WILL INFLATION AFFECT SURETY BOND PROTECTION ON FEDERAL CONTRACTS?
May 4, 2022
by David Hewett, Chief Underwriting Officer
Exempting the Miller Act from periodic indexing for inflation means the surety bond protection for subcontractors and suppliers on federal contracts worth at least $150,000 will remain in place. This is especially important for small and disadvantaged businesses that provide significant labor and supplies for these smaller contracts. Surety bonding is the only protection these contractors have since liens cannot be placed on public property. If the Miller Act threshold had increased to the proposed $200,000, contractors and suppliers on more than 1700 federal jobs would be unprotected. Not only does that pose a catastrophic threat to the subcontractors’ and suppliers’ businesses, but the taxpayers would be exposed to the potential of hundreds of millions in losses.
The Surety and Fidelity Association of America (SFAA) and the National Association of Surety Bond Producers (NASBP) worked hard to educate lawmakers about this risk and convinced them that bonding federal infrastructure protects taxpayers’ dollars, ensures project completion, protects local small businesses and workers, and promotes economic growth.