Summary: Under a pilot Surety Bond Waiver (SBW) Program, the Small Business Administration (SBA) is permitted to waive federal surety bond requirements for socially and economically disadvantaged contractors participating in SBA's 8(a) program. Separate legislation called for the Defense Department (DOD) to make every effort to award at least 30 contacts that used bond waivers in fiscal years 1990 and 1991. Only 13 contracts awarded in fiscal years 1989 through 1991 used bond waivers, and only nine of those were awarded by DOD. Reasons for this limited use of bond waivers include the following: (1) 8(a) program legislation does not provide the flexibility the SBA needs to select nonbondable contractors; (2) implementing the SBW program required certain regulation revisions that delayed issuance of SBW program guidelines; and (3) the opportunities to use bond waivers were limited by a military construction freeze from January 1990 to May 1991, the military base closure program, and Operation Desert Storm. SBA has begun to address other factors contributing to the waiver's limited use, such as poor staff training and outreach efforts. GAO notes that for the eight bond waiver projects completed as of March 1992, contractor performance was considered satisfactory or better.
