Bill Aimed at Helping Veteran-Owned Contractors Will Do More Harm Than Good, According to Industry Leader
Small veteran-owned contracting firms already struggle to compete against larger outfits for lucrative government projects.
But a House bill meant to help those veterans obtain surety bonding will actually do more harm than good, an industry figure recently told the U.S. House Veterans Affairs subcommittee.
The measure, H.R. 294, is called the “Veteran-Owned Small Business Promotion Act of 2009.” It would allow small veteran-owned contractors to obtain performance and payment bonds for federal construction projects that are half the normal size.
Lynn M. Schubert, president of the Surety & Fidelity Association, told the subcommittee in late September that the legislation would actually hurt the veterans who lawmakers sought to help.
Schubert testified that reducing the bond amount would not affect availability or make a small veteran-owned contractor more competitive. In fact, reducing the bond amount would actually expose taxpayers to harm because of “additional costs and subcontractors and suppliers to the risk of nonpayment if there is a default,” she told the subcommittee.
Surety bonds are three-way agreements between surety companies, project owners and contractors. Performance and payment bonds ensure that work is performed as specified by a contract and that the winning contractor pays all subcontractors, suppliers and laborers as detailed by the contract. These bonds are required for all federal projects in excess of $10,000.
Instead of altering the bond amount, Schubert suggested that lawmakers look for more impactful ways to help veteran-owned businesses. Chief among those avenues is boosting contractors’ access to capital and collateral.
She also urged the subcommittee to push for federal regulations that would subdivide construction contracts into bite-sized pieces, which would enable small veteran-owned contractors and other fledgling firms the opportunity to succeed.
“Small veteran-owned contractors should be permitted to joint venture with larger contractors, using the larger contractor’s surety bond relationship to obtain the bonds for the project and develop an independent relationship with the surety for future projects,” Schubert said.
