Surety Bond Guarantee Program -Final rule

41663

Rules and Regulations

Federal Register
Vol. 77, No. 136
Monday, July 16, 2012

This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.

SMALL BUSINESS ADMINISTRATION
13 CFR Part 115
RIN 3245–AG39

Surety Bond Guarantee Program—
Quick Bond Application and
Agreement
Small Business Administration.
Final rule.

AGENCY:
ACTION:

The Small Business
Administration (SBA) is issuing this
final rule to amend its Surety Bond
Guarantee (SBG) rules to implement a
streamlined application process in the
Prior Approval Program for contract
amounts not exceeding $250,000. This
rule also makes minor administrative
changes to the SBG Program regulations
to, among other things, clarify the
procedures for submitting application
forms and paying fees, and deletes an
obsolete reference to a form.
DATES: This rule is effective August 15,
2012.
FOR FURTHER INFORMATION CONTACT: Ms.
Barbara Brannan, Office of Surety
Guarantees, U.S. Small Business
Administration, 409 Third Street SW.,
Washington, DC 20416; 202–205–6545,
email: [email protected].
SUPPLEMENTARY INFORMATION:
SUMMARY:

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I. Background Information
Through the Surety Bond Guarantee
(SBG) Program, SBA guarantees bid,
payment, and performance bonds for
contracts up to $2 million for small and
emerging contractors who cannot obtain
bonds through regular commercial
surety channels. SBA’s guarantee
provides the incentive needed for
sureties to bond these contractors,
giving them greater access to contracting
opportunities. The SBG Program
consists of the Prior Approval Program
and the Preferred Surety Bond (PSB)
Program. In the Prior Approval Program,

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Sureties must apply to SBA for each
bond guarantee and must receive SBA
approval before issuing bonds. Sureties
in the PSB Program can issue SBA
guaranteed bonds without SBA’s prior
approval.
On February 6, 2012, SBA published
a notice of proposed rulemaking with
request for comments in the Federal
Register to implement a streamlined
application process in the Prior
Approval Program for contract amounts
not exceeding $250,000, and to make
other minor administrative changes to
the SBG Program regulations, including
clarifying the procedures for submitting
application forms and paying fees, and
deleting an obsolete reference to a form.
See 77 FR 5721. The comment period
was open until April 6, 2012, and SBA
received three comments, two from
trade associations and one from a
contract bond underwriter. All
submitters expressed support for the
proposed rule, observing that it is
consistent with industry practice, and
two commenters commended SBA for
its efforts to reduce the paperwork
burden on contractors and sureties. The
trade associations believe that the
streamlined process will reduce costs
associated with the SBG Program, which
may lead to greater participation. One
submitter offered suggestions for
program enhancements, including
changes to the current fee structure and
to the notice requirements related to
changes in the contract amount. These
suggestions are outside the scope of this
rule; however, SBA will take them into
consideration in the context of any
future program review.
Under this new streamlined process
involving contracts not exceeding
$250,000, the Surety will use the new
Quick Bond Guarantee Application and
Agreement, SBA Form 990A, which
consolidates two of the forms currently
used in the SBG Program—SBA Form
990, Surety Bond Agreement and SBA
Form 994, Application for Surety Bond
Guarantee Assistance. The new process
complements the existing industry
practice of offering a streamlined bond
application for smaller contract
amounts. In addition, under this new
process, SBA will not require the
Principal to complete and submit two
other forms for these small contract
amounts, including SBA Form 994F;
Schedule of Work in Process, and SBA
Form 413; Personal Financial Statement.

