1Providing for the establishment of the Surety Bond Guarantee
2Program; imposing duties on the Department of Community and
3Economic Development; establishing the Surety Bond Guarantee
4Fund; providing for contracts eligible for guarantee and for
5participation by disadvantaged businesses; and making an
6appropriation.

7The General Assembly of the Commonwealth of Pennsylvania
8hereby enacts as follows:

9Section 1. Short title.

10This act shall be known and may be cited as the Surety Bond
11Guarantee Fund Program Act.

12Section 2. Definitions.

13The following words and phrases when used in this act shall
14have the meanings given to them in this section unless the
15context clearly indicates otherwise:

16"Applicant." A disadvantaged business.

17"Department." The Department of Community and Economic
18Development of the Commonwealth.

19"Disadvantaged business." A small business which is owned or 
20controlled by a majority of persons, not limited to members of 

1minority groups, who:

2(1) have been deprived of the opportunity to develop and
3maintain a competitive position in the economy because of
4social disadvantages; or

5(2) are veterans, including service-disabled veterans.

6"Fund." The Surety Bond Guarantee Fund established in
7section 4.

8"Program." The Surety Bond Guarantee Fund Program
9established in section 3.

10"Secretary." The Secretary of Community and Economic
11Development of the Commonwealth.

12"Service-disabled veteran." A veteran who possesses either
13an adjudication letter from the United States Veterans
14Administration establishing a service-connected disability
15rating or a disability determination from the United States
16Department of Defense.

17"Small business." A business in the United States which is
18independently owned, is not dominant in its field of operation
19and employs 250 or fewer employees.

20"Surety bond." A guarantee in which the surety guarantees
21that the contractor or principal in the bond will perform the
22obligation stated in the bond. The term shall include the
23following types of bonds:

24(1) Bid bonds that guarantee the bidder will enter into
25a contract and furnish the required payment and performance
26bonds.

27(2) Payment bonds that guarantee payment from the
28contractor to parties who furnish labor, materials, equipment
29and supplies.

30(3) Performance bonds that guarantee the contractor will

1fulfill the contract in accordance with terms and conditions.

2(4) Ancillary bonds which may be incidental and
3essential to the performance of the contract.

4"Veteran." An individual who:

5(1) Served in the active United States military in any
6of the four current branches and all previous branches,
7including a reserve component or the National Guard.

8(2) Was released or discharged from active military
9service under conditions other than dishonorable.

10(3) Possesses a certificate of release or discharge from
11active duty.

12Section 3. Establishment of program.

13The Surety Bond Guarantee Fund Program is established, to the
14extent funds are appropriated specifically for the purposes of
15this act, in the department. The purpose of the program is to
16assist disadvantaged businesses to competitively bid for
17governmental contracts.

18Section 4. Surety Bond Guarantee Fund.

19(a) Fund established.--There is established the Surety Bond
20Guarantee Fund within the State Treasury for the purpose of
21assisting disadvantaged businesses to competitively bid for
22certain Commonwealth contracts.

23(b) Fund administration.--The fund shall be administered by
24the department. All moneys in the fund shall be used to finance
25guarantees to bonding companies against percentages of losses
26sustained as a result of defaults by qualified disadvantaged
27businesses on a contract or project.

28(c) Payments from fund.--Surety bond guarantees made with
29payments from the fund under the program shall not exceed the
30sum of $1,000,000 for any one disadvantaged business.

1Section 5. Contract eligible for guarantee.

2(a) Eligibility.--A bond guaranteeing the performance of a
3contract shall be qualified and eligible for a surety bond
4guarantee under the program if:

5(1) The bond is listed in the contract bonds section of
6the Surety Association of America's "Manual of Rules,
7Procedures and Classifications."

8(2) The bond is required by the contract, invitation for
9bid or request for proposal.

10(3) The bond is executed by a surety company that is
11acceptable to the Treasury Department and qualified by the
12department.

13(4) The bond meets any other requirements established by
14the department.

15(b) Required provision; notice of cancellation.--No bond
16shall qualify or be eligible for a guarantee under the program
17unless it contains a provision affirming that the bond shall not
18be canceled for any cause unless notice of intention to cancel
19is given to the department at least 30 days before the day upon
20which cancellation shall take effect. Cancellation of the bond
21shall not invalidate the bond regarding the period of time it
22was in effect.

23Section 6. Disadvantaged business participation.

24(a) Application process.--A disadvantaged business shall
25apply to participate in the program by filing an application
26with the department. The department shall review the application
27to determine if the applicant is eligible to participate in the
28program within 30 days of receipt of the completed application.
29The department may extend the review period for an additional 30
30days if it determines that additional time is needed to complete

1the review process. The department shall notify the applicant in
2writing of the extended period, including the date it will reach
3its final decision.

4(b) Investigation.--Upon receipt of a completed application,
5the department may conduct an investigation of the applicant,
6including an investigation of its owners, officers, directors,
7principals or agents, in order to determine whether the
8applicant is eligible to participate in the program. If the
9investigation finds and the department determines that an
10applicant is not eligible to participate in the program, it
11shall notify the applicant in writing that the applicant will
12not be approved for program participation. The notification of
13ineligibility shall include the reason the application was not
14approved and that the applicant has the right to appeal the
15department's determination to the secretary within 30 days of
16the date of the notice.

