On Aug. 31, 2009, the U.S. Department of Transportation ("DOT") announced that it has created the Disadvantaged Business Enterprise Bonding Assistance Program ("DBA BA Program"). 74 F.R. 44896-99 (Aug. 31, 2009). Under Title XII of the American Recovery and Reinvestment Act of 2009 ("Recovery Act"), Public Law 111-5, signed into law Feb. 17, 2009, Congress appropriated $20 million to be used for the program. Now, the DOT is carrying out this mandate, which presents a unique financial assistance opportunity to disadvantaged businesses, including women-owned businesses, which meet the eligibility requirements described below.

Program Background and Scope

The DOT has established the Bonding Assistance Reimbursable Fee Program to distribute the funding provided by the Recovery Act. Generally, under the Miller Act, 40 U.S.C. §§ 3131-3134, before a federal agency can award a contract that exceeds $100,000 for the construction, alteration, or repair of any building or public work, the contractor must furnish a performance bond in an amount that the contracting officer regards as adequate for the protection of the federal government. Most, if not all, states, in turn, have passed their own "Miller Acts" that impose similar bonding requirements for public construction contracts.

Typically, surety companies charge a premium fee to all contractors to ensure the surety company's financial backing and guarantee. These premium rates usually vary between 2 percent and 3 percent of the contract amount. If a contractor wants to use the U.S. Small Business Administration's ("SBA") Surety Bond Guarantee Program, SBA charges the contractor or small business concern a fee of 0.729 percent of the contract price to finance potential claims against the bond.

The DBA BA Program will allow disadvantaged businesses, which often have less working capital than large transportation construction contractors, to perform on transportation infrastructure projects funded by the DOT, or any of the sub-agencies housed within the DOT, such as the Federal Highway Administration, using money appropriated under the Recovery Act. Under the program, disadvantaged businesses can receive direct financial assistance from the DOT in the form of a bonding fee cost reimbursement. DOT will directly reimburse disadvantaged businesses the premiums paid to surety companies for performance, payment, bid or proposal bonds, or any fees paid to the SBA under that agency's Surety Bond Guarantee Program.

Eligibility

To be eligible for bonding assistance, a company must meet these criteria:

  • Be a certified disadvantaged business under DOT and SBA regulations
  • Have a current Dun and Bradstreet or "DUNS" number
  • Be registered in the Central Contractor Registration database at www.ccr.gov, including bank information for electronic payment
  • Provide goods or services, or submit a bid or proposal, related to a contract for a transportation-related project receiving DOT funding pursuant to the Recovery Act
  • Submit a completed application to DOT on or before Sept. 8, 2010, for bonds issued on or after Aug. 28, 2009

In addition to the listed requirements, the surety company that an applicant selects must be listed in the U.S. Department of Treasury's Listing of Approved Sureties.

Application Process

The application process is straightforward. A one-page form with instructions is available at the website: www.dot.gov/recovery/ost/osdbu/index.htm. Completed application forms must be submitted to the DOT by emailing the forms to the address bap.arra@dot.gov. Prior to completing the form, applicants must be prepared to provide the bond number, date of issue, name of the surety company, the type of bond, the bond amount, and the total bond premiums and fees for which the applicant seeks reimbursement.

In addition, applicants must include a copy of the bond, a copy of the contract, a copy of a certification letter based on the template found within the application form and instructions from the agency that awarded the contract for which the applicant seeks bond assistance, and a copy of the invoice or invoices from the surety company or SBA and proof of payment (e.g., canceled checks).

Compliance Obligations

A disadvantaged business that receives bond assistance must comply with the Civil Rights Act of 1964 (which prohibits gender, race, and similar types of discrimination against employees), as well as the Rehabilitation Act of 1973 and the Americans with Disabilities Act (which prohibit discrimination against persons with disabilities). In addition, such companies must file certificates regarding their non-use of federal funds for lobbying purposes in accordance with lobbying regulations. Participants in the bond assistance program must further certify their compliance with federal wage rate requirements. Applicants must not be suspended or debarred from doing business with the federal government.

Because recipients of bond assistance will necessarily be performing contracts funded by the Recovery Act, they must also comply with reporting requirements regarding jobs created and accountability for the use of Recovery Act monies under section 1512 of the Recovery Act.