When an Attorney-in-Fact signs a bid bond (SF-24) for a corporate surety and the bond is accompanied by a power of attorney, does the location (or place of business) of the Attorney-in-Fact need to be included on the power of attorney? In such a situation if neither the bond nor the power of attorney provides the location of the Attorney-in-Fact, how would a KO know if the Attorney-in-Fact is located in a state which the corporate surety is licensed?

Note (c) at the bottom of the TC 570 webpage states the following:

"A surety company must be licensed in the State or other area in which it provides a bond, but need not be licensed in the State or other area in which the principal resides or where the contract is to be performed [28 Op. Atty. Gen. 127, Dec. 24, 1909; 31 CFR Section 223.5(b)]."

In my view, the Attorney-in-Fact sigining a bond for a surety should (in-fact) be located in a state that the surety is licensed to conduct business.

By Anonymous on Wednesday, February 20, 2002 - 10:06 am:

Let me phrase it another way. Does it matter if the Attorney-in-Fact, signing a bond for a surety, is located within a state that the surety is licensed to do business?

By anon1 on Wednesday, February 20, 2002 - 11:57 am:

Anonymous, according to the section quoted and the definition of what an attorney-in-fact is entitled to do, it would appear that he/or she is acting as an agent for the principal soooooo if the principal does not have to reside in the state where the surety company is licensed, I would surmise that neither does the agent. Make sense? I hope

By Anonymous on Wednesday, February 20, 2002 - 12:37 pm:

Sorry, TC 570 is short for Treasury Circular 570, your "Approved Sureties" link at http://fms.treas.gov/c570/c570.html.

Anon1, if the bond is being "provided" in a state which the surety company isn't licensed in, i.e., the state that the Attorney-in-Fact is providing the bond from, then I would think, according to Note (c), that the bond would be improper.

By anon1 on Wednesday, February 20, 2002 - 02:25 pm:

Let me try it from a different angle:

According to your cite: I interpret this to mean that a surety company MUST be licensed in the state FROM which it issues the bond. (i.e., it must be licensed in the state or area in order to conduct this type of business.) The principal of the company that is involved in the business decisions or other duties of authority does not have to reside in that state or area nor does the surety company have to be licensed in the state where the work is being performed.

The attorney-in-fact is acting as an agent of the principal (Law of Agency) or standing in the principal's shoes. Now if the principal does not have to reside in the state where the surety company is licensed then why would the attorney-in-fact have to?

Example: ACME Bonding is licensed to conduct bonding activities in Massachusetts. The bond must be signed by a principal who resides in Rhode Island. The attorney-in-fact lives in New York but acts as the agent. The bond is for work being done in Virginia. It looks pretty on point to me according to the cite.

By Anonymous on Wednesday, February 20, 2002 - 05:03 pm:

Anon1, the attorney-in-fact is acting as an agent of the surety, not the principal. The principal on a bond is the contractor. The cite I referenced says "a surety company must be licensed in the State or other area in which it provides a bond". If the surety's agent, the attorney-in-fact, provides a bond in a state which the surety isn't licensed, then it seems to me the bond must be considered improper. It sounds as if you are saying that a surety need only be licensed in one state. If so, then why would any surety company listed in Treasury Circular 570 need to show that it was licensed in more than one state.

By anon1 on Wednesday, February 20, 2002 - 05:52 pm:

anonymous:
Your last message clarifies some unknowns. I'll do a little more checking and get back if someone doesn't answer beforehand.

By anon1 on Wednesday, February 20, 2002 - 08:00 pm:

anonymous:

It's somewhat difficult to figure what your concern may be but here is what I have found in dealing with some bonding personnel and based on some personal experience in my own business a few years back. The attorney-in-fact is nothing more than the individual that has authority to sign documents or whatever powers are delegated to him by the principal. Defining principal is the key. In this case, the principal in the law of agency is the surety company at least as far as the attorney-in-fact is concerned. You say that the principal in this situation is the contractor(different position)-okay. So real life scenario is again:

The surety company is licensed in the State of Massachusetts to provide a construction bond. The work to be performed is in the state of New York. My agent (attorney-in-fact) resides in Rhode Island and has the power to sign my bonds. So what? Any service of process and notification to the surety company still goes back to the surety company licensed in Massachusetts.I think it is a proper bond.

