Small & Emerging Business Development Program
DECLARATION OF EMERGENCY
Department of Economic Development
Office of the Secretary
Division of Business Retention and Assistance Services
Small and Emerging Business Development Program
(LAC 19:II.Chapters 1-13)
The Department of Economic Development's Small and Emerging Business Development Program is exercising the emergency provision of the Administrative Procedure Act, R.S. 49:953.B, in order to amend LAC 19:II.Chapters 1,3,5,7,9,11, and 13, expediting the delivery of managerial and technical assistance to the small and emerging business community, increasing the number of firms to be served through the program, improving the small business survival rate, and retaining and creating more jobs.
This Emergency Rule is effective on August 9, 2002, and shall remain in effect for a maximum of 120 days or until a final rule is promulgated, whichever occurs first. For more information you may call the Small and Emerging Business Development Program at (225) 342-4320.
Title 19
CORPORATIONS AND BUSINESS
Part II. Small and Emerging Business
Development Program
Chapter 1. General Provisions
§101. Statement of Policy
A. In accordance with the provisions of R.S. 51:941-945 and the provisions of the Administrative Procedure Act, R.S. 49:950-970 as amended the Department of Economic Development’s, Small and Emerging Business Development Program, administers these regulations which are intended to prescribe the procedures for qualifying and certifying Small and Emerging businesses; to provide for bonding and other financial assistance; to provide for technical and managerial assistance; to provide for a business mentor-protégé program; to recognize achievements for Small and Emerging businesses; and to facilitate access to state agency procurement.
§103. Purpose
A. The purpose and intent of this Chapter is to provide the maximum opportunity for Small and Emerging businesses to become competitive in a non-preferential modern economy. This purpose shall be accomplished by providing a program of assistance and promotion.
§105. Definitions
A. When used in these regulations, the following terms shall have meanings as set forth below.
Certification-determination that a business qualifies for designation as a Small and Emerging business.
Program-the Small and Emerging Business Development Program in the Department of Economic Development.
Small and Emerging Business (SEB)-a small business organized for profit and performing a commercially useful function which is at least 60 percent owned and controlled by one or more Small and Emerging Business persons and which has its principal place of business in Louisiana. A nonprofit organization is not a Small and Emerging Business for purposes of this Chapter.
Small and Emerging Business Person-a citizen of the United States who has resided in Louisiana for at least one year and whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same or similar line of business, and whose diminished opportunities have precluded, or are likely to preclude, such individual from successfully competing in the open market.
Director-the director of Office of the Secretary, Division of Business Retention and Assistance.
Firm-a business that has been certified as Small and Emerging.
Full-time-working in the firm at least 35 hours per week.
RFP-request for Proposal.
§107. Eligibility Requirements for Certification
A. An SEB is a firm owned and controlled by one or more Small and Emerging Business person(s). Eligibility requirements fall into two categories, one applies to the individual owners and the other to the applicant's firm. In order to continue participation in the program, a firm and its individual owners must continue to meet all eligibility requirements.
B. Small and Emerging Business Person. For purposes of the program, a person who meets all of the criteria in this Section shall be defined as a Small and Emerging Business person.
1. Citizenship. The person is a citizen of the United States.
2. Louisiana Residency. The person has resided in Louisiana for at least one year.
3. Net Worth. The person’s net worth may not exceed $200,000. The market value of the individual owner’s
personal residence will be excluded from the net worth calculation.
C. Small and Emerging Business
1. Ownership and Control. At least 60 percent of the company must be owned and controlled by one or more
Small and Emerging Business persons.
2. Principal Place of Business. The firm's principal place of business must be Louisiana.
3. Lawful Function. The company has been organized for profit to perform a lawful, commercially useful function.
4. Business Net Worth. The business' net worth at the time of application may not exceed $750,000.
5. Full Time. Managing owners who claim Small and Emerging Business person status must be full-time employees of the applicant firm.
6. Job Creation. An applicant firm anticipates creating new full-time jobs.
D. Requirement for Certification. An application containing an affidavit signed, dated, and notarized attesting to all of the aforesaid eligibility requirements.
§109 Control and Management
A. Description. An applicant firm's management and daily business operations must be controlled by an owner(s)of the applicant firm who has/have been determined to be a Small and Emerging Business person. In order for a Small and Emerging Business person to be found to control the firm, that individual must have managerial or technical experience and competency directly related to the primary industry in which the applicant firm is seeking program certification.
