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GAO-17-683R 1 (2017-08-07)

handle is hein.gao/gaobaalax0001 and id is 1 raw text is: G A O U.S. GOVERNMENT ACCOUNTABILITY OFFICE 441 G St. N.W. Washington, DC 20548 August 7, 2017 Congressional Committees Small Business Contracting: Surety Bond Waivers for Construction Contracts Surety bonds-which generally apply to construction contracts-are guarantees issued by providers, such as individuals or surety companies, to ensure that projects will be completed as required and that suppliers and subcontractors will be paid if a bonded prime contractor defaults.1 The House report accompanying the National Defense Authorization Act for Fiscal Year 2017 included a provision for us to report on the use of surety bonds in connection with federal contracts with small businesses.2 This report identifies (1) the requirements for obtaining surety bonds, (2) how often surety bonds are waived at selected agencies, and (3) the whistleblower process for reporting fraud related to surety bonds at selected agencies. To select the federal agencies for this review, we analyzed data from the Federal Procurement Data System - Next Generation (FPDS-NG) to identify those agencies that had the largest total obligations on construction contracts awarded to small businesses between fiscal years 2012 to 2016: the Department of Defense (DOD) and the Department of Veterans Affairs (VA). In addition, we selected the Department of State (State) because of its experience with construction contracts performed in foreign countries. Combined, these three agencies accounted for 81 percent of total obligations on federal construction contracts with small businesses from fiscal years 2012 to 2016. To assess the reliability of the FPDS-NG data, we reviewed relevant documents and data quality summaries. We determined that the FPDS-NG data were sufficiently reliable for the purposes of selecting federal agencies with the highest small business construction obligations. To address our objectives, we reviewed federal surety bond requirements in legislation and relevant Federal Acquisition Regulation (FAR) provisions and reviewed data collected in FPDS- NG. We interviewed officials from DOD, VA, and State, including policy and contracting officials, and officials responsible for construction and small business initiatives. We also reviewed agencies' policies and procedures related to surety bond requirements. We met with officials from the Small Business Administration (SBA) for subject matter expertise regarding government surety bond requirements for small businesses and the Surety Bond Guarantee Program. To get an industry perspective regarding the frequency of surety bond waivers for construction contracts, we met with representatives from the National Association of Surety Bond Producers, the Surety and Fidelity Association of America, and the Associated Builders and Contractors. Finally, we reviewed federal and agency whistleblower processes and 1A surety is an individual or corporation legally liable for the debt, default, or failure of a principal to satisfy a contractual obligation. FAR §2.101. 2H.R. Rep. No. 114-537 (2016). GAO-1 7-683R Surety Bonds Waivers Page 1

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