House Judiciary Committee Approves the Security in Bonding Act

Washington, D.C. –The House Judiciary Committee today approved H.R. 776, the Security in Bonding Act,by voice vote.   

Under current law, the federal government requires businesses that are prospective bidders for federal construction projects to support their bid with a variety of bonds. These bonds guarantee payment to the federal government and to the bidders’ subcontractors should the winning bidder fail to perform all of its obligations. Current law permits prospective bidders to use individual sureties to obtain these bonds, and allows individual sureties to use illiquid or risky collateral to support the bonds. 

Allowing individual sureties to use potentially risky collateral to support their bonds has caused the federal government and the American taxpayer to lose money as well as jeopardized the financial health of subcontractors. The Security in Bonding Act addresses this problem by requiring individual sureties to provide low-risk collateral to support their bonds. This measure will allow the federal government and subcontractors to have recourse should the winning bidder fail to perform its obligations and adds financial stability for the federal government, subcontractors, and the American taxpayer.

House Judiciary Committee Chairman Bob Goodlatte (R-Va.) praised today’s Committee vote:

Chairman Goodlatte: “Small businesses, subcontractors, and the federal government rely on a promise of payment through bonds to complete construction projects that benefit Americans across the country. Bonds serve a crucial role in the completion of these federal construction projects. They are not only a promise of payment to the federal government: they are relied on by subcontractors, which are often small and emerging businesses. The government and subcontractors trust that these bonds will serve as a reliable backup payment should the winning bidder fail to perform its obligations.

“However, non-regulated individual sureties undermine this system of trust through the use of illiquid or risky collateral that causes damage to all parties. Fortunately, today the Committee has approved the Security in Bonding Act that acts as a necessary solution. This legislation allows for the continued use of individual sureties while requiring that they provide low-risk collateral to support their bonds. I am pleased that this measure passed the Committee today and that small businesses will be protected from these losses so they can continue to drive our economy.”