1. The Small and Emerging Business person(s) upon whom eligibility is based shall control the board of directors of the firm, either in actual numbers of voting directors or through weighted voting. In the case of a two-person board of directors where one individual on the board is a Small and Emerging Business person and one is not, the formers vote must be weighted by share ownership, worth more than one vote to achieve a minimum of 60 percent control, in order for the firm to be eligible for the program. This does not preclude the appointment of nonvoting or honorary directors. All arrangements regarding the structure and voting rights of the board must comply with state law and with the firm's articles of incorporation and/or bylaws.
2. Individuals who are not a Small and Emerging Business person may be involved in the management of an applicant's firm and may be stockholders, partners, officers, and/or directors of such firm. Such individual(s), their spouse(s) or immediate family members who reside in the individual's household may not, however:
a. exercise actual control or have the power to control the applicant or certified firm;
b. be an officer or director, stockholder, or partner of another firm in the same or similar line of business as the applicant or certified firm;
c. receive excessive compensation as directors, officers, or employees from either the applicant or certified firm. Individual compensation from the firm in any form, including dividends, consulting fees, or bonuses, which is paid to a non-disadvantaged owner, his/her spouse or immediate family member residing in the same household will be deemed excessive if it exceeds the compensation received by the Small and Emerging Business person chief executive officer, president, partner, or owner, unless the compensation is for a clearly identifiable skill for which market rates must be paid for the firm to utilize the person's expertise;
d. be former employers of the Small and Emerging Business owner(s) of the applicant or certified firm, unless the program determines that the contemplated relationship between the former employer and the Small and Emerging Business person or applicant firm does not give the former actual control or the potential to control the applicant or certified firm and if such relationship is in the best interest of the certified firm.
B. Non-Small and Emerging Business Person Control.
Non-Small and Emerging Business person(s) or entities may not control, or have the power to control, the applicant firm. Examples of activities or arrangements which may disqualify an applicant firm from certification are:
1. a non--Small and Emerging Business person such as an officer or member of the board of directors of the firm, or through stock ownership, has the power to control daily direction of the business affairs of the firm;
2. the non-Small and Emerging Business person or entity provides critical financial or bonding support or licenses to the firm, which directly or indirectly allows the non-Small and Emerging Business person to gain control or direction of the firm;
3. a non-Small and Emerging Business person or entity controls the firm or the individual Small and Emerging Business person(s) through loan arrangements;
4. other contractual relationships exist with non-Small and Emerging Business person or entities, the terms of which would create control over the firm.
§111. Responsibility for Applying
A. It is the responsibility of any business wishing to participate in the program to complete the required certification process. Failure to provide complete, true, or accurate data may result in rejection of the application.
B. Certification materials will be distributed by SEBD Program upon written or verbal request. Written requests for certification materials should be directed to the SEBD Program office in Baton Rouge.
C. Certification as a SEB also does not constitute compliance with any other laws or regulations and does not relieve any firm of its obligations under other laws or regulations. Certification as a Small and Emerging Business also does not constitute any determination by SEBD Program or that the firm is responsible or capable of performing any work.
§113. Certification Application Procedure
A. Applicant submits an application containing a signed, dated, and notarized affidavit to the SEBD office.
B. The SEBD Program staff reviews the application and if it is found to be incomplete or further information is needed, the SEBD Program staff will contact applicant. If the applicant does not respond within 15 days, the application will be denied.
C. The director notifies the applicant in writing of the decision whether or not to grant certification.
§115. Duration of Certification
A. The maximum amount of time that a firm may be granted certification by the SEBD Program is seven years or when the firm graduates.
B. Retention of the firm in the program depends upon time, the firm's progress toward attainment of its business goals, willingness or ability to cooperate and follow through on recommendations of the SEBD Program staff.
§117. Reports by Certified Small and Emerging Businesses
A. Report Form. On forms identified or prescribed by the SEBD Program, certified businesses shall report at times specified by the SEBD Program their financial position and attainment of the business' performance goals. Failure to do so may result in termination from the program.
B. Verification of Eligibility. The SEBD Program may take any reasonable means at any time to confirm a certified firm's eligibility, such as by letter, telephone, contact with other governmental agencies, persons, companies, suppliers, or by either announced or unannounced site inspection.
C. Notification of Changes. To continue participation, a certified firm shall provide the SEBD Program with a written statement of any changes in an address, telephone number, ownership, control, financial status, or major changes in the nature of the operation. Failure to do so may be grounds for termination of eligibility.
D. Evaluation. The SEBD Program, as necessary, shall evaluate the information to determine progress, areas for further improvement, resources needed by the firm, and eligibility for continued participation in the program.
§119. Deception Relating to Certification of a Small and Emerging Business
A. Any person found guilty of the crime of deception relating to certification of an SEB as provided in R.S. 51:944 will be discharged from the program and will not be eligible to reapply under the business name involved in the deception or any business with which such individual(s) may be associated.
