The Surety Bond Guarantee Program: Significant Changes Are Needed in its Management
CED-80-34
Published: Dec 27, 1979. Publicly Released: Feb 11, 1980.
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Highlights
The Surety Bond Guarantee Program of the Small Business Administration (SBA) was established to guarantee up to 90 percent of a surety company's losses on bonds issued to small businesses which could not obtain bonding without the guarantee. From its inception in 1971, the program guaranteed more than 91,000 contracts totaling $6.3 billion. GAO evaluated the management of the program.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Small Business Administration | The Administrator, SBA, should establish and enforce guidelines regarding safety responsibilities in the areas of monitoring contractor progress and preventing defaults. |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
| Small Business Administration | The Administrator, SBA, should analyze the net claims-handling costs for the two types of sureties in the program, those that have an internal claims-handling capability and those that do not. Based on the results of this analysis, the Administrator should revise the reimbursement rate to a level which will result in a reasonable and equivalent net claims-handling cost for all sureties regardless of whether they have an internal claims-handling capability. |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
| Small Business Administration | The Administrator, SBA, should: (1) develop a method for identifying the management assistance needs of Surety Bond Guarantee Program contractors; and (2) provide timely and adequate management assistance to them. The Administrator should consider approving certain bond guarantees only if the contractor is willing to accept SBA management assistance. |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
| Small Business Administration | The Administrator, SBA, should: (1) develop underwriting guidelines to assist program personnel and surety companies in evaluating contractors' surety bond applications; (2) establish procedures for program officers to conduct indepth verifications and evaluation of selected contractor applications; and (3) direct program officers to decline applications with erroneous data and refuse to do business with those agents who repeatedly submit unreliable data. |
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
|
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Topics
Business assistanceLoan defaultsSmall business assistanceSurety bondsInsurance companiesSmall businessWarrantiesBreach of contractFinancial statementsIndemnity