Response to NASCIO Paper re: IT Contracts

It is the purpose of this paper to respond to the NASCIO membership regarding assertions made in the captioned paper published in August 2012 (hereinafter “NASCIO brief”). It is the understanding of NASBP and of SFAA from statements made by NASCIO that NASCIO sought no information or input, individually or collectively, from the surety bonding community or the organizations representing that community before issuing its brief. NASBP and SFAA are concerned that the information in the NASCIO brief neither adequately nor accurately describes the services of the surety or the benefits of bonding, nor properly characterizes the intended use of bonding in the procurement process. The NASCIO brief advocates the reduction or the elimination in the use of performance bonds at the expense of protecting taxpayers and contracting authorities. The brief posits that states should assume, not transfer to an established third-party surety, the risk of defaults on information technology (IT) services contracts. The NASCIO brief also advocates the use of an owner’s in-house project monitoring and contractual and legal remedies as preferable alternatives to the surety claims process to prevent or resolve vendor default. This paper will respond according to statements made within the titled paragraphs in the order they appear in the NASCIO brief. This paper encourages procurement officers to consider surety bonds as a widely accepted and available risk management tool.

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