State mulls expansion of minority bond program
Connecticut is considering expanding a bonding program designed to ensure minority contractors get a crack at jobs their financial profile might otherwise bar them from obtaining.
Since 2007, the Hartford Economic Development Corp. has been running a pilot program designed to help minority-owned construction companies in obtaining payment bonds for capital projects by the city of Hartford.
Travelers administers the HEDCo program and covers the first $1 million of any losses ”“ after that the state is on the hook for any bond payments covering contractor issues.
That program was expanded last year to Bridgeport, New Haven and New London and has been under consideration for another $2 million in funding by the State Bond Commission to expand it to unspecified additional locations.
“This ”¦ needs to be expanded not only for payment bonds but for bid bonds and performance bonds, because those are the other bonds that are required for contractors to be able to play in the game,” said Kim Hawkins, director of HEDCo”™s business resource center, testifying on the issue in Hartford earlier this year. “If you can”™t bid on a project because you don”™t have a bid bond, then you don”™t have the opportunity ”¦ to say that you”™re capable of doing any of the work.”
Under the program, small contractors typically pay a fee of up to 2 percent of the bond”™s value to obtain the backing, which Hawkins said was in line with what a general contractor would pay for bonding. She added that bonds typically total at least $500,000 for projects funded at the state level. Hawkins said HEDCo has written 10 bonds to date and has taken a loss on one.
“You can”™t guarantee that anybody”™s going to perform or pay, so you”™re stepping out based on a person”™s ability, based on their capacity and based on what you”™ve seen (before) to say that you”™re going to take a chance with them, in hopes that they will perform the work properly and pay all of their bills,” Hawkins said.
The Surety and Fidelity Association of America runs a model contractor development program under which more than a dozen states have expanded bonding to support minority contractors, including New York and Rhode Island. The Washington, D.C.-based group recently signed an agreement with the U.S. Department of Transportation to launch a DOT version of the program as well.
“We”™re on our third year in New York,” said Sam Carradine, director of development and diversity for Surety and Fidelity Association of America, and a former executive director of the National Association of Minority Contractors. “We have $67 million in bonding as of the third quarter of last year and it”™s probably higher by now. We”™re in seven locales throughout the state. Our partner is the Empire State Development Corp., which is similar to your economic development shop. That tends to be our partner in the various states.”
Bridgeport Rep. Ezequiel Santiago said many minority business contractors remain unaware of the HEDCo pilot program.
“I”™ve spoken to quite a few ”¦ small and minority contractors in Bridgeport,” Santiago said. “I asked what is the biggest obstacle with regards to some of the larger contracts that ”¦ are being awarded ”“ why they”™re not getting them ”“ and bond funding is definitely the first thing that comes out of their mouth.”
The Connecticut Department of Administrative Services, which manages the procurement process for state agencies, runs supplier diversity and minority business enterprise programs that require departments to reserve a set portion of their spending budgets for small-business and minority vendors.