Chapter 3. Developmental Assistance Program
§301. Developmental Assistance
A. Purpose. The SEBD Program will coordinate technical, managerial, and indirect financial assistance through internal and external resources to assist certified Small and Emerging Businesses to become competitive in the market place.
B. Developmental Steps
1. The certified SEB owner will be required to participate in, and complete a SEBD Program approved entrepreneurial training program. The Small and Emerging Business owner that demonstrates adequate entrepreneurial skills or compelling reasons for not participating may be granted a waiver by the director.
2. Determination of Additional Assistance. In consultation with the business owner, the SEBD Program's staff or its designee will determine areas in which the business owner needs additional assistance.
3. Referral to Additional Resources. The SEBD Program will assist the firm obtain technical and/or managerial assistance from other resources, such as Small Business Development Centers, Procurement Centers, consultants, business networks, professional business associations, educational institutions, and other public agencies.
4. Ongoing Evaluation. In conjunction with the Small and Emerging Business firm and appropriate external resources, the SEBD Program will periodically assess the SEB's progress toward attainment of its business goals. The SEBD Program, in conjunction with the SEB firm, will determine the effectiveness of assistance being administered. If assistance is ineffective, the SEBD Program will investigate and take appropriate action.
5. Graduation from the Program. Upon completion of the Program's seven year term or attainment of the SEB’s programmatic goals, the SEB will graduate from the program. Companies that do not make satisfactory progress and/or exceed the net worth prerequisites for certification will be terminated from the SEBD Program.
Chapter 5. Mentor-Protégé Program
§501. General Policy
A. The policy of the state is to implement a Mentor/Protégé program that breaks down barriers and builds capacity of small and emerging businesses, through internal and external practices which include:
1. tone setting-intense and deliberate reinforcement by the governor's office of the state's provision for substantial inclusion of small and emerging businesses in all aspects of purchasing, procurement and contracting;
2. accountability-responsibility of each cabinet member and policy administrator to produce self-imposed and specific outcomes within a specified period of time;
3. partnering-teaming of Small and Emerging Businesses with businesses who have the capability of providing managerial and technical skills, transfer of competence, competitive position and shared opportunity toward the creation of a mutually beneficial relationship with advantages which accrue to all parties;
4. capacity building-enhancing the capability of small and emerging businesses to compete for public and private sector contracting and purchasing opportunities;
5. flexibility-promoting relationships based on need, relative strengths, capability and agreement of the parties within the boundaries of the program objectives of inclusion, impartiality and mutual understanding;
6. education-sharing instruction on intent, purpose, scope and procedures of the Mentor/Protégé program with both government personnel at all levels of administration as well as the business community and the general citizenry;
7. monitoring-requiring the routine measurement and reporting of important indicators of (or related to) outcome oriented results which stems from the continuing quest for accountability of Louisiana state government;
8. reporting-informing the governor's office of self imposed outcomes via written and quarterly reports as to the-progress of intra-departmental efforts by having the secretary of the department and her/his subordinates assist in the accomplishment of the initiative keep records, and coordinate and link with representatives of the Department of Economic Development; and
9. continuous improvement-approach to improving the performance of the Mentor/Protégé operation which promotes frequent, regular and possible small incremental improvement steps on an ongoing basis.
§503. Incentives for Mentor Participation
A. Businesses participating as mentors in the Mentor/Protégé Program will be motivated for program participation via program features incorporated in the bid process as well as contracts and or purchase agreements negotiated with the firm. The following features may be instituted by the state of Louisiana to motivate Mentor participation.
1. Preferential Contract Award. The state of Louisiana may institute a system for awarding points to mentor participants which will confer advantages in the bid or selection process for contracting. The evaluation points granted a Mentor/Protégé Program participant will be proportionate to the amount of protégé participation in the project. Evaluation points will be weighted with the same standards as points awarded for quality for product or service; or
2. Performance Incentives. Contracts for goods or services may include a factor for evaluation of performance for the purpose of providing incentives for work performed or deliveries completed ahead of schedule. The incentive for contractors and suppliers who are Mentor/Protégé Program participants shall be not less than 5 percent greater than incentives awarded to firms who are not program participants.
§505. Incentives for Protégé Participation
A. Businesses participating as protégés will be eligible for the following program benefits.
1. Subcontracting Opportunities. Protégé firms may be eligible for non-competitive subcontracting opportunities with the state and private sector industries.
2. Technical and Developmental Assistance. Protégé firms will be provided technical and developmental assistance provided by Mentors which is expected to build the capacity of the protégé firm to compete successfully for public and private sector opportunities.
