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What's New: Government Affairs

SFAA Annual Meeting State Legislative Report

Wednesday, May 14, 2014  
--P3. Ohio HB 533 and SB 335 have just been introduced to revise the existing law that authorizes the Ohio Department of Transportation (DOT) to enter into a public-private initiative for transportation facilities. The bill would amend the existing law’s requirements for the public-private agreement so that it would have to include provisions requiring a performance bond and a payment bond in an amount that the DOT would determine. The Ohio Little Miller Act requires 100% bonding. SFAA and AIA are exploring the political viability of the legislation. A P3 bill that carried over from 2013 recently was assigned to committee in Pennsylvania. A P3 bill that would have authorized state universities to utilize P3s died in committee in Florida.

--Nullum Tempus. The Connecticut legislature adjourned without taking action on legislation SFAA supported that would have reversed the state supreme court’s decision in the Lombardo case. The bill would have applied a ten year statute of repose to the State. In Lombardo, the court applied the doctrine of nullum tempus and permitted the State to sue for alleged design and construction defects 12 years after the construction project had been completed, by which time the statute of limitations and repose had expired. The existing law remains in place—the statutes of limitation and repose do not apply to the State.

--Bad Faith. SFAA and Travelers met with the committee leadership in the Rhode Island Senate to discuss the future directions for the surety bad faith legislation that would allow any obligee, principal or claimant under any fiduciary bond to file a claim against the surety on the bond for wrongfully, and in bad faith, refusing to pay or settle a claim. The committee chair seemed to understand that in the surety three-party claims context, that there likely would be a bad faith suit in every probate bond claim. The Chair asked us for data regarding probate bond claims in Rhode Island. The Chair intends to bring the Senate bill back to committee for further consideration and asked us, through the AIA state counsel, to meet with the proponent of this bill. The proponent now has had a companion bill introduced in the House and it will be heard this week. AIA state counsel and Travelers will be at the hearing for us. We don’t expect the bill to get of committee in the House this week.

--Bond Thresholds. Colorado is moving toward increasing its state bond threshold from $100,000 to $150,000. The legislation is being driven by the universities. Legislation went to the Governor’s desk in Missouri to raise the state bond threshold from $25,000 to $50,000.

--Bond Waivers. A bill is headed to the Governor’s desk in Florida that repeals the authority of the Orlando-Orange County Expressway Authority (“Authority”) to waive bonds for small and emerging contractors in projects less than $500,000. SFAA was heavily involved in the negotiations in 2007 when this provision was under consideration in the Florida legislature. While we could not defeat the bond waiver, we were successful in including several SFAA-drafted provisions in the law. The Authority’s decision to waive bonds must be based on an investigation and conclusion that sufficient competition exists so that the Authority receives a fair price and does not undertake any unusual risk with respect to such a project. The law also requires the Authority to make payment claims as though a payment bond were in place if the general contractor does not or could not pay subcontractors, suppliers and workers on the job when the Authority waives bonds. The Authority was required to prepare a biennial report on the activities undertaken pursuant to the waiver provision. To the best of our knowledge, bonds were never waived. Instead, the bill provides that the Authority shall encourage the inclusion of local-, small-, minority-, and women-owned businesses in its procurement and contracting opportunities.

--Surety Eligibility Requirements. Legislation is moving toward enactment in Illinois regarding eligibility requirements for the surety on the bond in public works projects. The bill provides that the surety must be a company that has a certificate of authority from the Department of Insurance specifically authorizing it to execute surety bonds. The bill also would require the surety company to have a financial strength rating of at least “A” as rated by A.M. Best Company Inc. or a similar rating agency.

--Retainage. A bill on the Governor’s desk in Missouri is a victory for sureties on the retainage issue. For the past several sessions, legislation has been considered in Missouri that would prohibit retainage on public works projects when surety bonds are in place. This year’s bill
provides that if a contract is under the state bond threshold and no bond is required, the public owner could withhold retainage on the project in an amount not to exceed 10% of the value of the contract. Otherwise, retainage shall not exceed 5% of the value of the contract.

--License Bonds. Alaska changed the license bond amount for general contractors from $10,000 to $25,000. Further, a general contractor with a residential contractor license endorsement that performs exclusively residential work would have to post a $20,000 bond. The bond amount for mechanical contractors, specialty contractors, and home inspector was increased from$5,000 to $10,000.

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