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Instead, to mitigate any risk associated
with these smaller contract amounts, the
new SBA Form 990A requires the
Principal to provide a list of the three
largest contracts completed in the last 5
years. This final rule also sets forth the
circumstances under which SBA Form
990A cannot be used.
This final rule also makes other
changes to the existing SBG Program
rules, including clarifying that SBA
Form 990 or SBA Form 990A must be
submitted to and approved by SBA prior
to the Surety’s execution of the bond
(except for bonds issued under surety
bonding lines). With respect to the rules
regarding surety bonding lines, this final
rule removes the reference to SBA Form
994C as this form is no longer used. In
addition, with this final rule, SBA is
making minor and technical
modifications to clarify that Sureties
and Principals may make fee payments
through electronic means. The
Department of Treasury has directed
that payments be made by electronic
funds transfer when cost-effective,
practicable, and consistent with
statutory authority. See 31 CFR 206.4.
The final rule makes minor changes to
the language in 13 CFR 115.32(b) and
115.32(d) to provide Sureties and
Principals with the flexibility to make
these payments electronically,
conforming these provisions to the
Department of Treasury’s requirements.
II. Section-by-Section Analysis
Section 115.10. This section amends
the definition of the term ‘‘Prior
Approval Agreement’’ to add the ‘‘Quick
Bond Guarantee Application and
Agreement (SBA Form 990A)’’ to the
agreements into which a Prior Approval
Surety may enter with SBA. No changes
have been made to this provision as
proposed.
Section 115.30(d)(1). SBA amends
this paragraph to clarify that, where the
Surety Bond Guarantee Agreement (SBA
Form 990) is used, it must be approved
before the Prior Approval Surety
executes a Bid or a Final Bond, except
in the case of a bonding line under
§ 115.33(d). This is consistent with 13
CFR 115.19(f), which provides that SBA
may deny liability under its guarantee if
the Surety executes the bond prior to
the date of SBA’s guarantee. SBA is also
amending this paragraph to clarify that
the applicable guarantee fees must be
paid in accordance with 13 CFR 115.32.

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Federal Register / Vol. 77, No. 136 / Monday, July 16, 2012 / Rules and Regulations

No changes have been made to this
provision as proposed.
Section 115.30(d)(2). This new
provision implements a streamlined
application process for bond guarantees
for contracts that do not exceed
$250,000. Under this new process,
applicants use a new form, the ‘‘Quick
Bond Guarantee Application and
Agreement (SBA Form 990A)’’ in place
of SBA Form 990 and SBA Form 994.
This new provision requires that the
Quick Bond Guarantee Application and
Agreement (SBA Form 990A) be
submitted to and approved by SBA
before the Surety executes the Bid or
Final Bond. This provision also requires
that the guarantee fees be paid in
accordance with 13 CFR 115.32. This
provision also sets forth six
circumstances under which this
streamlined application process may not
be used. No changes have been made to
this provision as proposed.
Section 115.32(b). SBA amends the
fourth sentence of this provision to add
the requirement that the Principal’s fee
be remitted to SBA with the new SBA
Form 990A, just as it is required to be
submitted with SBA Form 990. In
addition, SBA is making minor
modifications to the rule as proposed to
give the Sureties and the Principals the
flexibility to pay the fee electronically
through the Pay.gov Web site managed
by the U.S. Department of Treasury’s
Financial Management Service. These
modifications include deleting the word
‘‘together’’ in the sentence to avoid any
suggestion that the payment must be
made by a paper check that is attached
to the SBA Form 990, and deleting the
phrase ‘‘by the Surety’’ to clarify that
the payment may be made by either the
Surety or the Principal. By deleting the
word ‘‘together’’, SBA does not intend
to change the requirement that the
Principal’s fee be remitted before the
guarantee application may be approved.
Section 115.32(c). SBA amends this
paragraph to clarify that the
requirements regarding the guarantee
fee paid by the Surety apply to the new
SBA Form 990A, just as they apply to
the SBA Form 990. No changes have
been made to this provision as
proposed.
Section 115.32(d)(1). SBA is deleting
the words ‘‘Supplemental Form 990’’
from this paragraph to make it clear that
this provision applies to bond
guarantees approved under the new
SBA Form 990A in addition to SBA
Form 990. SBA is also adding a sentence
to provide that, in notifying SBA of any
increase or decrease in the Contract or
bond amount, the Surety must use the
same form that it used in applying for
the original bond guarantee. No changes

