Category: Bond Articles

Amendment on the Miller Act Not Included in Final NDAA Report

The final conference report on the FY 2019 National Defense Authorization Act (NDAA) does not contain the amendment that SFAA and NASBP sought to exempt the federal Miller Act bond threshold from indexing for inflation. Our bill, H.R. 4486, was included in the House version of the NDAA, but was not in the Senate version when the NDAA went to conference. The Department of Defense (DOD) expressed concern about our amendment. Assuming continuing inflation, the DOD noted that over time a $150,000 contract will have less value than it does today. Hence, the DOD would be required to bond projects that are worth less than they are now at the $150,000 bond threshold. The DOD concluded that the risk of default/loss at these lower dollar values does not warrant the protection of bonds.

This June, the DOD, GSA, and NASA published a notice they will release a proposed regulation in December 2018 that would amend the Federal Acquisition Regulation (FAR) to make inflation adjustments of statutory acquisition-related thresholds that are due for consideration in 2020. The $150,000 Miller Act performance bond threshold is one of the thresholds to be considered in 2020. If the Miller Act bond threshold were increased from $150,000 to $200,000 in 2020, according to SFAA?s data, the federal government?s exposure to loss would increase $300 million annually.

The change order bill that the federal Construction Industry Procurement Coalition supported was included in the NDAA report, which will go to the President for signature soon. H.R. 4754 requires that for every solicitation for a contract to be awarded to a small business, the prospective bidders must be provided with the agency?s policies or practices for compliance with the FAR on Requests for an Equitable Adjustment (REAs) when a change order is issued. The FAR already requires the agencies to respond to REAs in ?the shortest practicable time.? If an agency does not have a policy or information on its past practices regarding on REAs, H.R. 4754 would require the agency to start collecting that information for a three-year period. The agency must collect data on whether they responded to a REA within 30, 60, 90, 180, or 360 days from receipt of the REA or whether the agency responds to REAs after the completion of the contract. This is a first step to gather information on the agency practices and to address compliance with the FAR. H.R. 4754 was included in the House NDAA but not in the Senate version. The bill also passed the House as a standalone bill on the suspension calendar.

The House plans to vote on the conference report soon. The Senate vote will be shortly thereafter.

Members should visit Advocacy / General Info (Members) for more information.

 For Members only (or from the menu, select “Advocacy” / “Federal/State Regulations“)

Commercial Lines Modernization Bills Moving in the States

Members should visit Advocacy / General Info (Members) for more information.

SFAA Addresses Surety Qualifications and Bonding Obligation for California Workers? Compensation Collateral Requirements

SFAA submitted comments to the California Department of Insurance (Department) to address proposed rules that would allow surety bonds to be posted to collateralize up to 20% of the funds required to be set aside for the California deductible under a workers’ compensation deductible policy. We questioned the requirement for the surety to have a rating of at least an “A” from A.M. Best, Fitch Ratings, or Standard & Poor’s, or at least an A3 rating from Moody’s Investor Service as sureties already are subject to financial regulation and licensure from the Department. The rating requirement needlessly restricts the sureties that can provide the bond.

SFAA also recommended that the bond?s condition should be clarified to reflect a specific obligation as the proposed rules currently provide for unconditional payments. The surety also would have ten days to pay the amount owed under a written demand for payment from the insurer. SFAA also advised the Department on the value of bonds in comparison to the other forms of security permitted under the proposed rules.

The surety could not be affiliated with the insurer that issued the worker’s compensation deductible policy. The surety must provide 90 days’ notice for cancellation or nonrenewal of the bond and the collateral would have to be replaced within 30 days of the effective date.

Members should visit Advocacy / General Info (Members) for more information.

The Weekly Legislation Report posted has been posted.  SFAA has replaced the monthly overview reports with the weekly legislative update on Surety & Fidelity legislation.  Reports are available for Members on the Weekly Legislative Reports page.

Members may sign up to receive email notifications by subscribing to the “Legislative-Regulatory Alert” group.

Case Summary Reports have been posted for Members, Subscribers, Claims Advisors and Case Summary Subscribers: 2003-2018 Surety and Fidelity Cases Indexed by State/Topic 2003-2018 Surety Cases Indexed by Topic 2003-2018 Fidelity Cases Indexed by Topic 2003-2018 Bail Cases by State

Members should navigate to the Claims page.
Subscribers should navigate to the Home / Subscriber Home Page.
Claims Advisors should navigate to the Home / Claims Advisors Home Page.
Case Summary Subscribers should navigate to Home / Case Summary Subscriber Home Page.

SFAA Bill to Address Missouri Case Law on Bonding Public Works Projects Introduced

Missouri HB 2453 would amend the existing procurement law to clarify that bonds are require when a construction manager agency is used.

Members should visit Government Relations / General Info (Members) for more information.