I 

111TH CONGRESS 

1ST SESSION H. R. 2991 

To amend title 49, United States Code, to provide authority to the Secretary 

of Transportation to guarantee sureties against loss resulting from a 

breach of the terms of a bond by an eligible small business concern, 

and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 23, 2009 

Mr. CUMMINGS introduced the following bill; which was referred to the 

Committee on Transportation and Infrastructure 

A BILL 

To amend title 49, United States Code, to provide authority 

to the Secretary of Transportation to guarantee sureties 

against loss resulting from a breach of the terms of 

a bond by an eligible small business concern, and for 

other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Department of Trans5 portation Bonding Assistance Authority Act of 2009’’. 


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1 SEC. 2. AUTHORITY OF SECRETARY TO GUARANTEE SUR2 ETY AGAINST LOSS FROM PRINCIPAL’S 

3 BREACH OF BOND. 

4 Subsection (e) of section 332 of title 49, United 

5 States Code, is amended to read as follows: 

6 ‘‘(e) AUTHORITY OF SECRETARY TO GUARANTEE

7 SURETY AGAINST LOSS FROM PRINCIPAL’S BREACH OF

8 BOND.— 

9 ‘‘(1) AUTHORITY.— 

10 ‘‘(A) IN GENERAL.—The Secretary may, 

11 upon such terms and conditions as the Sec12 retary may prescribe, guarantee and enter into 

13 commitments to guarantee any surety against 

14 loss resulting from a breach of the terms of a 

15 bid bond, payment bond, performance bond, or 

16 bonds ancillary thereto, by a principal. 

17 ‘‘(B) LIMITATION.—No such guarantee 

18 may be issued, unless— 

19 ‘‘(i) the person who would be principal 

20 under the bond is an eligible small busi21 ness concern; 

22 ‘‘(ii) the bond is required in order for 

23 such person to bid on a contract, or to 

24 serve as a prime contractor or subcon25 tractor thereon; 


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1 ‘‘(iii) such person is not able to obtain 

2 such bond on reasonable terms and condi3 tions without a guarantee under this sub4 section; and 

5 ‘‘(iv) there is a reasonable expectation 

6 that such principal will perform the cov7 enants and conditions of the contract with 

8 respect to which such bond is required, 

9 and the terms and conditions of such bond 

10 are reasonable in light of the risks involved 

11 and the extent of the surety’s participa12 tion. 

13 ‘‘(2) INDEMNIFICATION OF SURETY AGAINST

14 LOSS FROM AVOIDING BREACH.—Subject to the pro15 visions of this subsection, in connection with the 

16 issuance by the Secretary of a guarantee to a surety 

17 under paragraph (1), the Secretary may agree to in18 demnify such surety against a loss sustained by such 

19 surety in avoiding or attempting to avoid a breach 

20 of the terms of a bond guaranteed by the Secretary 

21 in accordance with the following: 

22 ‘‘(A) Prior to making any payment under 

23 this paragraph, the Secretary shall first deter24 mine that a breach of the terms of such bond 

25 was imminent. 


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1 ‘‘(B) A surety must obtain approval from 

2 the Secretary prior to making any payments 

3 pursuant to this paragraph. 

4 ‘‘(C) No payment by the Secretary pursu5 ant to this paragraph shall exceed 10 percent of 

6 the contract price unless the Secretary deter7 mines that a greater payment should be made 

8 as a result of a finding by the Secretary that 

9 the surety’s loss sustained in avoiding or at10 tempting to avoid such breach was necessary 

11 and reasonable. 

12 ‘‘(D) In no event shall the Secretary pay a 

13 surety pursuant to this paragraph an amount 

14 exceeding the guaranteed share of the bond 

15 available to such surety pursuant to paragraph 

16 (1). 

17 ‘‘(3) REIMBURSEMENT OF SURETY.— 

18 ‘‘(A) IN GENERAL.—Any guarantee or 

19 agreement to indemnify under this subsection 

20 shall obligate the Secretary to pay to the surety 

21 a sum— 

22 ‘‘(i) not to exceed 90 percent of the 

23 loss incurred and paid by the surety, but 

24 in no event may the Secretary make any 


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1 duplicate payment pursuant to paragraph 

2 (2) or any other paragraph; or 

3 ‘‘(ii) determined pursuant to para4 graph (2), if applicable. 

5 ‘‘(B) EXCEPTION.—Pursuant to any such 

6 guarantee or agreement, the Secretary shall re7 imburse the surety, as provided in subpara8 graph (A), except that the Secretary shall be 

9 relieved of all liability if— 

10 ‘‘(i) the surety obtained such guar11 antee or agreement, or applied for such re12 imbursement, by fraud or material mis13 representation; 

14 ‘‘(ii) the surety has breached a mate15 rial term or condition of such guarantee or 

16 agreement; or 

17 ‘‘(iii) the surety has substantially vio18 lated the regulations issued by the Sec19 retary pursuant to paragraph (4). 