3. Networking. The Department of Economic Development will institute a system of networking protégé firms with potential mentors for the purposes of facilitating successful Mentor/Protégé partnerships. SEB firms participating in the program will be included in the Department of Economic Development's protégé source guide, which lists the firm and its capabilities as a source of information for mentors in the program. Additionally, networking seminars for the purposes of introducing potential mentors and protégés will be held annually.
§507. Guidelines for Participation
A. The Mentor/Protégé Program will be open to participation by any business entity which meets the criteria for participation as outlined below.
1. Mentor Firms:
a. must be capable of contracting with the state;
b. must demonstrate their capability to provide managerial or technical skills transfer or capacity building; and
c. must remain in the program for the period of the developmental assistance as defined in the Mentor/Protégé plan.
2. Protégé Firms:
a. must be a certified Small and Emerging Business with the state of Louisiana Department of Economic Development;
b. must be eligible for receipt of government and private contracts;
c. must graduate from the program within a period not to exceed 7 years or until the firm reaches the threshold of $750,000 net worth as defined by the SEB certification guidelines.
3. Mentor/Protégé Plan
a. A Mentor/Protégé Plan signed by the respective firms shall be submitted to the Department of Economic Development, Program of Small and Emerging Business Development for approval. The plan shall contain a description of the developmental assistance that is mutually agreed upon and in the best developmental interest of the protégé firm.
b. The Mentor/Protégé plan shall also include information on the mentor's ability to provide developmental assistance, schedule for providing such assistance, and criteria for evaluating the protégé's developmental success. The plan shall include termination provisions complying with notice and due process rights of both parties and a statement agreeing to submit periodic report reviews and cooperate in any studies or surveys as may be required by the department in order to determine the extent of compliance with the terms of the agreement.
c. The submitted Mentor/Protégé Agreement shall be reviewed by an Economic Development Small Business Advisor. The Small Business Advisor may recommend to the director of the Program of Small and Emerging Business Development acceptance of the submitted Agreement if the agreement is in compliance with the program's Mentor/Protégé guidelines.
4. Protégé Selection-Selection of the protégé is the responsibility and at the discretion of the mentor. Protégés may be selected from the listing of SEB's provided by the Department of Economic Development, Program of Small and Emerging businesses. A protégé selected from another source or reference must be referred to the Department of Economic Development for certification as an SEB. The protégé must meet the department's guidelines for SEB certification as a condition of the Mentor/Protégé Plan acceptance.
§509. Measurement of Program Success
A. The overall success of the Mentor/Protégé program will be measured by the extent to which it results in:
1. an increase in the protégé firm's technical and business capability, industrial competitiveness, client base expansion and improved financial stability;
2. an increase in the number and value of contracts, subcontracts and supplier agreements by small and emerging businesses; and
3. the overall enhancement and development of protégé firms as a competitive contractor, subcontractor, or supplier to local, state, federal agencies or commercial markets.
§511. Internal Controls
A. The Program of Small and Emerging Business Development will manage the program and establish internal controls to achieve the stated program objectives. Controls will include:
1. reviewing and evaluating Mentor/Protégé agreements for goals and objective;
2. reviewing semi-annual progress reports submitted by mentors and protégés on protégé development to measure protégé progress against the approved agreement;
3. requesting and reviewing periodic reports and any studies or surveys as may be required by the program to determine program effectiveness and impact on the growth, stability and competitive position of Small and Emerging Businesses in the state of Louisiana; and
4. continuous improvement of the program via ongoing and systematic research and development of program features, guidelines and operations.
§513. Non-Performance
A. The Mentor/Protégé Agreement is considered a binding agreement between the parties and the state. Mentors who compete for contract award or purchasing activity and receive evaluation points as program participants are bound, in accordance with the terms of the state contract or purchase order, to fulfill the responsibilities outlined in the approved Mentor/Protégé Agreement as a condition of successful contracting or purchase activity. Protégé who are selected for program participation are bound, in accordance with the terms of their agreement with the Department of Economic Development for continued participation in the program. Failure of the parties to meet the terms of the agreement is considered a violation of contract with liabilities as outlined below.
B. Failure of the mentor to meet the terms of the Mentor/Protégé Agreement will be considered a default of state contract or purchasing agreement.
C. Failure of the protégé to meet the terms of the Mentor/Protégé Agreement will result in exclusion from future participation in the program.
§515. Conflict Resolution
A. The state will institute a system for independent arbitration for the resolution of conflicts between mentors and protégé as program participants and/or between program participants and the state.
Chapter 7. Recognition Program
§701. Repealed.
