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What's New: Public-Private Partnerships (P3s)

SFAA Participates in Joint Trade Comments on Performance Bonds for P3s

Thursday, February 12, 2015  

The Surety & Fidelity Association of America (SFAA) has submitted comments together with the American Subcontractors Association (ASA), and the National Association of Surety Bond Producers (NASBP) to the U.S. Federal Highway Administration (FHWA) on its draft Addendum to its new chapter on construction performance security on P3s in it is Model P3 Contract Guide Because FHWA views a P3s merely as a credit transaction/financial arrangement, it concluded that performance security should be based on the financial strength of the design-build contractor and that the equity and debt provider could determine the amount required.

The three trades joined together to show that in reality, a P3 is just another method to deliver a completed public works project and it should be bonded and subject to the same federal and state laws as any public works project. While the financial arrangements in a P3 might provide some protection for the public entity’s financial risk, they do not assure that the construction in a P3 will be completed on time and according to the terms of the construction contract. Construction is a risky business and it needs bonding for the successful completion of projects.

Nor did the joint trade group think that FHWA should look to the practices of foreign countries for construction performance security in the U.S. Other countries have different procurement systems in which there is little or no protection for subcontractors and suppliers, public owners and taxpayers if the contractor defaults. These countries do not treat P3s as different from any other type of projects and the U.S. should do the same. The bonding requirements and other protections in place for all public constructions projects in the U.S.—including P3s—should be the same. The U.S. has other protective laws, such OSHA for safety and Davis Bacon for wages. Just because foreign countries do not have these laws does not mean they should be waived when foreign companies invest in U.S. P3 projects. 

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