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have been made to this provision as
proposed.
Section 115.32(d)(2). SBA is making
minor modifications to the rule as
proposed by revising this provision to
give Principals and Sureties the
flexibility to remit the required fees
electronically through the Pay.gov Web
site. The modifications include deleting
the word ‘‘check’’ throughout the
provision.
Section 115.33(d). SBA is eliminating
references to the ‘‘Surety Bond
Guarantee Review Update (SBA Form
994C)’’ throughout this provision
because the form is no longer used. No
changes have been made to this
provision as proposed.
Compliance With Executive Orders
12866, 12988, 13132, and 13563, the
Paperwork Reduction Act (44 U.S.C.
Ch. 35) and the Regulatory Flexibility
Act (5 U.S.C. 601–612)
Executive Order 12866
The Office of Management and Budget
(OMB) has determined that this final
rule does not constitute a significant
regulatory action under Executive Order
12866. This final rule is also not a major
rule under the Congressional Review
Act.
Executive Order 12988
This action meets applicable
standards set forth in Sections 3(a) and
3(b)(2) of Executive Order 12988, Civil
Justice Reform, to minimize litigation,
eliminate ambiguity, and reduce
burden. The action does not have
retroactive or preemptive effect.
Executive Order 13132
For the purposes of Executive Order
13132, SBA has determined that this
final rule will not have substantial,
direct effects on the States, on the
relationship between the national
government and the States, or on the
distribution of power and
responsibilities among the various
levels of government. Therefore, for the
purpose of Executive Order 13132,
Federalism, SBA has determined that
this final rule has no federalism
implications warranting preparation of a
federalism assessment.
Executive Order 13563
For the purposes of Executive Order
13563, SBA discussed implementing a
streamlined application process with
several surety industry associations and
surety company representatives. The
final application reflects the feedback
received from these sources, particularly
the incorporation of best practices used
throughout the surety industry. SBA
also solicited public comments as part

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of the standard rule making process.
Those comments are described above.
Paperwork Reduction Act, 44 U.S.C.
Ch 35
SBA has determined that this final
rule imposes additional reporting and
recordkeeping requirements under the
Paperwork Reduction Act, 44 U.S.C.
chapter 35. SBA included a request for
comments on the Quick Bond Guarantee
Application and Agreement (SBA Form
990A) in the proposed rule that was
published in the Federal Register on
February 6, 2012 at 77 FR 5721. The
agency received three comments in
response to this request during the
60-day comment period. All of the
submitters expressed support for this
streamlined bond guarantee application
process, including the belief that it
would reduce the burden on sureties
and small business contractors. SBA has
not modified this information
collection; it is the same as described in
the proposed rule. As required by law,
SBA has submitted SBA Form 990A to
the Office of Management and Budget
(OMB) for review and approval. The
information submitted to OMB for
review is available at http://
www.reginfo.gov/public/jsp/PRA/
praDashboard.jsp.
A summary description of this
information collection, the respondents,
and the estimate of the annual hour
burden resulting from this new process
is provided below. Included in the
estimate is the time for reviewing
instructions, searching existing data
sources, gathering the data needed, and
completing and reviewing the
responses.
Title: Quick Bond Surety Guarantee
Application and Agreement (SBA Form
990A).
Description: The Quick Bond Surety
Guarantee Application and Agreement
is a combination application and bond
guarantee agreement that would be used
in the Prior Approval Program for
contract amounts that do not exceed
$250,000. It is a streamlined alternative
to the existing surety bond application
and agreement, the SBA Forms 990 and
994 (OMB Control Number 3245–0007).
The information would be used to
evaluate whether the applicant small
business meets the program eligibility
criteria and the likelihood that it will
successfully complete performance on
the contract.
OMB Control Number: New
Collection.
Description of and Estimated Number
of Respondents. This proposed new
collection would be submitted by small
businesses seeking to obtain a bond in
order to bid or perform on a contract,

