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During a Dec. 4 town hall meeting on Montgomery College's Rockville campus, U.S. Sen. Benjamin Cardin emphasized the importance of investing in America's infrastructure to stimulate the economy and to create jobs ("Cardin: Federal spending needed for economy," Dec. 5 article).

A key point made by Senator Cardin was the need to ensure that contracts for infrastructure projects should be unbundled and let in contract sizes that will allow small contractors as prime contractors to participate in this work.

The surety and construction industries have been urging this same solution in Congress to help small businesses increase their share of public works contract awards, and support Senator Cardin's proposal. However, his suggestion that surety bonds be waived for these infrastructure projects, while well-intentioned, will cause more detriment than benefit to the government, to U.S. taxpayers and to the small business community.

Under federal law, contractors must provide performance and payment bonds for all federal construction projects in excess of $100,000. A performance bond secures the contractor's obligation to perform the contract. A payment bond secures the contractor's obligation to pay subcontractors and suppliers.

In determining whether to write a bond for a contractor, a surety reviews the experience, capability and financial strength of the contractor, and provides a bond only if it believes that the contractor is capable of performing the contract.

If performance bond requirements are waived on federal construction projects, the government and taxpayers will bear the full financial risk if contractors fail to complete projects.

Further, waiving payment bonds on infrastructure projects will harm the small businesses that serve as subcontractors and suppliers on these projects. Subcontractors and suppliers performing public construction work do not have mechanic's lien rights against public property. If the prime contractor fails to pay subcontractors and suppliers due to bankruptcy or for other reasons, such subcontractors and suppliers do not have an alternative means to recover their wages, costs and expenses.

The Surety and Fidelity Association of America, a trade association of approximately 500 insurance companies that are licensed to provide surety and fidelity bonds, and the National Association of Surety Bond Producers, a trade association of surety bond producers, who assist construction firms of every size to position themselves to qualify for surety credit, support Senator Cardin's goal of assisting small contractors.

Lastly, the article seems to indicate that the recent troubles experienced by American International Group were a factor in Senator Cardin's suggestion to waive bonds for small contractors. There are two problems with this assessment.

First, it is typical that a surety, like any other business, has a target market. AIG is not active in the small contractor bonding market. Thus, AIG's recent difficulties do not have a direct impact on the bonding market for small contractors.

Second, although AIG is one of the leading issuers of surety bonds, there are other sureties that generate more premiums from surety bonds and there are many sureties that actively target the small contractor market. These sureties remain willing to write surety bonds for small construction businesses.

SFAA and NASBP urge Congress, as it addresses both our infrastructure needs and our economy, to do so in ways that allow increased small contractor participation through curtailing the practice of bundling smaller projects into larger projects, which makes it more difficult, if not impossible, for small businesses to bid on federal construction projects. However, waiving bond requirements is not the answer to assist these small businesses.

Lynn M. Schubert, Washington, D.C.

The writer is president of the Surety and Fidelity Association of America.

Richard A. Foss, Washington, D.C.

The writer is executive vice president of National Association of Surety Bond Producers.