Contracting with the government has just gotten a little more interesting. The US Small Business Administration increased the limit on surety bonds for small business contractors from $2 million to $5 million. That extra $3 million means that more small business contractors are going to be able to bid on higher paying contracts that were off-limits to them before.
For many people that does not mean anything; many are left wondering what Surety Bonds are. Most of the definitions that available online are not satisfactory and left me feeling a bit baffled. One way to look at them is that surety bonds are paid for by a third party insurance company, stating that if the contractor should default on a contract the government still gets the job done or has their money returned. A better analogy is that it is like when you buy a new car; during the loan process, you have to prove you have car insurance just in case you total the car before the loan is paid.
What does this mean though? In theory, larger surety bonds are going to help small businesses get more of the stimulus construction contracts, such as paving roads or constructing buildings. Acting SBA Administrator Darryl K. Hairston claims that “These changes will support small and emerging businesses nationwide, particularly construction contractors who have seen their markets hurt by a poor economy and lagging construction environment.” The $3 million increase in surety bonds is only one of the many changes the SBA has made recently. The SBA seems to be going all out trying to help small business gain federal contracts. One of the other changes made to the Federal Register allows the SBA to give a surety bond on a federal contract worth up to $10 million; however the SBA will only award such large Surety Bonds if the contracting officer determines that it is required.
Many contractors have a surety bonds in one form or another, however, not every company will be able to obtain one for $10 million. The range varies depending on the contract and your businesses performances. A thing to keep in mind is that when you are bidding on a contract, make sure that your business can provide what is being asked. The point of a surety bond is to prevent the government from losing money. Ideally you will never need to use one, but it is often required to have one for contracts. Obviously, you never want to default on a government contract because the likelihood of your business ever getting another is slim to none.
Showing posts with label big business bailout. Show all posts
Showing posts with label big business bailout. Show all posts
Tuesday, March 31, 2009
Thursday, March 12, 2009
Not Down For the Count: Citigroup’s Round Two
Think about last year, 2008. What comes to mind? For many Americans graduations, vacations, and anniversaries are the first things that pop into their head. However, quickly following these happy thoughts are ones focusing on the declining stock market, job loss, and the economy. I think I’m the only one who thinks it was the year of the rat, which I’m sure no one else but Chinese food lovers know, thanks to the free Christmas calendar. Last year also marked a key time in America’s history—the government didn’t let big businesses fail. Multiple American-based corporations received bailouts to try to keep jobs within the company. One of the recipients was Citigroup and they didn’t just receive one, but two bailouts in 2008 totaling roughly $45 billion.
Not all of the companies that received a bailout have turned a profit since the check came in. However, Citigroup did make a profit for the first time in five quarters. At the end of 2008, Citigroup declared that they had lost $8.29 billion in just the fourth quarter of the year. The government gave them a second chance. The first time around, Citigroup received $25 billion from the Troubled Asset Relief Program, TARP, which barely covers the total loss for 2008 or the five consecutive quarters that the company declared a loss instead of a gain. They got another $20 billion in November of 2008 from the government and yet, Citigroup still declared a loss by the end of the year.
However, the company acknowledged they needed change. Originally, Sanford I. Weill formed Citigroup in 1998 when he combined the insurance company Travelers Group and the nation’s largest bank, Citigroup Inc. It was a revolutionary idea that was supposed to combine insurance, Wall Street business, and traditional banking together; what most of its shareholders quickly found was that it was a flop. Since Citigroup merged, its stock price has fallen more than 76%. Due to its faults, whatever they may be, Citigroup announced in January of 2009 that it would split the company into two facets: Citicorp and Citi Holdings.
Since Citigroup announced the idea for splitting up its company, it has given the government more control over the stocks; the taxpayers technically own up to 36% of them. Before March 10, analysts were predicting that Citigroup would require another loan from the government down the line, but they might be changing their tune soon. On March 9, 2009, the company received an internal memo stating that the first two months of the year were at an $8.3 billion profit before taxes in February. Citigroup’s profit announcement caused the DJIA to soar on March 10 379.44 points to 6926.49; it was the largest one-day gain this year and one of the biggest since World War II.
The spike in Citigroup stock does not mean that their troubles are at an end. Like most companies, big or small, there are difficulties that we all must face. By splitting the company into two, making it easier to manage, and allowing the management to prune the unnecessary waste within the corporation, the company cut back on its early losses in 2009. Small businesses can learn from the big businesses failures. By accepting that what their company originally did wasn’t working, Citigroup took the help that the government offered and tried fixing themselves. They didn’t continue on the same downward path, but tried something a little different. Small businesses will not have as massive of a bailout as Citigroup received, but there will be more opportunities within the government contracting arena that weren’t there before. Taking advantage of what the government offers and implanting change might be the key lesson that needs to be learned by the business community.
Not all of the companies that received a bailout have turned a profit since the check came in. However, Citigroup did make a profit for the first time in five quarters. At the end of 2008, Citigroup declared that they had lost $8.29 billion in just the fourth quarter of the year. The government gave them a second chance. The first time around, Citigroup received $25 billion from the Troubled Asset Relief Program, TARP, which barely covers the total loss for 2008 or the five consecutive quarters that the company declared a loss instead of a gain. They got another $20 billion in November of 2008 from the government and yet, Citigroup still declared a loss by the end of the year.
However, the company acknowledged they needed change. Originally, Sanford I. Weill formed Citigroup in 1998 when he combined the insurance company Travelers Group and the nation’s largest bank, Citigroup Inc. It was a revolutionary idea that was supposed to combine insurance, Wall Street business, and traditional banking together; what most of its shareholders quickly found was that it was a flop. Since Citigroup merged, its stock price has fallen more than 76%. Due to its faults, whatever they may be, Citigroup announced in January of 2009 that it would split the company into two facets: Citicorp and Citi Holdings.
Since Citigroup announced the idea for splitting up its company, it has given the government more control over the stocks; the taxpayers technically own up to 36% of them. Before March 10, analysts were predicting that Citigroup would require another loan from the government down the line, but they might be changing their tune soon. On March 9, 2009, the company received an internal memo stating that the first two months of the year were at an $8.3 billion profit before taxes in February. Citigroup’s profit announcement caused the DJIA to soar on March 10 379.44 points to 6926.49; it was the largest one-day gain this year and one of the biggest since World War II.
The spike in Citigroup stock does not mean that their troubles are at an end. Like most companies, big or small, there are difficulties that we all must face. By splitting the company into two, making it easier to manage, and allowing the management to prune the unnecessary waste within the corporation, the company cut back on its early losses in 2009. Small businesses can learn from the big businesses failures. By accepting that what their company originally did wasn’t working, Citigroup took the help that the government offered and tried fixing themselves. They didn’t continue on the same downward path, but tried something a little different. Small businesses will not have as massive of a bailout as Citigroup received, but there will be more opportunities within the government contracting arena that weren’t there before. Taking advantage of what the government offers and implanting change might be the key lesson that needs to be learned by the business community.
Subscribe to:
Posts (Atom)
Posts