Chapter 9. Small Business Bonding Program
§901. Small Business Bonding Assistance
A. Program Activities-Louisiana Contractors Accreditation Institute (LCAI)
1. Eligibility. All SEB construction contractors who are certified by the Small and Emerging Business Development Program, Department of Economic Development, are eligible to attend the institute. However, other contracting businesses will be invited to attend the institute but they will not be able to receive bond guarantee assistance until they have been certified by the SEBD Program.
2. Standards and Procedures for Determining Course Content. The staff of Bonding Assistance Program (BAP) will once a year, or as budget permits, consult with the heads of the construction schools in Louisiana approved by the Board of Regents and Department of Education to ensure that current course content adequately prepares the students to run their construction firms in a businesslike manner.
3. Attendance. Attendance is open to only certified or potentially certified small and emerging business construction contractors. However, contractors must register for the institute he or she wishes to attend. Each contractor who successfully completes the LCAI will be issued a certificate of accreditation.
4. Accreditation without Institute Attendance. An SEB firm may request to be accredited without attendance. The staff of the BAP will conduct a review of the firm. If the contractor can present evidence he conducts business within standards set by Best Practices, an accreditation may be issued to the firm.
§903. Direct Bonding Assistance
A. Direct Bonding Assistance. All certified Small and Emerging construction businesses that have been accredited by the LCAI and all other certified SEBs (non-construction) may be eligible for surety bond guarantee assistance not to exceed the lesser of 25 percent of contract or $200,000 on any single project. All obligations whether contractual or financial will require the approval of the undersecretary.
B. Application Process
1. A Small Business Bonding Program applicant requesting a bond guaranty is first required to contact a surety company interested in insuring such a bond contingent on SEBD approval. The aforesaid surety will contact SEBD to discern eligibility requirements and submit a formal application on behalf of the business concern.
2. Application for surety bond guarantee assistance including contractor or business underwriting data as prescribed by surety companies shall be submitted by agent to the staff of the Bonding Assistance Program (BAP) and surety company.
3. Manager of BAP or designee will:
a. determine and document that business is eligible to participate in program;
b. secure proof that project has been awarded to contractor or business, in the case of performance and payment bonds;
c. determine worthiness of the project based on advice and input from surety company.
d. make recommendations to the BRAS director as required.
C. Surety Companies
1. Criteria for Eligibility and Continuation in the Program. A surety company must have a certificate of authority from and its rates approved by the Department of Insurance, and appear in the most current edition of the U.S. Treasury Circular 570.
a. BAP, at its sole discretion, may refuse to recommend the issuance of further guarantees/Letters of Credit (LC) to a participating surety where the administration finds any of the following:
i. fraud or misrepresentation in any of the sureties business dealings, BAP-related or not;
ii. imprudent underwriting standards;
iii. excessive losses (as compared to other participating sureties);
iv. failure of a surety to consent to BAP audit;
v. evidence of discriminatory practices; and
vi. consideration of other relevant factors.
b. BAP, at its sole discretion, may refuse to recommend the issuance of further guarantees/LC to a participating surety where the Department of Economic Development finds that the surety has failed to adhere to prudent underwriting standards or other practices relative to those of other sureties participating in the BAP. Any surety that has been denied participation in the program may file an appeal, in writing, delivered by certified mail to the secretary of the Department of Economic Development, who will review the adverse action and will render the final decision for the department. Appeals must be received no later than 30 days from the issuance of the director's decision.
2. Subsuretyship. A lead or primary surety must be designated by those sureties who desire to bond a contract together. BAP will recommend a guarantee only to one surety. This does not mean that surety agreements cannot be entered. In a default situation, BAP will recommend to indemnify only the lead or primary surety, which will have an indemnification agreement with its re-insurers.
§905. Calculation of Guarantee Fee Deduction
Repealed.
§907. Management Construction/Risk Management Company
A. Surety may require contractor to engage a management construction/risk management company to do, at a minimum, an independent take off and review of all low bid projects and advise BAP of their findings, this determination shall be made based on the Surety’s standard underwriting procedures. Surety may also require contractor to engage a management construction/risk management company to provide the following services:
1. review of the initial bond request for compatibility of the contractor with the scope of work as outlined in the solicitation;
2. job cost breakdown and bid preparation assistance;
3. monitor all projects once awarded. This will include a full (critical path) reporting throughout the life of the contract;
4. funds receipt and disbursement through a jobspecific account on each project. This will include compliance with all lien waivers, releases and vendor payment verification;
5. make itself immediately available for project completion on any defaults at no additional fee to the project cost.
B. Management construction/risk management company engaged by contractor shall be pre-approved by BAP and surety. BAP shall not receive any portion of any fees paid to management construction/risk management company by contractor.