20 ‘‘(4) REGULATIONS.—The Secretary may estab21 lish and periodically review regulations for partici22 pating sureties which shall require such sureties to 

23 meet the Secretary’s standards for underwriting, 

24 claim practices, and loss ratios. 


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1 ‘‘(5) PROCEDURE FOR REIMBURSEMENT.—The 

2 Secretary may, upon such terms and conditions as 

3 the Secretary may prescribe, adopt a procedure for 

4 reimbursing a surety for its paid losses billed each 

5 month, based upon prior monthly payments to such 

6 surety, with subsequent adjustments after such dis7 bursement. 

8 ‘‘(6) REPORTS TO AND AUDITS BY THE SEC9 RETARY.— 

10 ‘‘(A) REPORTS TO THE SECRETARY.—The 

11 Secretary shall require each participating surety 

12 to make reports to the Secretary at such times 

13 and in such forms as the Secretary requires. 

14 ‘‘(B) AUDITS BY THE SECRETARY.—The 

15 Secretary may at all reasonable times audit, in 

16 the offices of a participating surety, all docu17 ments, files, books, records, and other material 

18 relevant to the Secretary’s guarantee, commit19 ments to guarantee, or agreements to indemnify 

20 any surety pursuant to this subsection. 

21 ‘‘(C) TIMING.—Each participating surety 

22 shall be audited at least once every three years 

23 by examiners selected and approved by the Sec24 retary. 


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1 ‘‘(7) ADMINISTRATIVE PROVISIONS.—The Sec2 retary shall administer this subsection on a prudent 

3 and economically justifiable basis and establish such 

4 fee or fees for eligible small business concerns and 

5 premium or premiums for sureties as the Secretary 

6 deems reasonable and necessary, to be payable at 

7 such time and under such conditions as may be de8 termined by the Secretary. 

9 ‘‘(8) STATE PROGRAM.— 

10 ‘‘(A) IN GENERAL.—The Secretary shall 

11 establish a program under which not more than 

12 5 States may be selected to carry out, with a 

13 portion of the amounts appropriated for this 

14 subsection, the following: 

15 ‘‘(i) Activities of the Secretary under 

16 this subsection with respect to issuing 

17 guarantees. 

18 ‘‘(ii) Activities of a surety to assist eli19 gible small business concerns. 

20 ‘‘(B) ASSESSMENTS AND STANDARDS.— 

21 States selected to participate in the program 

22 under subparagraph (A) shall be subjected to 

23 such assessments and shall meet such stand24 ards and conditions as the Secretary may pre25 scribe. 


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1 ‘‘(C) REPORTS BY STATES.—A State se2 lected to participate in the program under sub3 paragraph (A) shall submit to the Secretary an 

4 annual report describing, at a minimum, the 

5 nature of the program such State administers, 

6 the total number and amounts of guarantees 

7 provided by the program, and the number of el8 igible small business concerns that have partici9 pated in the program. 

10 ‘‘(9) ANNUAL REPORT.—Not later than June 1, 

11 2010, and annually thereafter, the Secretary shall 

12 submit to the Committee on Transportation and In13 frastructure of the House of Representatives and the 

14 Committee on Commerce, Science, and Transpor15 tation of the Senate a report that describes, at a 

16 minimum— 

17 ‘‘(A) the actions taken to implement this 

18 subsection; 

19 ‘‘(B) the number of sureties that have re20 ceived guarantees, the States with respect to 

21 which guarantees were issued, the number of el22 igible small business concerns that have partici23 pated in the program, and the number and 

24 total amount of guarantees paid by the Sec25 retary; and 


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1 ‘‘(C) the number of States that have ap2 plied to manage amounts under the program es3 tablished under paragraph (8), the number of 

4 States approved to participate in such program, 

5 and the results achieved by States participating 

6 in such program. 

7 ‘‘(10) DEFINITIONS.—In this subsection, the 

8 following definitions apply: 

9 ‘‘(A) BID BOND.—The term ‘bid bond’ 

10 means a bond conditioned upon the bidder on 

11 a contract entering into the contract, if the bid12 der receives the award thereof, and furnishing 

13 the prescribed payment bond and performance 

14 bond. 

