Advisory Memorandum 7-32
Date Issued: Friday, September 28, 2007
Report Number: 7-32

On September 28, 2007, the OIG issued Advisory Memorandum 7-32 regarding surety selection of replacement contractors.  The OIG identified problems that occurred when a surety selected a replacement contractor to finish contracts on which the original contractor defaulted.  The OIG recommended that the SBA require a surety to perform one of the following actions before hiring a replacement contractor:  (1) ensure that a non-SBA guaranteed bond covers the prospective replacement contractor’s work on a project, or (2) exercise due diligence when selecting a replacement contractor, as outlined in this report.  The SBA agreed with these recommendations.