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Federal Register / Vol. 77, No. 136 / Monday, July 16, 2012 / Rules and Regulations
and by surety companies and their
agents or representatives. Based on the
current volume of bonds for contracts
up to $250,000, SBA estimates that
approximately 500 small businesses and
13 Prior Approval Sureties would
submit this streamlined application and
agreement form.
Estimated Response Time: It is
estimated that each applicant would
require approximately 5 minutes to
complete the proposed new form.
Estimated Number of Responses:
4,450. This number is based on SBA’s
projection of program activity during
Fiscal Year 2012.
Total Estimated Annual Hour Burden:
369 hours.
Estimated Annual Cost Burden:
$18,941.
Regulatory Flexibility Act, 5 U.S.C.
601–612
The Regulatory Flexibility Act (RFA),
5 U.S.C. 601, requires administrative
agencies to consider the effect of their
actions on small entities, small nonprofit enterprises, and small local
governments. Pursuant to RFA, when an
agency issues a rulemaking, the agency
must prepare a regulatory flexibility
analysis which describes the impact of
the rule on small entities. However,
section 605 of the RFA allows an agency
to certify a rule, in lieu of preparing an
analysis, if the rulemaking is not
expected to have a significant impact on
a substantial number of small entities.
Within the meaning of RFA, SBA
certifies that this final rule will not have
a significant economic impact on a
substantial number of small entities.
There are 13 Sureties that currently
participate in the SBA Prior Approval
Program, and no part of this final rule
would impose any significant additional
cost or burden on them.
List of Subjects in 13 CFR Part 115
Claims, Reporting and recordkeeping
requirements, Small businesses, Surety
bonds.
For the reasons stated in the
preamble, SBA amends 13 CFR part 115
as follows:
PART 115—SURETY BOND
GUARANTEE
1. The authority citation for part 115
continues to read as follows:

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■

Authority: 5 U.S.C. app. 3; 15 U.S.C. 687b,
687c, 694a, 694b note, Pub. L. 106–554; Pub.
L. 108–447, Div K, Sec. 203; Pub. L. 110–246,
Sec. 12079, 122 Stat. 1651; and Pub. L. 111–
5, 123 Stat. 115.
§ 115.10

[Amended]

2. In § 115.10 amend the definition of
‘‘Prior Approval Agreement’’ by adding

■

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‘‘or Quick Bond Guarantee Application
and Agreement (SBA Form 990A)’’ after
‘‘(SBA Form 990)’’.
■ 3. Amend § 115.30 by revising
paragraph (d) to read as follows:
§ 115.30 Submission of Surety’s guarantee
application.

*

*
*
*
*
(d) Prior Approval Agreement. To
apply for a bond guarantee, a Prior
Approval Surety must submit one of the
following forms:
(1) Surety Bond Guarantee Agreement
(SBA Form 990). A Prior Approval
Surety may complete and submit a
Surety Bond Guarantee Agreement (SBA
Form 990) to SBA for each Bid Bond or
Final Bond, and this Form must be
approved by SBA prior to the Surety’s
Execution of the bond, except in the
case of a surety bonding line approved
by SBA under § 115.33(d). The
guarantee fees owed in connection with
Final Bonds must be paid in accordance
with § 115.32.
(2) Quick Bond Guarantee
Application and Agreement (SBA Form
990A)—(i) General procedures. Except
as provided in paragraph (d)(2)(ii) of
this section, a Prior Approval Surety
may complete and submit the Quick
Bond Guarantee Application and
Agreement (SBA Form 990A) to SBA for
each Bid Bond or Final Bond, and this
Form must be approved by SBA prior to
the Surety’s Execution of the bond. SBA
Form 990A is a streamlined application
form that may be used only for contract
amounts that do not exceed $250,000 at
the time of application. The guarantee
fees owed in connection with Final
Bonds must be paid in accordance with
§ 115.32.
(ii) Exclusions. SBA Form 990A may
not be used under the following
circumstances:
(A) The Principal has previously
defaulted on any contract or has had
any claims or complaints filed against it
with any court or administrative agency;
(B) Work on the Contract commenced
before a bond is Executed;
(C) The time for completion of the
Contract or the warranty/maintenance
period exceeds 12 months;
(D) The Contract includes a provision
for liquidated damages that exceed $250
per day;
(E) The Contract involves asbestos
abatement, hazardous waste removal,
demolition, or timber sales; or
(F) The bond would be issued under
a surety bonding line approved under
§ 115.33.
■ 4. Amend § 115.32 as follows:
■ a. Revise the fourth sentence of
paragraph (b) to read as follows;

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b. Revise the second sentence of
paragraph (c) to read as follows;
■ c. Amend the second sentence of
paragraph (d)(1) by removing the words
‘‘(Supplemental Form 990)’’ and add a
new sentence at the end of paragraph
(d)(1) to read as follows; and
■ d. Revise paragraph (d)(2) to read as
follows.
■

§ 115.32

Fees and Premiums.

