1. Small and Disadvantage Business (S/DBE) Contractor Surety Bond Support Programs

2. S/DBE Program Goals Achieving small business participation in public sector construction projects Making this participation productive and successful Providing a foundation for the ongoing success of small contractors Enhanced local economic development

3. S/DBE Program Major Findings First, the real crisis is one of lack of business capacity and not necessarily one of bonding and contract financing. Second, bond waiver and bond guarantee programs do not greatly assist in increasing the long term participation or capacity of local small contractors Third, the most critical element for the success of local contractor support programs is the owner’s commitment and understanding of program objectives. Last, that local small companies fail to take advantage of outsourced business support services and current business software applications

4. Keys to a Successful S/DBE Program A knowledgeable and committed owner A receptive contractor community with a base level of capacity Bond and financing tools Competent local technical resources Direct connections to jobs

5. Types of S/DBE Programs Bond Wavier Programs Bond Referral Programs Bond Guarantee Programs Contractor Capacity Building Programs (Aon LCDP)

6. Bond Wavier Programs Main Attribute –Surety bonds are waived for projects below a certain amount ($250,000) Main Benefit –S/DBE do not have the surety bond as an obstacle to participation –Least expensive program to implement Main Disadvantages –S/DBE tend to stay small and remain in the bond wavier program –No surety bond tract record is achieved –No contract financing support Outcomes –Tends to keep the S/DBE contractor community underdeveloped

7. Bond Referral Programs (BRP) Main Attribute –Assistance in packaging surety bond applications and shopping around the market Main Benefit –Contractors get bond application prepared Main Disadvantages –Still primarily a financial based underwriting process –Generally no contract financing support Outcome –Only assist contractors that meet standard market underwriting criteria

8. Bond Guarantee Programs (BGP) Main Attribute –Owner establishes a fund for bond guarantee purposes Main Benefit –Provides somewhat easier access to surety bonding than standard market Main Disadvantage –Owner financial exposed –Still primarily a financial based underwriting process –Generally no contract financing support Outcome –Generally supports only contractors on the bubble and does not truly penetrate into the community

9. Contractor Capacity Building Programs (CCBP) Main Attribute –Designed for greater penetration into S/DBE market and to assist in both technical and managerial development Main Benefits –Employs a technically based underwriting for both surety and contract financing –Substantially reduces the traditional obstacles to obtaining surety bonding and contract financing for S/DSBE, while insuring that they can perform Main Disadvantage –Program Cost Outcome –Engender the creation of a new cadre/pool of prime capable local SDBE

10. Aon CCBP Uniqueness Underwriting for surety bonds and contract financing technically based In-house authority for surety bonding and contract financing Program targeted to support local emerging small and disadvantaged firms Contractor Progress Monitoring

11. Aon CCBP Uniqueness Pre-qualification assessment to assure contractor capabilities All technically qualified participants receive surety bonding and working capital Program operation in a non-setaside, non-preference environment

12. Aon CCBP Methodology Early analysis determines contractor community technical capacity Technical assessment provides qualified contractors with surety bonding and contract financing Ongoing contractor performance monitoring reduces risks Feedback on the path to qualification, for firms lacking capacity

13. Aon CCBP Elements Outreach Qualification Assessment Surety Bonding and Contract Financing Technical Assistance Referral Contractor Progress Monitoring

14. Outreach Communications and marketing plan to encourage participation by small contractors Identification of available support services provided by locally based organizations Expansion of existing pool of local contractors eligible to bid on projects

15. Credit Underwriting “Qualification Assessment” As rigorous as traditional underwriting Contractor’s technical qualifications, experience and track record are the major criterion Tailored financial floor Recommendations provided regardless of approval level

16. In-house Bonding Authority Qualification Assessment assures technically qualified contractors Conducted by engineering/construction and financial professionals Extensive interview, references, credit check and contractor progress monitoring Rates that will keep bidders competitive

17. In-house Contract Financing Authority CCBP underwriting is used for contract financing and surety bonding “Feeder System” Local banks benefit from financial development of emerging businesses Financing terms matched to local market

18. Performance Monitoring Coordination of contractor performance information with construction management team Monitoring of schedules, performance, and compliance with CM directives Preparation of periodic and final reports on contractor progress and performance

19. Aon CCBP Achieves Results Achieve local participation goals in a non-set- aside, non-preference environment Enables additional small contractors participation by substantially reducing the traditional financial obstacles to surety bonding and contract financing Contributes lasting economic benefit to communities through creation of viable new businesses capable of keeping more construction dollars local Provide a new unique database of qualified local contractors

20. Aon CCBP Based on a Proven Program Experience with programs in Florida, Texas, Michigan, Maryland, Colorado, Ohio and Washington Over 500 contracts successfully completed with no losses or defaults Over $300M in bonding capacity and $40M in contract financing provided Over 100 new prime contractors created