§909. Underwriting a BAP Guaranteed Bond
A. In underwriting a BAP guaranteed bond, the surety is required to adhere to the surety industry's general principles and practices used in evaluating the credit and capacity; and is also required to adhere to those rules, principles, and practices as may be published from time to time by the BAP.
B. Once an application for a bond guarantee/LC is received from a contractor, a review will be conducted in order to determine whether the Small and Emerging Business is eligible for BAP's surety bond guarantee assistance. This review will focus on the presence of a requirement for surety bonds and other statutory requirements.
1. Bonds
a. There must be a specific contract amount in dollars or obligee estimate of the contract amount, in writing, on other than firm fixed price contracts.
b. There must be nothing in the contract or the proposed bond that would prevent the surety, at its election, from performing the contract rather than paying the penalty.
c. BAP, having guaranteed the bid bond, may refuse to recommend guarantee of the required payment and performance bonds when the actual contract price exceeds the original bid and the higher amount. In such an instance, the surety would either issue the payment and performance bond without BAP's guarantee, or suffer default in fulfilling the bid bond, which should result in claims against the surety and surety's claim against BAP.
2. Types of Bond Guarantees. BAP guarantees will be limited to certain bid, performance, and payment bonds issued in connection with a contract. Bid, performance, and payment bonds listed in the Contract Bonds section, Rate Manual of Fidelity, Forgery and Surety Bonds, published by the Surety Association of America, will be eligible for a BAP guarantee. In addition, the BAP guarantee may be expressly extended, in writing, to an ancillary bond incidental to the contract and essential to its performance.
3. Ineligible Bond Situations and Exceptions
a. If the contracted work is already underway, no guarantee will be issued unless the director consents, in writing, to an exception.
b. While it should not be a common occurrence, and is in fact to be discouraged, applications for surety bonds may occasionally be submitted for consideration after a job is in process. In such cases, the surety must submit, as part of the application, the following additional information:
i. evidence from the contractor that the surety bond requirement was contained in the original job contract;
ii. adequate documentation as to why a surety bond was not previously secured and is now being required;
iii. certification by contractor: list of all suppliers indicating that they are paid up to date, attaching a waiver of lien from each; that all labor costs are current; that all subcontractors are paid to their current position of work and a waiver of lien from each;
iv. certification by obligee that the job has been satisfactorily completed to present status; and
v. certification from the architect or engineer that the job is in compliance with plans and specifications; and is satisfactory to the present.
c. There are prepared forms published by the American Institute of Architects (AIA), which may be used for the purposes listed above.
C. The surety must satisfy to BAP that there is reasonable expectation that the Small and Emerging Business will perform the covenants and conditions of the contract with respect to which a bond is required. BAP's evaluation will consider the Small and Emerging Business' experience, reputation, and its present and projected financial condition. Finally, BAP must be satisfied as to the reasonableness of cost and the feasibility of successful completion of the contract. The BAP's determination will take into account the standards and principles of the surety industry.
§911. Guarantee
A. Amount of Guarantee. Providing collateral in the form of an irrevocable letter of credit to the surety may be posted on an individual project basis at the discretion of the Department of Economic Development.
B. Surety Bond Guarantee Agreement
1. Terms and Conditions
a. The guarantee agreement is made exclusively for the benefit of BAP and the surety; it does not confer any rights or benefits on any other party including any right of action against BAP by any person claiming under the bond. When problems occur on a contract substantive enough to involve the surety, the surety is authorized to take actions it deems necessary. Regardless of the extent or outcome of surety's involvement, the surety's services, including legal fees and other expenses, will be chargeable to the contractor unless otherwise settled.
b. Any agreement by BAP to guarantee a surety bond issued by a surety company shall contain the following terms and conditions:
i. the surety represents that the bond or bonds being issued are appropriate to the contract requiring them;
ii. the surety represents that the terms and conditions of the bond or bonds executed are in accordance with those generally used by the surety for the type of bond or bonds involved;
iii. the surety affirms that without the BAP guarantee to surety, it will not issue the bond or bonds to the principal;
iv. the surety shall take all steps necessary to mitigate any loss resulting from principal's default;
v. the surety shall inform BAP of any suit or claim filed against it on any guaranteed bond within 30 days of surety's receipt of notice thereof. Unless BAP decides otherwise, and so notifies surety within 30 days of BAP's receipt of surety's notice, surety shall take charge of the suit for claim and compromise, settle or defend such suit or claim until so notified. BAP shall be bound by the surety's actions in such matters;
vi. the surety shall not join BAP as a third party in any lawsuit to which surety is a party unless BAP has denied liability in writing or BAP has consented to such joinder. .
c. When contractor successfully completes bonded job a status inquiry report is signed by appropriate parties and is forwarded to surety's collateral department. Surety shall release standby letter of credit within 90 days of recordation of acceptance date shown on status inquiry report.
