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Statement of the Hon. Nydia M. Velazquez on Leveraging the Infrastructure Investment and Jobs Act: The Role of the SBA’s Bond Guarantee Program

Last November, President Biden signed the $1.2 trillion Bipartisan Infrastructure Bill into law. The package culminated years of work to reverse decades of underinvestment and revitalize American infrastructure. This effort represents the most significant investment in America’s infrastructure in generations.

The funds outlined in the bill, include $550 billion in new spending, which will help rebuild our nation’s roads and bridges, strengthen public transportation, expand broadband to more Americans, and improve drinking water and wastewater infrastructure. Every American stands to benefit from these upgrades. But, crucially, the bill will also boost small businesses as they will play a critical role in rebuilding American infrastructure.

Today, I want to examine one of the key mechanisms that facilitate small business participation in government infrastructure projects, SBA’s Surety Bond Guarantee Program.

Surety bonds are three-party agreements between a surety, a contractor, and a project owner. If a contractor cannot complete a project, the surety is responsible for ensuring that the obligation is met. These bonds help reduce risks in the contracting process and protect project owners, subcontractors, and suppliers.
That’s why the Miller Act requires all federal construction contracts greater than $150,000 to have a surety bond. This practice has spread outside the public sector, as more and more private projects require surety bonds.

The SBG Program guarantees bonds for contracts of up to $6.5 million, and up to $10 million for federal contracts if a contracting officer deems such a guarantee necessary. Under the Program, SBA guarantees bonds to small entities when a bond is required, the businesses cannot obtain it elsewhere, and there is a reasonable expectation they will be able to complete the project they are competing for.

The SBG Program is vital to disadvantaged businesses that typically have a harder time obtaining a bond from traditional sources. In FY 2021 alone, SBA guaranteed 9,633 bonds for a contract value of approximately $7 billion, which supported more than 34,000 jobs. As projects related to the bipartisan infrastructure bill continue to develop, demand for Surety Bond Guarantees may increase. Given that, this Committee must look for ways to improve the Program to better serve more small businesses.

For instance, some experts have promoted raising program limits on individual and federal contracts to keep up with increased investment in infrastructure.

Questions have also been raised as to whether the SBG Program has the resources to adapt to the challenges that come with increased demand. In this respect, advocates believe that there is room for improvement in areas like information technology, staffing, and outreach activities, which could be addressed by allowing the Revolving Fund to be used for administrative expenses.

Today, I want to take a close look at how the Program is operating and how Congress can ensure it is equipped to meet small businesses' needs as they rebuild America’s infrastructure.
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