HOUSE BILL REPORT

HB 1267

BYRepresentatives Walk, Zellinsky, S. Wilson, Brough, Pruitt, Wang, Fisher, Schoon and P. King 

Authorizing modification of performance bond requirements for contracts for ferry construction and maintenance.

House Committe on Transportation

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (25)

      Signed by Representatives Walk, Chair; Baugher, Vice Chair; Betrozoff, Cantwell, Cooper, Doty, Fisher, Fox, Gallagher, Hankins, Heavey, Jacobsen, Jones, Kremen, Meyers, Patrick, Schmidt, D. Sommers, Sutherland, Todd, Vekich, J. Williams, K. Wilson, S. Wilson and Zellinsky.

House Staff:Vicki Fabre (786-7313)

AS REPORTED BY COMMITTEE ON TRANSPORTATION FEBRUARY 1, 1988

BACKGROUND:

Existing 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:

SUBSTITUTE BILL:  The Department of Transportation (DOT), 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 include, but are not 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, Marine Division, is authorized to divide, when it is to the state's advantage, ferry construction, alteration, repair or improvement projects by entering into separate contracts that are separately awarded.

These new provisions take effect immediately and terminate July 1, 1992.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The original bill authorized the waiver of the one hundred percent surety bond upon a showing of good cause.  In addition, the bond could be in a form or amount acceptable to the Department of Transportation and which guaranteed performance of the contract.

Fiscal Note:      Requested January 14, 1988.

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

House Committee ‑ Testified For:    Harold Parker, Marine Division, Department of Transportation; Fred Olson, AK-WA Incorporated; Tom Donnelly, Sixth Sense; Steve Lindstrom, Washington State Transit Association; Bob Morris, Marine Industries N.W.; Lou D'Ambrosio, Boilermakers L-568.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    Alternative forms of security (in lieu of the hundred percent bonding requirement) that secure performance on Ferry System vessel contracts are necessary to ensure the timely construction, repair, improvement or alteration of State Ferry System vessels.

Authorization of the use of alternative securities will improve the bid process by providing contractors an opportunity to submit viable and more competitive bids.

House Committee - Testimony Against:      None Presented.