15 ‘‘(B) ELIGIBLE SMALL BUSINESS CON16 CERN.—The term ‘eligible small business con17 cern’ means an entity determined by the Sec18 retary to be any of the following: 

19 ‘‘(i) A small business concern owned 

20 and controlled by socially and economically 

21 disadvantaged individuals (as such term is 

22 defined in section 8(d)(3) of the Small 

23 Business Act (15 U.S.C. 637(d)(3))). 

24 ‘‘(ii) A small business concern owned 

25 and controlled by service-disabled veterans 


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1 (as such term is defined under section 3(q) 

2 of the Small Business Act (15 U.S.C. 

3 632(q))). 

4 ‘‘(iii) A qualified HUBZone small 

5 business concern (as such term is defined 

6 under section 3(p) of the Small Business 

7 Act (15 U.S.C. 632(p))). 

8 ‘‘(iv) A small business concern owned 

9 and controlled by women (as such term is 

10 defined under section 3(n) of the Small 

11 Business Act (15 U.S.C. 632(n))). 

12 ‘‘(C) OBLIGEE.—The term ‘obligee’ 

13 means— 

14 ‘‘(i) in the case of a bid bond, the per15 son requesting bids for the performance of 

16 a contract; or 

17 ‘‘(ii) in the case of a payment bond or 

18 performance bond, the person who has con19 tracted with a principal for the completion 

20 of the contract and to whom the obligation 

21 of the surety runs in the event of a breach 

22 by the principal of the conditions of a pay23 ment bond or performance bond. 

24 ‘‘(D) PAYMENT BOND.—The term ‘pay25 ment bond’ means a bond conditioned upon the 


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1 payment by the principal of money to persons 

2 under contract with the principal. 

3 ‘‘(E) PERFORMANCE BOND.—The term 

4 ‘performance bond’ means a bond conditioned 

5 upon the completion by the principal of a con6 tract in accordance with its terms. 

7 ‘‘(F) PRIME CONTRACTOR.—The term 

8 ‘prime contractor’ means the person with whom 

9 the obligee has contracted to perform the con10 tract. 

11 ‘‘(G) PRINCIPAL.—The term ‘principal’ 

12 means a person who may be a prime contractor 

13 or a subcontractor and— 

14 ‘‘(i) in the case of a bid bond, is bid15 ding for the award of a contract; or 

16 ‘‘(ii) is primarily liable to complete a 

17 contract for the obligee, or to make pay18 ments to other persons in respect of such 

19 contract, and for whose performance of his 

20 obligation the surety is bound under the 

21 terms of a payment or performance bond. 

22 ‘‘(H) SECRETARY.—The term ‘Secretary’ 

23 means the Secretary of Transportation, acting 

24 through the Minority Resource Center estab25 lished under subsection (b). 


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1 ‘‘(I) SUBCONTRACTOR.—The term ‘subcon2 tractor’ means a person who has contracted 

3 with a prime contractor or with another subcon4 tractor to perform a contract. 

5 ‘‘(J) SURETY.—The term ‘surety’ means 

6 the person or State that— 

7 ‘‘(i) under the terms of a bid bond, 

8 undertakes to pay a sum of money to the 

9 obligee in the event the principal breaches 

10 the conditions of the bond; 

11 ‘‘(ii) under the terms of a perform12 ance bond, undertakes to incur the cost of 

13 fulfilling the terms of a contract in the 

14 event the principal breaches the conditions 

15 of the contract; 

16 ‘‘(iii) under the terms of a payment 

17 bond, undertakes to make payment to all 

18 persons supplying labor and material in 

19 the prosecution of the work provided for in 

20 the contract if the principal fails to make 

21 prompt payment; or 

22 ‘‘(iv) is an agent, independent agent, 

23 underwriter, or any other company or indi24 vidual empowered to act on behalf of such 

25 person or State. 


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1 ‘‘(11) AUTHORIZATION OF APPROPRIATIONS.— 

2 There is authorized to be appropriated to the Sec3 retary to carry out activities under this subsection 

4 $50,000,000 for each of fiscal years 2010 through 

5 2014, of which not more than $20,000,000 may be 

6 made available each fiscal year to carry out activities 

7 under paragraph (8).’’. 

8 SEC. 3. NATIONAL INFORMATION CLEARINGHOUSE. 

9 Section 332(b)(1) of title 49, United States Code, is 

10 amended by striking ‘‘the maintenance, rehabilitation, re11 structuring, improvement, and revitalization of the rail12 roads of the United States’’ and inserting ‘‘any Federal, 

13 State, or local mode of transportation’’. 

14 SEC. 4. PROVISION OF RELEVANT INFORMATION. 

15 Section 332(d) of title 49, United States Code, is 

16 amended by striking ‘‘United States Railway Association, 

17 the Consolidated Rail Corporation, and the’’. 

Æ 


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