(May 29, 2009) In an effort to increase contracting opportunities for California’s small businesses, the California Department of Transportation (Caltrans) has partnered with the U.S. Small Business Administration (SBA) to help California small businesses bid on construction projects.
The first such partnership in the nation and one of the top 10 recommendations from participants at the Governor’s Conference on Small Business and Entrepreneurship, the joint Bonding Assistance Initiative helps qualified small businesses gain access to bond guarantees – which are required on Caltrans construction contracts and are currently difficult for small businesses to attain.
Under the joint Bonding Assistance Initiative, qualified small businesses can more easily obtain the necessary bond guarantees required on Caltrans construction contracts. Before this partnership, California-based small businesses faced a limited number of companies issuing SBA surety bond guarantees. California’s new partnership with the SBA will increase the number of surety bond companies statewide so small businesses will have easier access to bond guarantees and applications, which are required on Caltrans construction contracts.
With better access to bond guarantees, this initiative will help increase small business bid participation as Caltrans advertises its projects, including those funded by the American Recovery and Reinvestment Act (Recovery Act). California has received nearly $2.6 billion in Recovery Act funding for highway and local streets, and Caltrans is advertising projects for contractors, including small businesses.
The SBA helps eligible small businesses obtain the surety and performance bonds needed to work on state highway projects through its Surety Bond Guarantee Program, a public-private partnership between the federal government and the bond-issuing surety industry. Caltrans, through its Office of Business and Economic Opportunity, will work in conjunction with the SBA to provide free education and technical assistance statewide through Caltrans and SBA district offices.
How to Apply
There are two SBA Surety Bond Guarantee Programs, the Prior Approval or SBG Program, and the Preferred or PSB Program.
SBA does not issue bonds directly to a contractor. The contractor must first choose a surety company or bonding agent who represents a participating surety company and establish a business relationship. The contractor then completes the surety application and submits the required SBG forms, providing the agent with necessary credit, capacity, and character information. The agent underwrites the application and decides whether to execute the bond with or without an SBA guarantee.
The SBA website provides a list of participating Prior Approval Surety Companies and agents empowered to represent the individual companies and a list of participating Preferred Surety Companies.
Applying for a Bond
The new electronic bond application process is part of Prior Approval Program. For each Program, Prior Approval or Preferred, the contractor must first establish a business relationship with the surety company or agent representing a surety company. This means that the company or agent is willing to issue the contractor a bond, provided SBA will issue a bond guarantee. Once the contractor has established the business relationship with the surety company or agent, the contractor can apply for a bond under the Prior Approval Program electronically or with a paper application. The application process for the Preferred Program is paper only, and can be discussed directly with the Preferred Surety Company representative.
Prior Approval Program
Businesses can submit applications electronically through the E-Application (E-App) system, which is available 24 hours a day, seven days a week from the SBA website. All required information can be entered electronically and sent to a surety company agent.