Small Business:

Use of the Surety Bond Waiver Has Been Limited

RCED-92-166: Published: Jul 7, 1992. Publicly Released: Jul 7, 1992.

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GAO provided information concerning: (1) the number of contracts awarded that used the Small Business Administration's (SBA) Surety Bond Waivers (SBW) Program; (2) the problems and limitations of SBA 8(a) Program implementation; (3) the impact of SBW Program regulations and procedures on contractor participation; (4) defense agency contracting officers and SBA 8(a) Program contractors problems in obtaining requested bond waivers; (5) the problems experienced when bond waivers were requested but not obtained; and (6) the performance of contractors on contracts that used bond waivers.

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.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: The Senate Small Business Committee disagrees with the GAO observation and plans no action. So there is no need to keep the recommendation open.

    Matter: When considering reauthorization of the pilot SBW Program, Congress needs to be aware of the preferences given to bondable contractors in the current 8(a) program legislation and operating procedures. Specifically, the 8(a) legislation gives the procuring agency the ability to recommend to SBA the contractor that is to be used for a sole-source 8(a) contract. In most cases, the procuring agency recommends a contractor that is able to obtain bonding, which protects the government's interests and the interests of subcontractors and suppliers. Furthermore, 8(a) program operating procedures state that bondable contractors are to receive preference when SBA selects a contractor. As long as these preferences exist, the use of bond waivers is unlikely to increase appreciably.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The reporting requirement was not extended through regulatory action, but Defense's Office of Small and Disadvantaged Utilization has arranged with military services for them to continue to provide reports.

    Recommendation: The Secretary of Defense should extend the requirement that the military services submit quarterly SBW Program activity reports for the remainder of fiscal year (FY) 1992 and FY 1993 and ensure that all three defense agencies comply with the requirement.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: In October 1992, SBA published a list of 8(a) firms in their developmental phases. SBA plans to periodically update the list.

    Recommendation: The Administrator, SBA, should direct the Associate Administrator, MSB&COD, to periodically provide DOD and civilian agencies with a list of all contractors in the developmental stage of the 8(a) program.

    Agency Affected: Small Business Administration

  3. Status: Closed - Implemented

    Comments: During its August 1992 national training week meeting, SBA instructed regional office officials to include surety bond waiver information in their outreach activities and their outreach activity reports to SBA.

    Recommendation: The Administrator, SBA, should direct the Associate Administrator, MSB&COD, to determine what SBW Program outreach efforts are being performed in field offices by incorporating questions on these efforts into the MSB&COD field offices' report on outreach activities, and if warranted, provide guidance to the field offices on any additional SBW Program outreach that needs to be performed.

    Agency Affected: Small Business Administration

  4. Status: Closed - Implemented

    Comments: SBA notified federal agencies of the waiver program during the August 1992 small business seminar sponsored by SBA.

    Recommendation: The Administrator, SBA, should direct the Associate Administrator, MSB&COD, to contact those civilian federal agencies that award 8(a) contracts to ensure that they are aware of the SBW Program.

    Agency Affected: Small Business Administration

  5. Status: Closed - Implemented

    Comments: During its August 1992 national training meeting, SBA provided training to its Assistant Regional Administrators and other field office staff on implementing the bond waiver program.

    Recommendation: The Administrator, SBA, should direct the Associate Administrator, MSB&COD, to provide training to field office staff responsible for implementing the bond waiver program.

    Agency Affected: Small Business Administration

  6. Status: Closed - Implemented

    Comments: SBA revised its 8(a) operating procedures to provide that annual business plan updates obtain information on developmental firms having bonding problems, and that field offices report such information to SBA.

    Recommendation: The Administrator, SBA, should direct the Associate Administrator, Minority Small Business and Capitol Ownership Development (MSB&COD), to require SBA field offices to use the annual updates of 8(a) firms' business plans to identify and report the number of developmental-stage contractors that are having problems obtaining the bonding needed for 8(a) contracts.

    Agency Affected: Small Business Administration

 

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