DOT program would help small, disadvantaged businesses get insurance for government contracts

Program helps small businesses get government work

The Department of Transportation is planning a series of workshops to help small and disadvantaged businesses get the insurance needed to obtain stimulus and other government contracts.

The DOT will hold 10-week workshops in Chicago, Dallas and Atlanta to teach businesses how to obtain surety bonding, the type of insurance used in the construction industry. At the end of the workshops, each business will be matched with a local company that can provide bonding. More cities may be added later to the program.

Smaller and minority firms have complained that they have been unable to win stimulus contracts. Some groups have received a disproportionately small percentage of contract dollars.

Transportation Secretary Ray Lahood said Wednesday that bonding seems to be the main issue for small businesses. Billions of dollars in stimulus contracts have yet to be awarded, he said.

Factors such as capital, lines of credit, equipment, personnel and character references are considered when deciding whether to bond a company. Since government contracts are usually large, smaller businesses often don’t have the experience, capital or track record to compete for the work.

Samuel Foley, chairman of the construction committee of the National Black Chamber of Commerce, said the new program does not address the underlying issue of small or disadvantaged businesses caught in a Catch-22 situation: They don’t have enough capital or bank credit to get bigger jobs, and without the bigger jobs they can’t get the funds to grow.

“These firms know how to get bonded,” Foley said. “It’s their bondability that’s an issue.”

But Lynn Schubert, president of the Surety and Fidelity Association of America, which is collaborating with the DOT on the workshops, said the program will walk businesses through the steps needed to overcome such limitations.

“That’s what this program is really all about,” she said. “Working with contractors to understand what it takes to move from this size project to the next size project, and then working with them to get that in place so they can get that bigger job.”

The DOT expects about 30 to 35 businesses to participate in each city. The workshops will be held May 27 in Chicago, June 10 in Dallas and June 24 in Atlanta.