 23% goal and has awarded $82.3 billion in contracts to small businesses. The Democrats offered two amendments to this bill, one to increase the goal for awards to women-owned businesses from 5% to 6% and the other to increase the goal for disadvantaged business enterprises (DBEs) from 5% to 7%. The amendments were rejected 12 to 10 on a straight party line. The Democrats believed that certain small businesses should be targeted for additional assistance and the Republicans believed that rules and benefits of this bill should apply equally to all small businesses. The Democrats forced a roll call vote on both amendments.

Provisions on contract bundling also were included in today’s mark up. H.R. 4094, The Contracting Data and Bundling Accountability Act, passed by a voice vote. The Committee agreed with the conclusions of the staff’s research 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 were marked up address data quality from the agencies.

The Improving Opportunities for Service-Disabled Veteran-Owned Small Businesses Act, H.R. 2882, generated no debate on its substance, but resulted in another party line vote on funding for the bill. H.R. 2882 is intended to eliminate the problems of different definitions, interpretations and processes for service-disabled veterans between the Small Business Administration and the Veterans Affairs Administration. Veterans that qualify at one agency as service-disabled do not qualify as such for benefits and assistance at the other. The SBA will be charged to develop a single bright line test and otherwise create a single process for veterans’ applications for assistance. Under the legislation, funding for new SBA functions will come from fees that the Veterans Administration collects and retains, which are not subject to appropriations. Such fees would have to be remitted in part to the SBA. The Democrats contended that this is unstable funding for such important functions to serve veterans and wanted a $15 million appropriation instead. Any appropriation would have to be funded with new revenues or cuts in spending, which would make the bill difficult to pass. The proposed appropriation was defeated on a party line vote.

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