d. Variances. The terms and conditions of BAP's guarantee commitment or actual bond guarantee may vary from surety to surety and contract to contract depending on BAP's experiences with a particular surety and other relevant factors. In determining whether BAP's experience with a surety warrants terms and conditions which may be at variance with terms and conditions applicable to another surety, BAP will consider, among other things, the adequacy of the surety's underwriting; the adequacy of the surety's substantiation and documentation of its claims practice; the surety's loss ration and its efforts to minimize loss on BAP guaranteed bonds; and other factors. Any surety which deems itself adversely affected by the director's exercise of the foregoing authority may file an appeal with the secretary of the Department of Economic Development. The secretary will render the final decision.
2. Reinsurance Agreement. In all guarantee situations, BAP agrees to reimburse the participating surety up to the agreed-upon percentage of any and all losses incurred by virtue of default on a particular contract. The participating surety agrees to handle all claims, with recoveries being shared on a pro rata basis with BAP. This includes reinsurance agreements between the surety and any other licensed surety or reinsurance company. In other words, no indemnity agreement can be made to inure solely to the benefit of the surety to recover its exposure on any bond guarantee by BAP without BAP participating in its pro rata share.
3. Default
a. Notice of Default. Surety shall notify BAP if it becomes aware of any circumstances which may cause the contractor to fail to timely complete the project in accordance with the provisions of the contract. Where BAP receives information from other sources indicating a contractor is in potential violation of his contract, the information is to be relayed to the surety for its information and appropriate action.
b. Default Claims, Indemnity Pursuit, and Settlement
i. The sole authority and responsibility in BAP for handling claims arising from a contractor's default on a surety bond guaranteed by the BAP shall remain with the director and undersecretary relative to BAP's guarantee. The director and undersecretary will process and negotiate all claim matters with surety company representatives.
ii. In those situations where BAP's share is $500 or less, the surety shall notify the contractor, by letter, of its outstanding debt with no further active pursuit undertaken by the surety for which BAP would be requested to reimburse.
iii. In those situations where BAP's share is over $500 through $2,500, the surety shall promptly develop financial background information on the debtor contractor. These findings will determine whether it is economically justified to further pursue indemnity recovery or to close the file.
iv. In those situations where BAP's share is over $2,500, the surety shall pursue recovery through its normal method, assessing and comparing the estimated cost of recovery efforts with the probable monetary gain from the effort prior to exercising its rights under LC. v. The surety shall advise BAP of attempts made to contact indemnitor or to attach other assets, and the outcome of these attempts. The surety shall insure that BAP is credited with its respective apportionment of all recovery within 90 days of the recovery.
vi. At the culmination of subrogation and indemnity recovery efforts, the surety shall notify the obligor of the total amount outstanding. A copy of t he notice sent to the contractor shall be promptly forwarded to the BAP. After recovery efforts have been exhausted, the surety and BAP will make final reconciliation on the defaulted case, and close the file on that particular contractor's project. Prior to closing the file, surety shall conduct a recapitulation of the account to assure that BAP has been correctly credited with all funds recovered from any and all sources.
vii. Under the terms and conditions of the surety bond guarantee agreement, the authority to act upon proposed settlement offers in connection with defaulted surety bonds lies with the surety, not with the BAP. A settlement occurs when a defaulted contractor and its surety agree upon a total amount and/or conditions which will satisfy the contractor's indebtedness to the surety, and which will result in closing the loss file. The surety must pay BAP its pro rata share of such settlement. BAP, immediately upon receipt of same, closes the file.
4. Reinstatement. A contractor's contractual relationship is with the surety company. Therefore, all matters pertaining to reinstatement must be arranged with and through the surety. BAP's contractual relationship is with the surety company only. Because of these relationships, BAP will neither negotiate nor discuss with a contractor amounts owed the surety by the contractor, or settlement thereof.
§913. Audits
A. At all reasonable times, BAP or designee may audit the office of either a participating agency, its attorneys, or the contractor or subcontractor completing the contract, all documents, files, books, records and other material relevant to the surety bond guarantee commitments. Failure of a surety to consent to such an audit will be grounds for BAP to refuse to issue further surety guarantees until such time as the surety consents to such audit. However, when BAP has so refused to issue further guarantees the surety may appeal such action to the secretary of the Department of Economic Development. All appeals must be in writing and delivered by certified mail within 30 days of receiving the director's written issuance of notice that no further guarantees will be issued. Otherwise the director's decision becomes final.
§915. Ancillary Authority
A. The director, with the approval of the undersecretary and assistant secretary, will have the authority to commit funds and enter into agreements which are consistent with and further the goals of this program. This authority would include, but not be limited to, designating a pool of funds upon which only a particular surety has recourse to, in the event of a contractor default.
