Section 1680-08-04-.03 - BOND GUARANTEE PROGRAM(1) Department Requirements and Limitations.(a) The Department may guarantee sureties participating in the BGP against a portion of their losses incurred and paid as a result of a Certified Small Business's breach of the terms of a bid bond and/or contract bond on any eligible contract. The Department may guarantee up to ninety percent (90%) of a surety bond amount of two hundred fifty thousand dollars ($250,000) or less and up to eighty percent (80%) of a surety bond amount greater than two hundred fifty thousand dollars ($250,000) if such surety bond is provided by an approved surety. The surety must obtain the Department's approval before a guaranteed bond can be issued. The Department may determine the bond guarantee amount based on the criteria outlined in Rule 1680-8-4-.03(4) herein and the availability of funds. Participation in the BGP is limited due to the statutory mandate that in no event shall the total BGP amount guaranteed under this program at any given time exceed five million dollars ($5,000,000).(2) A surety who desires to participate in the BGP shall submit an Application for Surety Participation Form to the Tennessee Department of Transportation Small Business Development Program Office.(3) Certified Small Business Eligibility Requirements/Limitations. (a) Eligibility to participate in the BGP shall be specifically limited to Certified Small Businesses that have attained a Certificate of Proficiency by meeting the Minimum Curriculum Standards of Proficiency in the CMDP or that have received an exemption from the CMDP (See Rule 1680-8-3-.09).(4) The Department is authorized to expend funds from the State highway fund to fund administrative expenses and fund any losses that may arise under the BGP. In no event shall the total BGP amount guaranteed under this program at any given time exceed five million dollars ($5,000,000). Therefore, the number, size, and availability of the bond guarantees shall be limited. Obtaining a Certification of Proficiency does not ensure that a Certified Small Business will receive a bond guarantee. The Department may use the following criteria to determine which Certified Small Businesses may participate in the BGP and receive a bond guarantee (it shall be the responsibility of the applicant to provide evidence of the following criteria): (a) Administration and Management of Business. The applicant shall provide adequate evidence that it:
1. Holds all current and relevant licenses and meets all other legal requirements regarding the Certified Small Business;2. Shows capability to develop an overall business plan;3. Maintains an adequate credit history;4. Maintains adequate staff and employees required to carry out the work associated with the Certified Small Business;5. Maintains a payroll system set up to feed accurate and complete information into the job costing system;6. Is able to generate accurate financial statements in accordance with generally accepted accounting principles; and7. Has policies and procedures regarding timely billing and collection from customers.(b) Bidding/Estimates. The applicant shall provide adequate evidence that it:
1. Has an understanding how to implement all requisite steps in the preparation of Department bids; and2. Has competence in accurately estimating project costs.(c) Contract Negotiating and Knowledge. The applicant shall provide adequate evidence that it:
1. Has an understanding of contract terms concerning the rights, obligations, and liabilities for Small Businesses;2. Has an understanding of the basic elements of Department contracts; and3. Has an ability to adequately negotiate, draft, and interpret subcontracts.(d) Project Planning. The applicant shall provide adequate evidence that it:
1. Has capability in scheduling and phasing the work of a project and in allocating labor to timely complete the project;2. Has skill in developing schedules for ordering and assuring delivery of materials and equipment and hiring of work force; and3. Has knowledge of the reports and other paperwork required by the Department and/or the prime contractor.(e) Project Performance. The applicant shall provide adequate evidence that it:
1. Maintains a system of project monitoring that includes job-site inspections by management as well as periodic reporting from its project superintendent;2. Maintains a field monitoring and reporting system to warn of any deviations from project schedule or cost overruns;3. Maintains a reporting system that will keep detailed records of the time expended and materials used on a project;4. Has capability to maintain an updated and accurate job costing system;5. Maintains a system for dealing with change orders; including requiring written change order and method for calculating prices to cover the changes; and6. Demonstrates knowledge of project closeout procedures.(f) Inability to obtain surety bond. The applicant shall provide adequate evidence that it:
1. Has made at least one (1) unsuccessful attempt to obtain a surety bond.(5) Guaranteed Bond Limit. No Certified Small Business may have more than two (2) Department guaranteed bonds at any one time, and the total amount of such guaranteed bonds shall not exceed five hundred thousand dollars ($500,000).(6) Bond Applications. (a) When requested by the Certified Small Business, the Department may provide assistance in preparing bond applications that are to be presented to surety companies to obtain a bonding capacity.(b) When the Certified Small Business has developed a complete package that is deemed acceptable by the Department, then the Department may forward the prepared bond applications to a surety company that has agreed to participate in this program. The Certified Small Business shall indicate to the Department what surety company, that has agreed to participate in this program, shall receive the prepared bond application.(7) The Department may assist a Certified Small Business, which has been accepted into the BGP, in obtaining a surety bond.(a) Once the surety company decides to execute the bond on the basis of the BGP, a Justification for Bond Guarantee form will be submitted by the surety company to the Department.(b) Upon receipt of the Justification for Bond Guarantee form, the Department may execute and return the Bond Guarantee Agreement form to the surety company.(8) Project monitoring and technical assistance may be provided to all Certified Small Businesses receiving a bond guarantee.Tenn. Comp. R. & Regs. 1680-08-04-.03
Original rule filed June 15, 2005; effective August 29, 2005.Authority: T.C.A. § 4-3-2305.