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What's New: Government Affairs

Contract Surety Bills Moving Quickly in the States

Monday, March 24, 2014  
--Bond Thresholds. Oklahoma SB 1582 would increase the bond threshold from $50,000 to $150,000. The sponsor is aware of our concerns and appears willing to address them. We have shown the bill sponsor that all surrounding states have lower bond thresholds, with most around $25,000. At AIA state counsel’ request, the bill sponsor “struck the title” on bill before it passed the Senate, meaning that it must be returned to that chamber prior to being finally passed

--P3s. New Hampshire SB 399 would authorize state agencies to the use P3s. The bill provides that for contracts in excess of $25,000, performance bonds and payment bonds would be required in an amount equal to 100% of the contract price, not including the cost of operation, maintenance, and finance. The bill, however, also would permit the payment and performance bond to be reduced to 50% of the contract price. AIA state counsel testified for the sureties on the 50% bond when the bill was heard. Late last week, SB 399 was sent to study so it will not be enacted this year. Even if the study committee recommends that some of the issues in the bill be addressed, there seems to be an understanding that that lowering the bond requirement is not a good idea.

Kentucky HB 407, which would authorize public private partnerships (P3s) for construction, goods, services and supplies, has passed the House. Bonding under the state Little Miller Act is otherwise required for state agency and DOT projects. SFAA and AIA are working to amend the bill in the Senate so that it similarly requires the construction portion of a local government P3 project to be bonded. As is passed out of the House, the bill contained a controversial provision that prevents tolling on a large local bridge project. The bill has a good chance of passage this year.

--Surety Eligibility Requirements. Washington SB 6110 was a surety initiative to address the issue of some public owners requiring the surety on a retainage bond to have an A+ rating from A.M. Best’s. The sureties reached an agreement with the port authorities behind this bill that would have repealed the provisions in the procurement code that the public owners were interpreting to give them authority to set eligibility requirements, and to instead permit public owners to require the sureties to have a rating of A- or better. SB 6110 passed the Senate but failed to pass the House before the legislature adjourned last week. The bill does not carry over to 2015.

--Payment Bond Claims. It looks as though we have held Minnesota HB 2225 in committee this year. The bill would create a new time frame for giving the notice of a payment bond claim and bringing an action to enforce a payment bond claim under any bond given to the DOT. SB 2225 provides that the notice of the payment bond claim and any action to enforce a bond claim must be made prior to finalization an closeout of the contract under which the claimant provided labor or supplies. That could be a much longer time period than under existing law, especially for the early completing subcontractors and suppliers on a DOT project that spans several years. The date when a project is “closed out” is not always clear.

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