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Pursuant to a legislative requirement, GAO reviewed the Department of Defense's (DOD) implementation of a test program in which it would award construction contracts to small and disadvantaged businesses exempted from submitting performance and payment surety bonds. GAO found that: (1) although the bond exemption test program was to be developed and implemented in 1989, the Small Business Administration (SBA) and DOD have made little use of their exemption authority; (2) between 1992 and 1993, DOD and SBA did not meet the minimum test program requirements of awarding 30 contracts utilizing their bond exemption authority and awarded only nine contracts; (3) DOD agencies often did not follow regulations or procedures when using bond waiver authority; and (4) DOD and military service officials believe that surety bond requirements do not significantly impede small or disadvantaged firms and bond exemption authority increases financial risk and affords little benefit to contractors.

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