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U.S. Government Accountability Office Reports Findings on Bond Waivers and Surety Fraud for Federal

Friday, August 11, 2017  

U.S. Government Accountability Office Reports Findings on Bond Waivers and Surety Fraud for Federal Contracts

 

In last year’s NDAA bill, a provision was included in the House Report that required a study on federal agency practices for waiving bonds on small business contracts, the results between contracts where bonds were or were not waived, and the whistleblower process for when fraud related to surety bonds is reported. SFAA met with Representative Steven King’s office as he requested this study based on his experience as a small contractor that was awarded federal and state construction contracts. Representative King believes that his business competed with other small contractors for whom the cost of bonds was waived and/or that the procurement rules were not being applied consistently to all small contractors.

The General Accounting Office (GAO) interviewed SFAA among others in its research to produce this study, which was released on August 7. We told the GAO that the Miller Act requires bonds, except when obtaining bonds in foreign countries is impractical, and that it would be illegal for the federal agencies to waive bonds. The GAO interviewed and used data from the Department of Defense (DOD), Department of Veterans’ Affairs (VA) and the State Department as these agencies awarded the most contracts to small businesses and the State Department has the most experience with foreign construction. The agencies reported that there is no source of data for contracts in which bonds were waived. In addition, they reported that instances of bond waivers are rare. There are some examples of waivers in foreign countries, as permitted under the Miller Act. The State Department noted that it has become easier for small contractors to obtain bonds so that the Department is not issuing waivers in foreign contracts as often. The federal agencies also reported that whistleblower cases regarding surety fraud also are rare, but any reports of surety fraud would be handled in the same manner as any other type of fraud. The GAO reports made no recommendations for any change in the federal procurement process.

Members should visit Government Relations / General Info (Members) for more information.



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