Whether an entrepreneur is opening a new car dealership or a contractor is building a bridge, surety bonds exist to guarantee business will be done properly. When it comes to federal construction projects, some deceptive contractors will try to sneak their way through surety regulations that are in place to protect the public; and that’s how “The Security in Bonding Act of 2011″ came about.
The Security in Bonding Act of 2011 (HR 3534) was recently presented by U.S. Representative Richard Hanna (R-NY). The bill revises requirements concerning surety bonds backed by assets and is intended to deliver added protection to subcontractors and suppliers that work on federal construction projects. HR 3534 is co-sponsored by U.S. Representative Mick Mulvaney (R-SC), chairman of the Contracting and Workforce Subcommittee.
Some changes HR 3534 include:
• HR 3534 requires non-corporate sureties to pledge detailed and secure assets as required from others providing collateral to the federal government.
• HR 3534 requires the assets be held by a government entity to guarantee payments can be made in case they are needed.
HR 3534 will knot a loophole that lets shifty contractors use insufficient assets to obtain surety bonds from “individual” or non-corporate sureties. The shortage of regulation on “personal” or “individual” sureties has spouted multiple instances where the assets guaranteed to back the bond were phony or inadequate. This means contractors who aren’t qualified are still getting bonded for construction jobs and then many times end up defaulting on the work, potentially wasting taxpayer dollars. Bonding unqualified contractors puts many construction jobs and taxpayer dollars at risk. Hopefully this new bill will make it harder for contractors to engage in fraud in the future.
“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”, said Mulvaney.