SENATE BILL REPORT

ESHB 1267

BYHouse Committee on Transportation (originally sponsored by Representatives Walk, Zellinsky, S. Wilson, Brough, Pruitt, Wang, Fisher, Schoon and P. King) 

Authorizing alternative forms of security for state ferry construction contracts.

House Committe on Transportation

Senate Committee on Transportation

Senate Hearing Date(s):February 22, 1988; February 24, 1988

Majority Report:  Do pass as amended.

      Signed by Senators Patterson, Chairman; Nelson, Vice Chairman; DeJarnatt, Kiskaddon, McMullen, Metcalf, Owen, Sellar.

Senate Staff:Vicki Fabre (786-7313)

                  February 25, 1988

AS REPORTED BY COMMITTEE ON TRANSPORTATION, FEBRUARY 24, 1988

BACKGROUND:

Law requires a bond in an amount equal to the full contract price for any work to be performed on behalf of the state and units of local government.  Special provisions exist to exclude projects of less than $25,000 from any bond requirement.

The Department of Transportation, Marine Division, in recent months has been unable to obtain viable bids on Ferry System vessel 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:

The department's marine division is authorized to substitute, in lieu of the one hundred percent surety bond, an alternative form of security, a combination of alternatives, or a combination of a bond and an alternative security.  All substitutions must be in an amount equal to the full contract price.

The surety bond or alternative securities are available for alteration, repair or improvement, not just initial construction or routine maintenance.  Alternative securities are held in an escrow account dedicated to secure performance under a contract for such work.

Acceptable alternative securities are limited to the following:  (a) certified check; (b) cashier's check; (c) treasury bills; (d) irrevocable bank letter of credit; (e) assignment of a savings account; or (f) unencumbered personal or corporate assets.  Substitutions for any bond are subject to specified format and conditions as determined by the Marine Division.

The DOT's marine division is authorized to divide ferry construction, alteration, repair or improvement projects by entering into separate contracts that are separately awarded, when it is to the state's advantage.

A contractor with both in-state and out-of-state shipbuilding yards who enters into a contract for ferry system repair and renovation must perform all structural work in an in-state yard.  This requirement does not apply to repair contracts for which federal funds are sought.

These provisions take effect immediately and sunset July 1, 1992.

SUMMARY OF PROPOSED SENATE AMENDMENT:

The marine division of DOT is authorized to reduce any bond or substituted alternative form of security for ferry vessel alteration, repair or improvement contracts, provided the reduction is in an amount not less than 25 percent of the contract price.  Ferry vessel construction contracts are still subject to the 100 percent surety bond requirement.

Appropriation:    none

Revenue:    none

Fiscal Note:      requested January 14, 1988

Senate Committee - Testified: Lou D'Ambrosio, Boilermakers Local 568 (for); Robert Morris, Marine Industries NW, Inc. (for); Jim Sainsbury, WSDOT Marine Division (for); Ton Donnelly, Economic Impact Project; Randy Ray, Todd Shipyards (for)