*

*
*
*
*
(b) * * * The Principal’s fee is
rounded to the nearest dollar, and is to
be remitted to SBA with the form
submitted under either § 115.30(d)(1) or
(2).
(c) * * * Subject to § 115.18(a)(4), the
Surety must pay SBA a guarantee fee on
each guaranteed bond (other than a Bid
Bond) within 60 calendar days after
SBA’s approval of the Prior Approval
Agreement. * * *
(d) * * *
(1) * * * In notifying SBA of any
increase or decrease in the Contract or
bond amount, the Surety must use the
same form (SBA Form 990 or SBA Form
990A) that it used in applying for the
original bond guarantee.
(2) Increases; fees. The payment for
the increase in the Principal’s guarantee
fee, which is computed on the increase
in the Contract amount, is due upon
notification of the increase in the
Contract or bond amount under this
paragraph (d). If the increase in the
Principal’s fee is less than $40, no
payment is due until the total amount
of increases in the Principal’s fee equals
or exceeds $40. The Surety’s payment of
the increase in the Surety’s guarantee
fee, computed on the increase in the
bond Premium, must be submitted to
SBA within 60 calendar days of SBA’s
approval of the Prior Approval
Agreement, unless the amount of such
increased guarantee fee is less than $40.
When the total amount of increase in
the guarantee fee equals or exceeds $40,
the Surety must remit the fee within 60
calendar days.
*
*
*
*
*
■ 5. Amend § 115.33 by revising
paragraphs (d)(1) and (d)(2) to read as
follows:
§ 115.33

Surety bonding line.

*

*
*
*
*
(d) * * *
(1) Bid Bonds. Within 15 business
days after the Execution of any Bid
Bonds under a bonding line, the Surety
must submit a ‘‘Surety Bond Guarantee
Underwriting Review’’ (SBA Form
994B) to SBA for approval. If the Surety
fails to submit the form within this time
period, SBA’s guarantee of the bond will
be void from its inception unless SBA

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determines otherwise upon a showing
that a valid reason exists why the timely
submission was not made.
(2) Final Bonds. Within 15 business
days after the Execution of any Final
Bonds under a bonding line, the Surety
must submit a Surety Bond Guarantee
Underwriting Review (SBA Form 994B)
and a Surety Bond Guarantee
Agreement (SBA Form 990) to SBA for
approval. If the surety fails to submit
these forms within the time period or
the guarantee fees are not paid in
accordance with § 115.32, SBA’s
guarantee of the bond will be void from
its inception unless SBA determines
otherwise upon a showing that the
Contract is not in default and a valid
reason exists why the timely submission
was not made.
*
*
*
*
*
Dated: July 2, 2012.
Karen G. Mills,
Administrator.
[FR Doc. 2012–17104 Filed 7–13–12; 8:45 am]
BILLING CODE 8025–01–P

DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 97
[Docket No. 30849; Amdt. No. 3485]

Standard Instrument Approach
Procedures, and Takeoff Minimums
and Obstacle Departure Procedures;
Miscellaneous Amendments
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule.
AGENCY:

This rule establishes, amends,
suspends, or revokes Standard
Instrument Approach Procedures
(SIAPs) and associated Takeoff
Minimums and Obstacle Departure
Procedures for operations at certain
airports. These regulatory actions are
needed because of the adoption of new
or revised criteria, or because of changes
occurring in the National Airspace
System, such as the commissioning of
new navigational facilities, adding new
obstacles, or changing air traffic
requirements. These changes are
designed to provide safe and efficient
use of the navigable airspace and to
promote safe flight operations under
instrument flight rules at the affected
airports.
DATES: This rule is effective July 16,
2012. The compliance date for each
SIAP, associated Takeoff Minimums,
and ODP is specified in the amendatory
provisions.

