"The Small Business Administration's (SBA's) Surety Bond Guarantee Program is designed to increase small businesses' access to federal, state, and local government contracting, as well as private-sector contracts, by guaranteeing bid, performance, and payment bonds for small businesses that cannot obtain surety bonds through regular commercial channels. […] In FY2013, the SBA guaranteed 12,866 bid and final surety bonds with a total contract value of about $6.1 billion. A surety bond is a three-party instrument between a surety (who agrees to be responsible for the debt or obligation of another), a contractor, and a project owner. The agreement binds the contractor to comply with the contract's terms and conditions. If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed. […] This report examines the program's origin and development, including the decision to (1) supplement the original Prior Approval Program with the Preferred Surety Bond Guarantee Program that provides a lower guarantee rate (70%) than the Prior Approval Program (80% or 90%) in exchange for allowing preferred sureties to issue SBA-guaranteed surety bonds without the SBA's prior approval; and (2) increase the program's bond limit. It also examines the program's eligibility standards and requirements, provides performance statistics, and concludes with a discussion of proposals to merge the Prior Approval Program and the Preferred Surety Bond Guarantee Program while retaining the Preferred Program's more flexible operating requirements."
CRS Report for Congress, R42037