By Anonymous on Thursday, February 21, 2002 - 09:12 am:

Here's the facts. A contractor submitted a bid bond with it's bid as required by the terms of the IFB. The bond was furnished by an attorney-in-fact acting for a surety company incorporated in the state of PA. The power of attorney accompanying the bond appointed the attorney-in-fact to "...make, execute, and deliver" surety bonds for the surety (act as the surety's agent). Neither bond or the power of attorney provided the address of the attorney-in-fact. The address of the attorney-in-fact on the bond was the home office of the surety.

The reference I cited is a note found at the bottom of the Treasury Circular 570. Treasury Circular 570 is a list of approved surety companies that provides the sureties State of incorporation, underwriting limitation, and the States that the surety is licensed to do business in.

Since the address of the attorney-in-fact is unknown the State in which the bond was provided is therefore unknown. I realize the surety is licensed to do business in PA (and numerous other states), but what I don't know is if the state that the attorney-in-fact provided the bond is a state that the surety is licensed in. What you are saying, however, is that the surety is from PA and PA is a state that the surety is licensed in, so it doesn't matter which state the attorney-in-fact provides the bond from.

I don't agree with you, but you're the only advice I've received, I appreciate it.

By AnonX on Thursday, February 21, 2002 - 09:16 am:

Anonymous:

Reject the bond and the bid. The protest decision should settle the question for you. You win either way it goes (think about it) and you advance our procurement knowledge.

By anon1 on Thursday, February 21, 2002 - 10:51 am:

Anonymous:

Am I missing something here? Your last post, in the first sentence said " the address of the attorney-in-fact was the home office of the surety" I assume the home office is in PA and that they are licensed to provide bonds. Your second to last para. says the attorney-in-fact address is unknown. I glad to see Bob might agree with some aspect of the agency theory-AnonX--where's your spirit of adventure?

Anonymous, from your last post and as more facts become known, how about this?

The surety company is licensed in the state of PA to issue bonds (not to be confused with licensed to provide bonds in the state of PA ONLY-see the difference.)Now taking the aforementioned cite, the contractor is performing services in New York.

The surety company does not have to be licensed in the state of New York and it doesn't really matter where the attorney in fact resides.

Thanks for keeping the neurons kicking.

By Anonymous on Friday, February 22, 2002 - 10:07 am:

I have a couple of questions:

Why does Treasury Circular 570 list all the states that a surety company is licensed to provide Miller Act bonds in?

-AND-

Why don't Miller Act sureties obtain a license in a single state and then just appoint attorney-in-facts throughout the U.S. to issue it's bonds?

By Anonymous on Friday, February 22, 2002 - 09:19 pm:

Bonds are somewhat like insurance. You must be licensed in the state to sell bonds for projects in that state. The states have regulatory agencies. Believe me, they need to regulate bonding companies.

By Anonymous on Monday, February 25, 2002 - 08:51 am:

Anon-9:19 pm, are you saying that a surety must be licensed in the state that it provides bonds in, or that a surety must be licensed in the state in which the project is being performed in?

By Anonymous on Monday, February 25, 2002 - 09:28 am:

Anon, 0851, I just spoke with a local agent for various construction bonding companies. She confirmed that the bonding company must be licensed in the state that the project is located in.

Some states (there are a few left) also require the agent, selling a bond for a project in that state, to be a local, state agent.

Finally, the bonding company has to be licensed in the state in which its agent is located.

You can call a local agent and obtain more clarification. They are in the yellow pages and are usually very helpful.

By Anonymous on Monday, February 25, 2002 - 09:53 am:

Anon-9:28 am, the original posting contains a quote from Note (c) found at the bottom of the Treasury Circular 570 webpage. It tends to agree with everything you're bonding agent said except that a bonding company need be licensed in the state that the project is being performed in.

Did she mention anything about the law of agency theory?

By Anonymous on Monday, February 25, 2002 - 10:33 am:

nope.

By Vern Edwards on Monday, February 25, 2002 - 10:49 am:

I called the Department of the Treasury's Surety Bond Branch this morning at (202) 874-6850. (Their phone number is on Circular 570.) Anybody with a question about bonds can call them. They were very nice and helpful. (Hint, hint.) According to them, both the surety company and the attorney-in-fact must be licensed in the state in which the bond is executed. Thus, in order to be sure that the bond is valid, you need to know the location of the attorney-in-fact who signed the bond. That does not mean that if the attorney-in-fact's location does not appear on the power of attorney you should reject the bid as nonresponsive (I checked the GAO decisions and couldn't find a case on point), but it probably means that you should find out where the attorney is located. If it turns out that either the surety company or its attorney is not properly licensed, then I suppose that you must reject the bid bond as being invalid and reject the bid as nonresponsive.

