Small Business

Use of the Surety Bond Waiver Has Been Limited Gao ID: RCED-92-166 July 7, 1992

Under a pilot Surety Bond Waiver (SBW) Program, the Small Business Administration (SBA) is permitted to waive federal surety bond requirements for socially and economically disadvantaged contractors participating in SBA's 8(a) program. Separate legislation called for the Defense Department (DOD) to make every effort to award at least 30 contacts that used bond waivers in fiscal years 1990 and 1991. Only 13 contracts awarded in fiscal years 1989 through 1991 used bond waivers, and only nine of those were awarded by DOD. Reasons for this limited use of bond waivers include the following: (1) 8(a) program legislation does not provide the flexibility the SBA needs to select nonbondable contractors; (2) implementing the SBW program required certain regulation revisions that delayed issuance of SBW program guidelines; and (3) the opportunities to use bond waivers were limited by a military construction freeze from January 1990 to May 1991, the military base closure program, and Operation Desert Storm. SBA has begun to address other factors contributing to the waiver's limited use, such as poor staff training and outreach efforts. GAO notes that for the eight bond waiver projects completed as of March 1992, contractor performance was considered satisfactory or better.

GAO found that: (1) the use of surety bond waivers has been limited, and in 1990 and 1991 SBA issued a total 13 surety bond waivers out of 2,820 eligible contracts; (2) 8(a) program provisions limit waiver use by requiring procuring agencies to select contractors that are already bonded; (3) the Department of Defense (DOD) awarded fewer 8(a) contracts due to delays in revisions of the Federal Acquisition Regulation; (4) potential SBA 8(a) Program use of surety bond waivers is unknown; (5) untrained SBA field office staff and limited SBA outreach efforts limited use; (6) lack of data provided to SBA and DOD impairs monitoring efforts; and (7) contractors that have been given bond waivers have performed satisfactorily.

Recommendations

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