SENATE BILL REPORT

SHB 1503

BYHouse Committee on Transportation (originally sponsored by Representatives 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

Senate Committee on Transportation

Senate Hearing Date(s):March 21, 1989; March 24, 1989

Majority Report:  Do pass.

      Signed by Senators Patterson, Chairman; Nelson, Vice Chairman; von Reichbauer, Vice Chairman; Barr, Bender, Conner, Hansen, Madsen, Sellar, Thorsness.

Senate Staff:Vicki Fabre (786-7313)

                  March 24, 1989

AS REPORTED BY COMMITTEE ON TRANSPORTATION, MARCH 24, 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:

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.  A combination of bonding and alternative security is authorized.  An asset (such as a certified check) used as an alternative form of security cannot be used to secure a bond.

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.

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.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

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

Senate Committee - Testified: Kern Jacobsen, Department of Transportation; Bob Morris, Marine Industries; Lori Park, Economic Impact Project; Randy Ray, Todd Shipyards