Summary: This testimony discusses the use of surety bonds in the construction industry and presents the results of GAO's survey of small construction firms. The law requires contractors to provide surety bonds on all federal construction contracts worth more than $25,0000. Most state and local governments and some private-sector lending also require surety bonds. Surety companies decided whether firms have the experience and financial resources to do a given job and quality for a bond. Small businesses argue that bonding decisions made by surety companies often impede the development of small firms, especially those owned by women and minorities. Recent legislation directed GAO to survey small construction firms on their experiences in obtaining surety bonds. This report discusses (1) the percentage of firms that obtained bonds, (2) reasons some firms were given for denying the bonds, (3) additional conditions some firms had to meet to obtain surety bonds, and (4) changes in requirements for surety bonds on federal construction contracts.
