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What's New: Government Affairs

Amended House PPP Bill Headed to the Senate in North Carolina

Wednesday, May 15, 2013  

As amended in the House, North Carolina HB 857 would permit the State and all local government units to use the design-build and public-private partnership (PPP) methods for public works projects. Such projects would be governed by the terms of this legislation. The bill would require that the design-builder to provide a performance and payment bond in compliance with the State’s Little Miller Act. Regarding PPPs, the bill would require a payment bond from a surety company authorized to do business in the State. The bond would have to be in the amount of 100% of the total anticipated amount of the construction contracts to be entered into under the development contract. The payment bond would be conditioned on the prompt payment for all labor or materials for which the private developer or its contractors or their subcontractors are liable, and the bond would be for the sole protection of persons furnishing such labor or materials. The bill would outline the procedures for filing payment bond claims and would provide a payment bond form.

As originally introduced, the bill would have required a 125% payment bond. SFAA worked with the AIA to reduce the bond amount to 100%. There are two other issues that we still are working to address. The PPP bill should be amended to require both payment and performance bonds as that is what the Little Miller Act requires. Since design build and PPPs are both methods to deliver a construction project, it would make sense that the bonding requirements for both methods would be identical under HB 857. We would like to further amend the bill so that bonding under the Little Miller Act is required for the construction portion of the PPP.

Such an amendment also would address the other issue we have with the bond amount being based on the total anticipated amount of the construction contracts, rather than the actual amount of the contracts. In tough economic times, the anticipated cost can be higher than the contract price. The sureties in Ohio just amended a similar law, which required the bond amount based on the total estimated cost of the work, so that the bond now is for the contract price.

HB 587 has passed out of committee and is on the House floor where it could pass as early as today. The bill has widespread local support, including the Governor’s office. The bill was developed as a consensus bill with 14 different local entities. All the local contractor, architect and engineering groups support HB 587. The Municipal League and the Associations of County Commissioners support this bill as it will pre-empt a large number of individual and county bills for these delivery methods. The bill will create uniform standards for these two delivery methods for state and local government contracting entities.

One such individual bill already was enacted this year. SB 75 authorizes Onslow County to enter into a PPP for a capital project for buildings or other improvements, including, but not limited to, paving, grading, utilities, infrastructure, reconstruction, or repair. The new law requires a payment bond from a surety company authorized to do business in the State in the amount of 125% of the total anticipated amount of the construction contracts to be entered into under the development contract.

SFAA and AIA will pursue further amendments to HB 857 in the Senate.

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