Surety bonds for the BEAD Program

BEAD – Enabling possibility through connectivity

The federal Broadband Equity, Access, and Deployment (BEAD) program provides $42.45 billion in funding to states to expand high-speed internet access across the US by 2030.

Due to the risks inherent in such important projects, BEAD requires states to adopt financial assurance measures for entities bidding to undertake the work.

The program also requires states to take all necessary steps to ensure that minority-owned businesses and women’s business enterprises are used, when possible. The NTIA stipulates that “minority businesses, women-owned business enterprises, and labor surplus area firms are recruited, used, and retained when possible.”

Surety bonds can help mitigate financial risks and help provide compliance with contracts paid for by federal funding. As the world’s largest surety broker by premiums placed, Marsh is keen to assist firms not familiar with bonding, or perhaps with inadequate capacity to allow for broader participation in the process, by providing a means for small businesses to obtain a bond for a contract.

Who can apply for BEAD funding?

The National Telecommunications and Information Administration (NTIA) distributes program funding to US states, which then host subgrant competitions to distribute the monies.

In general, municipalities, local governments, and private service providers can apply for BEAD funding. Public-private partnerships (P3s) are likely to receive priority funding through state grant programs. Each state has different restrictions — for example, some states limit municipalities with a population of more than 25,000 from providing internet service.

Which services can participate in the BEAD program?

The BEAD program aims to address the digital divide in the US based on three priorities: Building infrastructure, developing broadband action plans, and supporting programs to promote user adoption of services.

Accordingly, subgrantees (participants that have responsibilities to carry out the award), may include companies involved in:

Construction
Network improvement and updates
Engineering and design
Workforce development
Cybersecurity

Who can apply for a surety bond?

For many of the sectors participating, a surety bond is often required to guarantee a project’s completion or the supply of a good or service.

How does it work?

In essence, surety bonds are an agreement between three parties: the contractor (your business), the insurance/surety company (such as those Marsh provides access to), and the project owner (the municipalities).

To obtain a surety bond, the insurer will evaluate the contractor on experience, qualifications, and capacity as a prerequisite for qualifying for the bond. The cost of the bond will depend on the size of the project, the strength of the contractor’s balance sheet, and the risk of default.

Small businesses can benefit from surety bonds as an alternative to bank guarantees. Often, bank guarantees can be expensive both in terms of costs and liquidity impact, whereas surety bonds may be offered at a lower cost and have the benefit of being an off balance-sheet liability with no liquidity impact. If the contractor fails to comply with the terms and conditions of the contract, the bond may provide financial compensation to the project owner for any losses or damages, thereby protecting tax-payers.

What are the benefits of surety for BEAD?

Surety can help reduce capital barriers for potential applicants and enable more providers to participate in BEAD investment, such as small and community-focused ISPs, municipalities, and minority and women-owned businesses.

Many beneficiaries of surety bonds are government entities, as bonds can help protect against contractors not completing the work on time or to the correct standard, or contractors not being able to pay for subcontractors, supplies, and materials.

How Marsh can help

Marsh’s Surety Practice brings together longstanding relationships with the surety industry and sophisticated risk management resources to help your company take advantage of the benefits surety bonds can offer to potentially participate in the BEAD program. Marsh is also collaborating with Peachtree Providence Partners, to expand surety market access to contractors who may be unfamiliar with bonding.

Some of the benefits Marsh’s Surety Practice may bring to your company are:

The largest surety broker in the US by premiums placed, with significant industry experience in broadband and telecom surety placements
Industry specialists who seek to understand your business and then tailor surety solutions to your business needs
Our strong relationships with sureties’ decision-makers
Secure technology through MSurety, Marsh’s online bond management system, which enables you to easily monitor, modify, and manage your surety program

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Surety bonds for the BEAD Program