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[Comments on Proposed Amendments to F.A.R.]

B-230529.4,B-233708 Published: Mar 20, 1989. Publicly Released: Mar 20, 1989.
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Highlights

GAO commented on two General Services Administration (GSA) proposals to change Federal Acquisition Regulation provisions regarding: (1) use of individual sureties; and (2) taxpayer and contract information reporting requirements. GAO advised that: (1) GSA should wait until GAO finished a study about problems with use of individual sureties before adding possibly restrictive requirements for sureties' reporting of asset information or provision of security; and (2) it had no comments on the proposed addition of a clause requiring reporting of specified taxpayer and contract information to the Internal Revenue Service.

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B-230529.4, B-233708, Mar 20, 1989, Office of General Counsel

PROCUREMENT - Payment/Discharge - Federal procurement regulations/laws - Amendments - Financial information - Information disclosure DIGEST: 1. General Accounting Office has no comment on Federal Acquisition Regulation (FAR) case No. 88-43, an interim rule that adds FAR subpart 4.9 and a clause at FAR section 52.204-3 to implement statutory and regulatory provisions requiring that specified taxpayer and contract information be reported to the Internal Revenue Service. PROCUREMENT - Competitive Negotiation - Sureties - Acceptability PROCUREMENT - Sealed Bidding - Bid guarantees - Sureties - Acceptability 2. General Accounting Office comments on a change proposed in Federal Acquisition Regulation (FAR) case No. 88-57 to the requirements of FAR Part 28 concerning the use of individual sureties, and the proposed addition of a clause at FAR section 52, 228-11, by noting that it is required to study and report to Congress on the problems incident to the use of individual sureties; GAO therefore suggests that action on a final rule changing existing requirements be deferred pending completion of its study.

Margaret A. Willis

FAR Secretariat

General Services Administration:

This responds to your letter of November 16, 1988, requesting our comments on two Federal Acquisition Regulation (FAR) cases, FAR case Nos. 88-57 and 88-43.

FAR case No. 88-57 is a proposal to revise FAR Part 28 and add a clause at FAR section 52.228-11 concerning the use of individual sureties to secure bid, payment, and performance bonds. The explanatory material accompanying the proposal indicates that a task force established by the FAR councils found problems with the current methods of handling individual sureties. Existing requirements in this area are thought to be inadequate, particularly those involving the asset information individual sureties currently must provide on Standard Form 28.

Under the proposed changes, the use of an individual surety would continue to be permitted, but only if the surety provided the government with a security interest in assets equal in value to the penal amount of the bond. The security interest generally would be in the form of a lien on fee simple real property or, for cash or securities, an escrow account in a financial institution. An escrow account would not be required if government securities in book entry form were pledged. The proposed changes also would provide for precluding particular individuals from acting as sureties if certain circumstances were found to exist.

In Altex Enterprises, Inc., B-228200, Jan. 6, 1988, 67 Comp.Gen.184, 88-1 CPD Para. 7, we sustained a protest involving requirements concerning individual sureties very similar to those now being proposed for governmentwide use. We agreed with the protester that the requirements were too stringent and unduly burdened those bidders who must use individual sureties, primarily small businesses. We concluded that in the absence of regulations authorizing such requirements or of a specific showing of a need for them, such requirements constitute an undue restriction on full and open competition. The proposed FAR change would provide the regulatory base that was lacking in Altex.

We are not currently aware of the exact nature and extent of the problems being encountered with the use of individual sureties. In this regard, however, the conference report on the Small Business Administration Reauthorization and Amendment Act of 1988, Pub.L. 100 590, contains a request that this Office conduct an in-depth study of the matter and issue a report containing our recommendations by November of this year. H.R. Rep. No. 1029, 100th Cong., 2d Sess. 32 (1988). We suggest that action on a final rule changing the requirements for use of individual sureties be deferred pending completion of our study.

FAR case No. 88-43 is an interim rule that adds FAR subpart 4.9 and a clause at FAR section 52.204-3 to implement statutory and regulatory provisions requiring that specified taxpayer and contract information be reported to the Internal Revenue Service. We have no comments on these proposed changes.

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Federal regulationsFederal taxesFinancial disclosureProcurement regulationsReporting requirementsSurety bondsFederal acquisition regulationsTaxpayersGovernment procurementSmall business