By Vern Edwards on Monday, February 25, 2002 - 10:55 am:

P.S.: Contrary to what Anonymous of 2/25 at 9:28am's "local agent" says, Treasury Circular 570 says that the surety does not have to be licensed in the state in which the project is located. Here is the note from the Circular:

"(c) A surety company must be licensed in the State or other area in which it provides a bond, but need not be licensed in the State or other area in which the principal resides or where the contract is to be performed [28 Op. Atty. Gen. 127, Dec.24, 1909; 31 CFR Section 223.5 (b)]. The term 'other area' includes the District of Columbia, American Samoa, Guam, Puerto Rico, and the Virgin Islands."
 

Underlining added.

By anon1 on Monday, February 25, 2002 - 12:07 pm:

So Vern, according to anonymous post of 2-21-2002 9:12, the attorney in fact address seems to be at the location where the PA firm is licensed. Brings us to another interesting scenario. Is the the attorney-in-fact really an attorney which must be licensed in the state since the attorney-in-fact transacts business or other matters in general not of a legal character-Interesting

By Vern Edwards on Monday, February 25, 2002 - 01:21 pm:

anon1:

Well, it's a question. But that's easy to check.

By Anonymous on Monday, February 25, 2002 - 01:28 pm:

FYI--the contractor who provided the bid bond has responded to an inquiry I made. The attorney-in-fact (his bonding agent) operates out of Georgia and issued the bond from Georgia. The state of Georgia is listed on the TC-570 as a state that the surety company (the one headquartered in Pennsylvania), is licensed to do business in. Therefore the bond was considered acceptable.

However, the bid would've been declared nonresponsive if the bonding agent (attorney-in-fact) had provided the bond from a state which the surety wasn't licensed to do business in.

By Vern Edwards on Monday, February 25, 2002 - 01:33 pm:

I'll tell you one thing--all these @#%$*& Anonymouses sure make this thread hard to follow. I can't tell who's talking to whom. Why can't people who won't give their real names at least give themselves distinct phony names like: Anonymighty, Clueless in DC, TrustMe, TheTruth, Gandalf, Delphi or ThePythoness, etc.? And while I can understand the original questioner not wanting to provide his/her name, why should anyone trust an answer from someone who won't give his real name?

I only wrote in to show that the original Anonymous could have gotten his or her answer simply by calling Treasury.

By anon1 on Monday, February 25, 2002 - 03:36 pm:

Cripes Vern, I always used ANON1

By Vern Edwards on Monday, February 25, 2002 - 03:53 pm:

anon1:

I wasn't talking about you or AnonX. There appear to be at least two other people in this thread who are using just plain "Anonymous."

By anon1 on Monday, February 25, 2002 - 04:44 pm:

Actually looks like there might have been three ,Vern, but it looks like Anonymous (original) at 1:28 got his answer. Now anonymous (orignal) aren't you glad you didn't reject it out of hand per anonX. Would cost protest money.

By Original Anon on Tuesday, February 26, 2002 - 09:31 am:

Sure am, Anon1.

By anon1 on Tuesday, February 26, 2002 - 07:45 pm:

Right on, seems like you are one of the type of Contracting people I still like to work with on the Federal side of the house, i.e., you asked-Good luck

By Anonymous on Wednesday, March 06, 2002 - 03:03 pm:

Below is a response from the Treasury folks to question I (original Anonymous) asked originally:

This is in response to your 2/22/02 email.

We have consulted our Legal Advisor and have been referred back to the regulation at 31 CFR Section 223.5(b) which is referenced in the note to the Circular 570.

A surety company must be licensed in the state where it or its agent executes (signs) a bond.
Stated another way, a bond is not acceptable if the agent/attorney in fact executes (signs) the bond in a state where the surety company is not
licensed to do business.

This is fairly clearly stated in 31 CFR Section 223.5(b), a copy of which may be obtained from our web site at www.fms.treas.gov/c570/index.html
under "Regulations". We have now modified footnote (c) on the Circular 570 to clarify this.

For your convenience, I am also inserting the language from this section below:

31 C.F.R. Sec. 223.5 Business.

(a) The company must engage in the business of suretyship whether or not also making contracts in other classes of insurance, but shall not be engaged in any type or class of business not authorized by its charter or the laws of the State in which the company is incorporated. It must be the intention of the company to engage actively in the execution of surety bonds in favor of the United States.

