Today (1/02/08), we learned of a bill proposed in Maine (HB 1478) that would increase the threshold at which performance and payment bonds are required for public works projects, including highways, from $100,000 to $250,000. Also, the bill would give the State discretion to accept letters of credit in lieu of surety bonds. Currently, only surety bonds may be furnished on public works projects.
The SFAA and AIA will be working to gather information on the bill and to address it as needed. See the proposed bill below.
123rd MAINE LEGISLATURE
Second Regular Session
Legislative Document No. 2092 H.P. 1478
Maine 123rd Legislature — Second Regular Session
SUMMARY
This bill amends the Public Works Contractors’ Surety Bond Law of 1971 by:
1. Increasing from $100,000 to $250,000 the threshold limit for a contract
for the construction, alteration or repair of any public building or other
public improvement or public work for which a person must provide a
performance bond and a payment bond; and
2. Allowing, at the discretion of the State or other contracting
authority, the person to provide an irrevocable letter of credit instead of
either or both the performance bond and the payment bond.
An Act To Amend the Public Works Contractors’ Surety Bond Law
of 1971
Presented by Representative HASKELL of Portland.
Fiscal Impact: Not Yet Determined, Fiscal Note
Be it enacted by the People of the State of Maine as follows:
Sec. 1. 14 MRSA Section 871, sub-Section 3, as amended by PL 1993, c. 436,
Section 1, is further amended to read:
3. Surety bonds. Except as provided in Title 5, section 1745, before any
contract exceeding $100,000 $250,000 in amount for the
construction, alteration or repair of any public building or other public
improvement or public work, including highways, is awarded to any person by
the State or by any political subdivision or quasi-municipal corporation, or
by any public authority, that person must furnish to the State or to the other
contracting body, as the case may be, the following surety bonds:
A. A performance bond in an amount equal to the full contract amount,
conditioned upon the faithful performance of the contract in accordance with
the plans, specifications and conditions thereof. Such bond is solely for the
protection of the State or the contracting body awarding the contract, as the
case may be; and
B. A payment bond in an amount equal to the full amount of the contract
solely for the protection of claimants supplying labor or materials to the
contractor or the contractor’s subcontractor in the prosecution of the work
provided for in the contract. The term “materials” includes rental of
equipment.
When required by the contracting authority, the contractor shall furnish
bid security in an amount which the contracting authority considers sufficient
to guarantee that if the work is awarded the contractor will contract with the
contracting agency.
The bid security may be in the form of United States postal money order,
official bank checks, cashiers’ checks, certificates of deposit, certified
checks, money in escrow, bonds from parties other than bonding companies
subject to an adequate financial standing documented by a financial statement
of the party giving the surety, bond or bonds from a surety company or
companies duly authorized to do business in the State.
The bid security may be required at the discretion of the contracting
authority to assure that the contractor is bondable.
The bid securities other than bid bonds must be returned to the respective
unsuccessful bidders. The bid security of the successful bidder must be
returned to the contractor upon the execution and delivery to the contracting
agency of the contract and performance and payment bonds, in terms
satisfactory to the contracting agency for the due execution of the work.
In the case of contracts on behalf of the State, the bonds must be payable
to the State and deposited with the contracting authority. In the case of all
other contracts subject to this section, the bonds must be payable to and
deposited with the contracting body awarding the contract.
Sec. 2. 14 MRSA Section 871, sub-Section 3-A is enacted to read:
3-A. Letter of credit. Notwithstanding the surety bond requirements of
subsection 3, at the discretion of the State or other contracting authority, a
person may provide an irrevocable letter of credit in lieu of the performance
bond required by subsection 3, paragraph A or the payment bond required by
subsection 3, paragraph B, or both, to the State or the contracting authority,
as the case may be.
A. The letter of credit must be:
(1) Issued in favor of the State or other contracting authority by an
issuer;
(2) In a form satisfactory to the State or other contracting
authority; and
(3) In an amount equal to the full amount of the contract.
B. If the letter of credit has an expiration date that is earlier than
the date of acceptance of performance of the contract in accordance with the
plans, specifications and conditions of the contract, a replacement letter of
credit that meets the specifications of paragraph A must be delivered to the
State or other contracting authority not later than 30 days prior to that
expiration date.
For purposes of this subsection, “letter of credit” has the same
meaning as in Title 11, section 5-1102, subsection (1), paragraph (j).
Filed under: Surety Legal Issues, Surety Legislation
