Construction Contracts:

Individual Sureties Had No Defaults on Fiscal Year 1991 Contracts

GGD-92-69: Published: Apr 1, 1992. Publicly Released: Apr 1, 1992.

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Pursuant to a legislative requirement, GAO reviewed the: (1) extent to which contractors used individual sureties to meet bonding requirements on federal construction contracts; and (2) default rate when individual sureties were used on construction contracts awarded during fiscal year (FY) 1991.

GAO found that: (1) contractors used individual sureties to meet only a small part of the construction contract bonding requirements in FY 1991; (2) contractors used individual sureties for 100 of the 8,124 federal construction contracts with bonding requirements awarded in 1991, with individual sureties accounting for about $388 million of the total construction contract value of $8.7 billion; (3) of the 1,541 construction contracts with bonding requirements awarded to minority business enterprises in FY 1991, 26 were bonded by individual sureties; (4) in FY 1991, prime contractors defaulted on 9 of the 8,124 contracts, but none of the 9 were bonded by individual sureties; and (5) changes to the Federal Acquisition Regulation in February 1990 to curtail abuse by individual sureties were a step toward strengthening management controls over individual sureties, but many contracts span several years, and it would be premature to say that no problems with individual sureties will emerge.

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