Small prime contractors often have difficulty securing necessary bid, performance and payment bonds for federal government contracts–especially in the construction industry, where payment and performance bonds are typically required. Not surprisingly, small primes often turn to their larger subs to secure the necessary bonding.
A small prime’s reliance on its subcontractor for bonding was recently put to the test in a GAO bid protest. Fortunately for small primes everywhere, in Shaka, Inc., B-405552 (Nov. 14, 2011), the GAO held that the subcontractor’s role in the bond process did not render the bond defective. But small primes and their large subcontractors shouldn’t pop the champagne for a celebration, because subcontractor bonding assistance can still increase the risk of ostensible subcontractor affiliation.