Chapter 11. Promotion of Small and Emerging Businesses
§1101. Promotion
A. Directory
1. Compilation. The SEBD Program shall compile a directory of all certified SEBs and make it available to the businesses and governmental agencies.
2. Frequency of Publication. The directory shall be updated at least annually, based upon information provided by certified businesses. The SEBD Program may issue updated directories more frequently.
3. Volume and Distribution. At least one copy of the directory will be made available to each state agency and educational institution, and copies will be provided to the state library. Additional copies may be made available to the public and governmental agencies as SEBD Program's resources permit.
4. Available Information. Public information concerning a Small and Emerging Business may be obtained by contacting the Small and Emerging Business Development Program staff during normal working hours.
B. Other Promotional Means. The SEBD Program will utilize other feasible means of promoting Small and Emerging Businesses, such as, but not limited to, the internet, world wide web, electronic bulletin boards, trade shows, or private sector contacts.
Chapter 13. Complaints and Investigations
§1301. Complaints and Investigation of Ineligibility
A. Right To File Complaint. Any individual, firm, or governmental agency which believes that a certified business does not qualify for certification may file a written, signed complaint with the SEBD Program. The complaint must contain sufficient information for SEBD Program staff to conduct an investigation, including specific identification of the affected business, basis for the charge of ineligibility, and identification, mailing address, and telephone number of the complainant.
B. Right to Due Process. No Small and Emerging Business shall be decertified based upon a complaint, without first having had an opportunity to respond to the allegations; however, failure of the Small and Emerging Business to respond to the SEBD Program's notification within 30 calendar days of mailing from the Program may result in revocation of certification.
C. Investigative Procedure
1. Notification of Allegation. The SEBD Program shall notify the certified business which is subject of the complaint by certified mail, return receipt requested, of the allegation within 15 calendar days of the complaint's receipt.
2. Investigation Conducted. Within available resources, the SEBD Program shall investigate each complaint as promptly as possible. In no event shall the investigation extend beyond 60 calendar days from the date that the complaint was received.
3. Cooperation. The Small and Emerging Business shall cooperate fully with the investigation and make its staff and records available to the SEBD Program, if requested. Insufficient cooperation may be grounds for concluding that the firm has not borne the burden of proving to the satisfaction of the SEBD Program that it is eligible for certification, resulting in revocation of certification.
4. Upon completion of the investigation, the SEBD Program's staff shall make a determination and issue a written decision which either rejects the complaint or revokes the certification within 10 working days. A copy of the written decision shall be sent to the firm that was subject of the complaint, the complainant, and the director of the SEBD Program of State Purchasing.
§1303. Grounds and Procedure for Reconsideration of Denial
A. Right to Petition. A decision by the SEBD Program to deny issuing certification, deny renewal of certification, or to revoke certification will be reconsidered after an applicant business has submitted a written petition for reconsideration to the staff of the SEBD Program.
B. Grounds. Grounds for petitioning the SEBD Program to reconsider a denial or revocation of certification are that the Small and Emerging Business Development Program:
1. did not have all relevant information;
2. misapplied its rules;
3. otherwise made an error in reaching it original decision.
C. Right to Petition for Reconsideration. A petitioning business may appeal SEBD Program's decision to deny issuance of certification, to deny recertification, or to revoke certification. Only a firm, which is subject of the denial or revocation, has a right to petition for reconsideration.
1. Petition Submitted. The appellant business submits a written petition for reconsideration to the SEBD Program's staff. If the petition has not been received by the SEBD Program within 30 days of the date of the letter announcing the denial or revocation, the SEBD Program's decision becomes administratively final.
2. The petition shall specify grounds upon which reconsideration is justified and the type of remedy requested. The petition for reconsideration must also clearly identify a contact person, mailing address, telephone number. The petitioning firm may provide any additional information which would be pertinent to the issue.
3. Acknowledgment. Upon receiving a petition for reconsideration, SEBD Program shall acknowledge its receipt by sending certified mail, return receipt requested, to the petitioner within five working days.
4. Reconsideration. The SEBD Program shall consider the petition and review all pertinent information, including additional information provided by the appellant business. The SEBD Program may conduct further investigation as necessary.
5. Notification of Decision. No later than 60 calendar days from receipt of the petition for reconsideration, the SEBD Program shall notify the petitioner by certified mail, return receipt requested, of its decision either to affirm the denial or revocation, with specific reason(s) of the grounds for the decision.
D. Final Decision. A decision to deny, revoke, or suspend certification following consideration of a petition for reconsideration is final.
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