Almost all federal and state construction contracts (and some subcontracts) require that your company have “bonding capacity” – the ability to obtain bid bonds, payment bonds, and performance bonds from an approved surety. Bonding capacity is also required for some certifications, like the 8(a) program.
Bonding capacity can be a challenge for small construction companies, especially those who don’t have an established surety relationship and who are looking to make the leap from private world to government contracts.
The government can help! Both the Department of Transportation and the Small Business Administration have programs to assist companies obtain (or increase) bonding capacity.
- The DOT’s Bonding Education Program (BEP) is open to the owners or key personnel of small construction companies. It provides education; access to approved sureties; and introduction to industry leaders, peers, and government purchasers. Each of the DOT Regional Small Business Transportation Resource Centers runs at least two BEPs per year. Two of them – New York and New England – have upcoming virtual programs with application deadlines of November 1. If you’re interested, submitting an application soon is a great idea. (But don’t worry if you miss these; there will be more coming down the pike.)
- The SBA’s Surety Bond Guarantee guarantees certain bonds offered to small businesses apply for contracts of up to $9 million (non-federal) or $14 million (federal). This government guarantee can help your company obtain a bond (or obtain a larger bond than you might otherwise be able to). All you need to do to get started is contact one of the bonding agencies listed in the SBA’s directory. We recommend researching and reaching out to some of these agencies now, so that you can find one that’s right for you, build a relationship, and be ready to demonstrate bonding capacity when you need to.
Interested in learning more? Check out these DOT and SBA slides from a recent joint webinar on the subject. Or contact us, and we can help.