HOUSE BILL REPORT

HB 1503

BYRepresentatives Ebersole, Schmidt, Walk, Nelson, Jones, Zellinsky, R. Fisher, Beck, S. Wilson, Wang, Heavey, Brough, Schoon, Tate and P. King; by request of  Department of Transportation

Relaxing bonding requirements on ferry contracts.

House Committe on Transportation

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (24)

      Signed by Representatives Walk, Chair; Baugher, Vice Chair; Schmidt, Ranking Republican Member; Wood, Assistant Ranking Republican Member; Cantwell, Cooper, G. Fisher, R. Fisher, Gallagher, Hankins, Heavey, Jones, Kremen, R. Meyers, Nelson, Patrick, Prentice, Prince, Smith, D. Sommers, Todd, Walker, S. Wilson and Zellinsky.

House Staff:Vicki Fabre (786-7313)

AS REPORTED BY COMMITTEE ON TRANSPORTATION FEBRUARY 7, 1989

BACKGROUND:

Existing law (RCW 39.08.030) requires a contractor's bond for all public works contracts in excess of $25,000 to be in an amount equal to the full contract price.

The Department of Transportation, Marine Division, has been unable to obtain viable bids on Ferry System vessel construction, alteration, repair or maintenance projects due, in part, to the inability of bidders to obtain state-required bonding.  The bonding problem has significantly impacted the Marine Division's ability to construct or repair Ferry System vessels in a timely fashion.

SUMMARY:

SUBSTITUTE BILL:  On contracts for the construction, maintenance or repair of marine vessels, the Department of Transportation is authorized to substitute alternative forms of security in lieu of the bond.  Acceptable alternative forms of security include:  certified check, replacement bond, cashier's check, treasury bill, an irrevocable bank letter of credit, or assignment of a savings account.  Other liquid assets approved by the Secretary of Transportation are also authorized.

The Secretary of Transportation is required to predetermine and provide, in the bid package, the amount of the alternative security or bond.  The bond or alternative security must be in an amount adequate to protect 100 percent of the state's exposure to risk.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  Reference to a repealed statute on ferry construction bonding is deleted.

Language authorizing the use of a combination of bonding and alternative form of security is added.

An asset(s) (such as a certified check) used as an alternative form of security cannot be used to secure a bond.

The Department of Transportation is required to promulgate rules and regulations, by October 1, 1989, that establish procedures for determining the state's exposure to loss.

An emergency clause is added.

A title amendment reflects the placement of the provisions of the bill in a more appropriate section of law.

Fiscal Note:      Not Requested.

Effective Date:The bill contains an emergency clause and takes effect immediately.

House Committee ‑ Testified For:    Kern Jacobson, Washington State Ferry System; Basil Badley, American Insurance Association; Tom Donnelly, Sixth Sense; Randy Ray, Todd Pacific Shipyards Corporation; Lori Park, The Economic Impact Project.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    There is a need to change the state bonding requirements and bid procedures for ferry vessel construction, maintenance and repair work to enhance competition in the shipbuilding industry, reduce bond-related cost, and insure a more timely completion of work on state ferry vessels.

House Committee - Testimony Against:      None Presented.