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SUMMARY:

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The incorporation by reference of
certain publications listed in the
regulations is approved by the Director
of the Federal Register as of July 16,
2012.
ADDRESSES: Availability of matter
incorporated by reference in the
amendment is as follows:
For Examination—
1. FAA Rules Docket, FAA
Headquarters Building, 800
Independence Avenue SW.,
Washington, DC 20591;
2. The FAA Regional Office of the
region in which the affected airport is
located;
3. The National Flight Procedures
Office, 6500 South MacArthur Blvd.,
Oklahoma City, OK 73169 or
4. The National Archives and Records
Administration (NARA). For
information on the availability of this
material at NARA, call 202–741–6030,
or go to: http://www.archives.gov/
federal_register/
code_of_federal_regulations/
ibr_locations.html.
Availability—All SIAPs are available
online free of charge. Visit nfdc.faa.gov
to register. Additionally, individual
SIAP and Takeoff Minimums and ODP
copies may be obtained from:
1. FAA Public Inquiry Center (APA–
200), FAA Headquarters Building, 800
Independence Avenue SW.,
Washington, DC 20591; or
2. The FAA Regional Office of the
region in which the affected airport is
located.
FOR FURTHER INFORMATION CONTACT:
Richard A. Dunham III, Flight Procedure
Standards Branch (AFS–420) Flight
Technologies and Programs Division,
Flight Standards Service, Federal
Aviation Administration, Mike
Monroney Aeronautical Center, 6500
South MacArthur Blvd., Oklahoma City,
OK 73169 (Mail Address: P.O. Box
25082 Oklahoma City, OK 73125)
telephone: (405) 954–4164.
SUPPLEMENTARY INFORMATION: This rule
amends Title 14, Code of Federal
Regulations, Part 97 (14 CFR part 97) by
amending the referenced SIAPs. The
complete regulatory description of each
SIAP is listed on the appropriate FAA
Form 8260, as modified by the National
Flight Data Center (FDC)/Permanent
Notice to Airmen (P–NOTAM), and is
incorporated by reference in the
amendment under 5 U.S.C. 552(a), 1
CFR part 51, and § 97.20 of Title 14 of
the Code of Federal Regulations.
The large number of SIAPs, their
complex nature, and the need for a
special format make their verbatim
publication in the Federal Register
expensive and impractical. Further,

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airmen do not use the regulatory text of
the SIAPs, but refer to their graphic
depiction on charts printed by
publishers of aeronautical materials.
Thus, the advantages of incorporation
by reference are realized and
publication of the complete description
of each SIAP contained in FAA form
documents is unnecessary. This
amendment provides the affected CFR
sections and specifies the types of SIAP
and the corresponding effective dates.
This amendment also identifies the
airport and its location, the procedure
and the amendment number.
The Rule
This amendment to 14 CFR part 97 is
effective upon publication of each
separate SIAP as amended in the
transmittal. For safety and timeliness of
change considerations, this amendment
incorporates only specific changes
contained for each SIAP as modified by
FDC/P–NOTAMs.
The SIAPs, as modified by FDC
P–NOTAM, and contained in this
amendment are based on the criteria
contained in the U.S. Standard for
Terminal Instrument Procedures
(TERPS). In developing these changes to
SIAPs, the TERPS criteria were applied
only to specific conditions existing at
the affected airports. All SIAP
amendments in this rule have been
previously issued by the FAA in a FDC
NOTAM as an emergency action of
immediate flight safety relating directly
to published aeronautical charts. The
circumstances which created the need
for all these SIAP amendments requires
making them effective in less than
30 days.
Because of the close and immediate
relationship between these SIAPs and
safety in air commerce, I find that notice
and public procedure before adopting
these SIAPs are impracticable and
contrary to the public interest and,
where applicable, that good cause exists
for making these SIAPs effective in less
than 30 days.
Conclusion
The FAA has determined that this
regulation only involves an established
body of technical regulations for which
frequent and routine amendments are
necessary to keep them operationally
current. It, therefore—(1) Is not a
‘‘significant regulatory action’’ under
Executive Order 12866; (2) is not a
‘‘significant rule’’ under DOT regulatory
Policies and Procedures (44 FR 11034;
February 26, 1979); and (3) does not
warrant preparation of a regulatory
evaluation as the anticipated impact is
so minimal. For the same reason, the
FAA certifies that this amendment will

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