SBA bolsters bonding program for small construction contractors

Construction of neu motorway in Germany

Bruce M. Allen of KOG International Inc. – KOG International Inc.

Several changes took effect Wednesday that are meant to improve a U.S. Small Business Administration program that is said to be a boon for small New Jersey construction contracting companies and the wider Garden State public alike.

Bruce M. Allen, president at KOG International Inc., explained the long-running initiative, the Surety Bond Guarantee Program, as one that subsidizes medium, small and emerging contractors through a guarantee that encourages a company such as his to issue a bond that it would likely not otherwise provide for a business without particular qualifications.

The big picture is this: It’s good for more than just a subset of businesses.

“It creates a more competitive platform and environment for all contractors bidding on that work,” Allen said. “That helps the public, because that competition hopefully will drive the price on that project down to a cheaper level.”

Allen and his colleagues are the state’s foremost experts — perhaps across the entire East Coast — on the program. His firm, which was recently recognized by the SBA after years of partnership with the organization, is the largest agent in the region in this line of business.

In association with the SBA’s program, the agency connects partnering firms like Allen’s to small and emerging contractors guaranteed on a surety bond. These bonds ensure contract completion — on government projects such as roads, highways and bridges — in the event of contractor default.

The program may not give small businesses a shot at bidding on billion-dollar bridge projects, given that the SBA primarily caps its guarantees on bonds for contracts at the $6.5 million mark. But, even a municipality’s $250,000 road-paving project might be difficult work for a small contractor to secure without a guarantee like what the SBA offers, Allen said.

“So, it stimulates a lot of opportunity for emerging contractors,” he said. “And that includes disadvantaged contractors, a variety of minorities and specially certified contractors like service-disabled veterans. Typically, those kind of accounts have had a tough time getting bonds, so this is also kind of a social program that provides support for contractors that might not be able to sustain in the market otherwise.”

One of the updates the SBA is making to the program specifically addresses those contractors. If a small business is owned by veterans, socially or economically disadvantaged individuals or certain other businesses, SBA is raising its bond guarantee from 70 percent to 90 percent.

That change also applies to businesses with contract amounts of $100,000 or less, while all other guarantees will be 80 percent.

The other change entails the eligible contract amount being increased from $250,000 to $400,000 when small businesses are using a streamlined application process referred to as Quick Bond, which allows those businesses to bid on contracting opportunities with less delay.

The district director of the SBA’s presence in the state, Al Titone, said in a statement that there are “over 75,000 small construction firms in New Jersey that can benefit from the new changes.”