NCJ Number
73679
Date Published
1979
Length
51 pages
Annotation
This General Accounting Office (GAO) report describes the management of the Small Business Administration (SMA) Surety Bond Guarantee Program and suggests ways to improve the program's operation.
Abstract
The program began national operations in 1971 to guarantee contract bonds for small construction, service, or supply contractors. Since that time, SBA has guaranteed bonds on more than 91,000 contracts for about $6.3 billion. To evaluate the program, GAO did detailed audit work at the SBA central office and at several regional offices and visited selected surety companies, agents, and contractors. GAO also reviewed pertinent legislation, analyzed samples of underwriting and claim files, reviewed applicable correspondence, and interviewed appropriate officials regarding program policies and procedures. Findings indicate that SBA is not managing the program satisfactorily. For example, bond guarantees are often based on unreliable underwriting data and superficial reviews, SBA and the surety companies are making scant effort to minimize losses, the program is not 'graduating' significant numbers of contractors into the private surety bonding market, and SBA is not providing management assistance to program contractors. Therefore, GAO recommends that SBA develop underwriting guidelines to assist program personnel and surety companies in evaluating contractors' surety bond guarantee applications and require program officers to verify the data on such applications. It also suggests that SBA (1) establish and enforce guidelines regarding surety responsibilities for monitoring contractor progress and preventing defaults, (2) identify the management assistance needs of program contractors, and (3) establish graduation criteria and procedures for encouraging contractors to obtain private bonding. SBA's comments, surety companies' comments, and GAO's evaluation are included at the end of each chapter. SBA's complete comments and a copy of SBA's underwriting review form are appended. Some footnotes are also included.