You're a small, very good, subcontractor struggling to stay profitable and get enough work in this difficult construction economy. You're working on a federal job for a GC with good references. You didn't get a copy of their bonds from the GC because you didn't want to offend your new client.
The job’s going pretty well, but you find out the excavator isn’t getting paid on time. Then, after weeks of your complaints and the GC's excuses, you have to file a payment bond claim.
When you ask the GC for a copy of their bonds, you run into a problem. Who is John Doe and why is he the bonding company?
Then you find out the GC has a payment problem on another job and their bonding company cut them off. They had to get bonds from an individual surety.
Federal project contracting officers are allowed to take individual surety. They are considered riskier than the corporate sureties that are reviewed and ranked by the Department of the Treasury. Instead of the Treasury qualification process, the contracting officer will receive valid assets to support the bond and hold such assets in escrow to pay subs' claims. If assets are insufficient or worthless, subcontractors, suppliers and taxpayers get burned.
The National Association of Surety Bond Producers, www.nasbp.org, and many other construction and surety organizations, are trying to fix this problem. It happens a lot more often than anyone expects and can devastate construction businesses, especially small businesses. Also, all contractors operating properly find it difficult to compete with rule breakers.
A common sense solution, H.R. 3534, http://thomas.loc.gov/home/thomas.php passed by a voice vote in the U.S. House of Representatives and has been in the U.S. Senate since May 15. Mark McCallum, NASBP's chief executive, says the bill is still in the Senate Homeland Security and Governmental Affairs Committee and that NASBP is encouraging the Committee Chair to move it to markup. If not, the bill may be dead for this session.
Mark also says that some senators have questioned the importance of fixing this problem, despite the NASBP presenting them with egregious case examples where worthless individual surety bonds cost the government and subcontractors millions of dollars.
When the House passed H.R. 3534, Representative Mick Mulvaney (R-SC), a co-sponsor, stated for the Congressional Record, “I rise today to bring to light the fact that we are actually doing something on a bipartisan basis to help the country. I thank my colleagues from across the aisle for actually coming together today to try to do something to help the nation advance.”
If you want to help, too, write to the the Senate and your U.S. senator and help make sure everyone gets paid and sleeps better at night!