R42037 — SBA Surety Bond Guarantee Program

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. The program guarantees individual contracts of up to $9 million, and up to $14 million for federal contracts if a federal contracting officer certifies that such a guarantee is necessary. The SBA’s guarantee currently ranges from 80% to 90% of the surety’s loss if a default occurs. In FY2024, the SBA guaranteed 11,092 bid and final surety bonds with a total contract value of $9.21 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. Surety bonds encourage project owners to contract with small businesses that may not have the credit history or prior experience of larger businesses and may be at greater risk of failing to comply with the contract’s terms and conditions. Surety bonds are important to small businesses interested in competing for federal contracts because the federal government requires prime contractors—prior to the award of a federal contract exceeding $150,000 for the construction, alteration, or repair of any building or public work of the United States—to furnish a performance bond issued by a surety satisfactory to the contracting officer in an amount that the officer considers adequate to protect the government. The SBA’s Surety Bond Program’s contract limit is $9 million, or up to $14 million for federal contracts if a contracting officer certifies that such a guarantee is necessary. These limit thresholds reflect inflation adjustments made to the statutory contract limits through SBA regulations. Statutory limits were most recently altered by P.L. 112-239, the National Defense Authorization Act for Fiscal Year 2013, which increased the program’s contract limit to $6.5 million, or up to $10 million for federal contracts if a federal contracting officer certifies that such a guarantee is necessary. Prior to that adjustment, the limit had been $2 million since 2000, with a temporary increase from February 17, 2009, through September 30, 2010, to $5 million, and up to $10 million for federal contracts if a federal contracting officer certified in writing that such a guarantee was necessary. Advocates of raising the program’s bond limit argued that doing so would increase contracting opportunities for small businesses and bring the limit more in line with the sole-source contracting limits of other small business programs, such as the Historically Underutilized Business Zone (HUBZone) Program. Opponents argued that raising the limit could lead to higher amounts being guaranteed by the SBA and, as a result, increase the risk of program losses. This report examines the program’s origin and development, including (1) the decision to supplement the original Prior Approval Program with the Preferred Surety Bond Guarantee Program that initially provided a lower guarantee rate (not to exceed 70%) than the Prior Approval Program (not to exceed 80% or 90%, depending on the size of the contract and the type of small business) in exchange for allowing preferred sureties to issue SBA-guaranteed surety bonds without the SBA’s prior approval; (2) P.L. 114-92, the National Defense Authorization Act for Fiscal Year 2016, which increased the Preferred Surety Bond Guarantee Program’s guarantee rate from not to exceed 70% to not to exceed 90% of losses; and (3) the decision to increase the program’s bond limit.

Curated by CRS — every bill listed in this report's relatedMaterials. Edge type cited_in_report, gold confidence.

• S 2232 — Expanding the Surety Bond Program Act of 2025 · 119th Cong
• S 2206 — Expanding the Surety Bond Program Act · 118th Cong