SBA's Progress in Implementing the Public Law 95-507 Surety Bond Waiver Provision and the 8(a) Pilot Program

The Small Business Administration (SBA) has published proposed rules and regulations for surety bond waivers. The surety bond waiver provision called for a 2-year pilot effort to help certain small businesses obtain contracts even if they could not obtain the necessary bonding. For a qualified small business, SBA has the authority to waive any amount of any bond otherwise required on any government contract under the 8(a) program. SBA has proposed operating procedures which limit to $100,000 the amount of a contract on which a surety bond may be waived. SBA field officials are skeptical that the provision, as currently structured, can be implemented in their areas. SBA has still not issued to its field offices detailed standard operating procedures for identifying and processing bond waivers, and not a single small business has been granted a waiver. GAO believes that extending the surety bond waiver provision beyond the September 30, 1981, expiration date would be reasonable because SBA has not implemented the provision. Congress should consider: extending the surety bond waiver provision to enable SBA to finalize and distribute implementing procedures to its field officers; identifying eligible concerns that have a need for bond waivers; and monitoring and reporting the effectiveness of the provision. The 8(a) pilot program has not been successful. However, opportunities exist to more fully test the pilot program in agencies which have been reluctant to volunteer procurements to the regular 8(a) program. Before any further contracts are selected and awarded under the pilot program, the Administrator of SBA should: (1) demand contracts only when the Army is reluctant to offer them under the regular 8(a) program; (2) use the pilot program only when a qualified firm is available; (3) collect adequate data on firms' capabilities; and (4) conduct performance reviews of the three initial pilot contracts. Congress should amend the authorizing legislation to allow for further testing of the pilot program in an agency that has yet to demonstrate support for the 8(a) program. Congress may wish to clarify whether quality or quantity of contracts, or both, should be emphasized.