(b) No bond is acceptable if it has been executed (signed and/or otherwise validated) by a company or its agent in a State where it has not obtained that State's license to do surety business. Although a company must be licensed in the State or other area in which it executes a bond, it need not be licensed in the State or other area in which the principal resides or where the contract is to be performed. The term other area includes the Canal Zone, District of Columbia, Guam, Puerto Rico, and the Virgin Islands.

I trust this answers your question. If you have additional questions about how to interpret this regulation, you may wish to address your questions with your Agency's legal counsel.

By anon1 on Wednesday, March 06, 2002 - 07:59 pm:

anonymous:
Leads us back to your post of 21 Feb at 9:12. You said in your last sentence 1st para-the attorney in fact listed his address at the home office of the surety. If it's listed as licensed to do business in the state-it's valid-Regards

By Anonymous on Thursday, March 07, 2002 - 09:43 am:

Afraid not. According to Treasury, the attorney-in-fact and the surety are two separate and distinct entities. If a surety signs a bond on behalf of itself, no power-of-attorney is required, the individual signing for the surety would have been given such authority through corporate by-laws or some other means. If there's a power-of-attorney accompanying a bond, then the surety is authorizing some entity other than itself to sign the bond. Therefore, just because an attorney-in-fact signs a bond using the surety's home office address, doesn't necessarily mean that the attorney-in-fact is licensed to do business in the same state that the surety's home office is located. The attorney-in-fact must still be licensed in the state it executes the bond.

Please call the Treasury Department, Surety Bond Branch at (202) 874-6740, if you need further clarification on this matter.

By Anonymous on Thursday, March 07, 2002 - 10:15 am:

Anon1--

I see your point. However, it was found that the attorney-in-fact was not from the state that the surety's home office was in. And it was highly unlikely that the bond was issued by an attorney-in-fact in PA (also home office of surety) to a contractor in LA.

By joel hoffman on Thursday, March 07, 2002 - 10:20 am:

The "attorney-in-fact" typically works for a commercial insurance/bonding agency (e.g., Willis-Corroon Company), acting as an agent for the bonding company (e.g., USF&G), often located in another state. The bonding company has to be licensed in the state where the agent is located. It's pretty simple - similar to an insurance company-agent relationship. State Farm has to be licensed to sell insurance in the state that it's agent is located. happy sails! joel

By joel hoffman on Thursday, March 07, 2002 - 10:29 am:

I forgot to add that, the agent's location doesn't appear on the bond. Our contract admin offices allow upfront, separate progress payments for the bond. The Contractor furnishes a paid invoice from the agency which sold the bond. That's how we determine who the agent works for - not by reviewing the bond, itself. One should always require that Contractor submit the PAID invoice information with it's request for reimbursement for the bond. You'd be surprised at the number of small constructors that don't pay the bonding company. happy sails!

By Anonymous on Thursday, March 07, 2002 - 12:28 pm:

Joel--

31 C.F.R. Sec. 223.5(b), states in part, as follows:

"No bond is acceptable if it has been executed (signed and/or otherwise validated) by a company or its agent in a State where it has not obtained that State's license to do surety business."

If it's not known where the surety's agent provided a bond from, then how would Government know if bond is acceptable? And what happens if your contract admin office, when processing a payment for the bond, discovers that the bond was unacceptable because the surety's agent was unlicensed in the state which they provided the bond to the contractor?

Just wondering.

By joel hoffman on Thursday, March 07, 2002 - 07:16 pm:

I've never encountered such a situation. Our attorneys review the performance and payment bonds before the Contractor is allowed to begin work

Do the power of attorney accompanying the bid bond and the POA accompanying the P&P bonds describe the agency the attorney-in-fact works for? I don't remember and am out of town. Does anyone working construction contracts know the answer?

happy sails! joel

By Anonymous on Friday, March 08, 2002 - 12:27 pm:

Joel--

I asked my original question (original anon) due to reciept of a POA that didn't list the agent's location. I had never seen that before so I did a little research. I looked at several POA's received from contractor's. All of them listed the agent's state (sometimes city and state) at the end of the list of names of individuals appointed by the surety.

I work strictly with construction contracts. After your 3/7/02 post I went and looked at 13 bid bonds we received in response to a recent bid. All of the POA forms accompanying the bonds listed the agents state (or city and state), similar to the following:

Jeff Johnson, Terry Johnson, Kirby Johnson, Mary Johnson, individually, Johnsonville, TN

The Treasury Dept. folks have clarified all my questions. Thanks for the input.