17(c) Criteria for determining eligibility.--An applicant
18shall be deemed eligible to participate in the program if the
19department determines that an applicant meets all of the
20following qualifications:

21(1) The applicant is a disadvantaged business certified
22by the Department of General Services.

23(2) The applicant's business is in the construction or
24building trade industry.

25(3) The applicant has been actively operating its
26business for at least one year prior to the application date.

27(4) The applicant has the experience and financial
28fitness appropriate to a qualified contract.

29(5) The applicant has agreed to subcontract no more than
3075% of the work to be performed under a qualified contract.

1(6) The applicant has demonstrated an inability to
2secure bonding under normal market conditions.

3(7) The applicant or one of its owners, officers,
4directors, principals or agents has not committed or been
5convicted of any of the activities set forth in section 7.

6(8) The applicant and the applicant's business meets any
7other program requirements that establish criteria for
8eligibility that the department shall adopt by regulation,
9guideline or statement of policy within 180 days of the
10effective date of this act.

11Section 7. Criteria for denying program participation.

12The department may not approve or may deny an application for
13program participation if it determines that the applicant or one
14of its owners, officers, directors, principals or agents
15committed or has been convicted of the following:

16(1) Made a material misstatement in the application or
17any other document required to be submitted by the department
18under a provision of this act and by the Department of
19General Services under 62 Pa.C.S. (relating to procurement).

20(2) Failed to comply with or violated any provision of
21this act or any regulation, order or statement of policy
22issued by the department under this act or any regulation,
23order or statement of policy issued by the Department of
24General Services under 62 Pa.C.S.

25(3) Engaged in unfair or unethical conduct in connection
26with the construction or building trade industry or in
27violation of 62 Pa.C.S. Ch. 23 (relating to ethics in public
28contracting).

29(4) Does not possess the financial fitness, character,
30reputation, integrity and general fitness sufficient to

1warrant reasonable belief that the applicant's business will
2be conducted lawfully, honestly and in the public interest.

3(5) Notwithstanding any other provision of law to the
4contrary, been convicted of or pleaded guilty or nolo
5contendere to a crime of moral turpitude or to an offense
6graded as a felony.

7(6) Been enjoined by a court of competent jurisdiction
8from engaging in the construction or building trade industry.

9(7) Has had a license issued by the department or any
10other Federal, state or local agency denied, not renewed,
11suspended or revoked.

12(8) Has had the certification as a disadvantaged
13business issued by the Department of General Services
14revoked.

15(9) Became the subject of a United States Postal Service
16fraud order.

17(10) Demonstrated negligence or incompetence in
18performing an act for which the applicant is required to hold
19a license under any law of this Commonwealth.

20(11) Has an outstanding debt to the Federal Government,
21the Commonwealth or any Federal or Commonwealth agency or a
22political subdivision of the Commonwealth or agency of a
23political subdivision.

24(12) Became insolvent at any time prior to the
25application date, meaning that the liabilities of the
26applicant exceeded the assets of the applicant or that the
27applicant could not meet the obligations of the applicant as
28they matured or was in such financial condition that the
29applicant could not continue in business without jeopardizing
30the health, safety and welfare of its customers.

1(13) At any time prior to application, has failed to
2disburse payments to subcontractors in a timely manner as
3agreed to under a contract for any reason other than the
4owner's failure to make the agreed-to payments to the
5applicant or because such disbursement would constitute a
6violation of applicable law or an order issued by a court or
7administrative body of competent jurisdiction.

8Section 8. Duties of department.

9(a) Technical assistance.--The department, in consultation
10with the Department of General Services, shall provide technical
11assistance to enable disadvantaged businesses to competitively
12bid on State and other governmental contracts. Technical
13assistance shall include, but not be limited to, assisting
14disadvantaged businesses in responding to bid requests,
15strengthening financial condition and addressing other concerns
16raised or likely to be raised by a bonding company.

17(b) Monitoring program.--The department shall establish a
18monitoring program to monitor the activities of disadvantaged
19businesses participating in the program. The monitoring program
20shall include inspections of projects approved for bond
21guarantees to minimize the risk of calls on the fund. The
22department shall promptly advise the disadvantaged business of
23any deficiencies identified during an inspection. In the event
24the deficiencies noted in the report are not promptly addressed
25by the disadvantaged business to the satisfaction of the
26department, the department may give the disadvantaged business a
27reasonable period to correct the deficiencies or may report such
28deficiencies to the issuing bond company.

29Section 9. Regulations.

30(a) Adoption of regulations.--The department shall

1administer and enforce the provisions of this act and shall
2adopt and promulgate regulations, guidelines or policy
3statements necessary to carry out the provisions of this act.

4(b) Department of General Services.--The department shall
5consult with the Department of General Services to carry out the
6provisions of this chapter. The Department of General Services
7shall provide any technical or staff assistance as may be from
8time to time required to assist the department in carrying out
9the provisions of this chapter.

10Section 10. Publication of notice.

11The secretary shall, upon the effective date of an act making
12an appropriation under section 3 to the department, submit for
13publication in the Pennsylvania Bulletin notice thereof.

14Section 11. Effective date.

15This act shall take effect as follows:

16(1) The following provisions shall take effect
17immediately:

18(i) This section.

19(ii) Section 10.

20(2) The remainder of this act shall take effect upon
21publication of the notice under section 10.