Waiver of Bonds Under Consideration in Cleveland
Tuesday, August 13, 2013
The Surety Association of Ohio alerted us to a proposed ordinance in Cuyahoga County (Cleveland) that would permit the waiver of performance bonds. Under the existing Cuyahoga County Code, Chapter 504 requires payment and performance bonds for construction manager at risk and design build contracts. Chapter 504also provides that the Director of Public Works, with the approval of the Director of Law, determines the appropriate bonding requirements for all contracts entered into under Chapter 504, which is the chapter on alternate construction delivery methods. These provisions were added to the County Code under the county’s home rule authority. There already is some discretion in the Code on bonding for these types of projects.
On July 23, the County Executive and the Director of the Law Department had a proposed ordinance introduced to repeal and replace the existing code provisions regarding bonding, as described above. The proposed ordinance would enact new code sections that expand the discretion to waive bonds to all contracts, including all construction contracts. The proposal only applies only to performance bonds.
The bill was referred to the Public Works, Procurements and Contracting Committee. That committee is scheduled to meet on Monday, August 12 and the Committee of the Whole has an Executive Session on August 13th, followed by a meeting of the County Council. The following is the text of the bill to be heard on Monday:
Chapters 507 and 508 of the Cuyahoga County Code are hereby enacted as follows:
Chapter 507: Performance Bonds
Section 507.01: Performance Bond Requirements
Notwithstanding any provisions in the Ohio Revised Code, Ohio Administrative Code, or any other law or regulation to the contrary, the County, through the Director of Law, shall have the discretion to determine whether to require performance bonds, and the amounts of any such bonds, on a contract-by-contract basis, including all construction contracts.
Section 507.02 Small Business Considerations
In exercising his or her discretion on whether to require performance bonds and the amounts for such bonds, the Director of Law, through the Law Department’s Risk Management Division, shall give deference to the County’s interest in contracting with small businesses without causing undue risk to the County.Chapter 508: County’s Insurance Requirements
Section 508.01: Insurance Requirements
The Director of Law, through the Law Department’s Risk Management Division, shall determine the County’s insurance needs and requirements, including all insurance requirements related to County contracts.
Section 508.02: Updates to County’s Insurance Requirements
The Director of Law, through the Law Department’s Risk Management Division, shall continually update the County’s insurance requirements as necessary to protect the County’s interests.
The SAO has organized a group of sureties to attend the committee hearing on Monday and address the proposed ordinance. SAO members also have been asked to make contact with members of the committee and express opposition to the ordinance. Attached is a letter that SFAA sent to all members of the committee today. SFAA’s letter focuses on the public policy benefits of surety bond requirements and explains the risk to which the county will be exposed if it waives bond, a level that both the State of Ohio and the federal government deem unacceptable for them. We know that NASBP has done the same and that there will be local producers in attendance. ASA will have a local subcontractor in attendance.
This impetus for this proposal may well be a small and emerging contractor issue as it was a recommendation from the Economic Inclusion Task Force, formed in Cuyahoga County last year.
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