SENATE BILL REPORT

HB 1816

BYRepresentatives H. Sommers, Cole, R. Fisher and Winsley

Changing provisions for sureties for public works bonds.

House Committe on Capital Facilities & Financing

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):March 28, 1989; March 29, 1989

Majority Report:  Do pass as amended.

      Signed by Senators Lee, Chairman; Anderson, Vice Chairman; McMullen, Murray, Saling, Smitherman, Warnke, West, Williams.

Senate Staff:Charles A. Woods (786-7452)

                  March 30, 1989

AS REPORTED BY COMMITTEE ON ECONOMIC DEVELOPMENT & LABOR, MARCH 29, 1989

BACKGROUND:

State law requires all contractors for public works projects to be bonded.  The bonding requirement is to insure that the contractor performs all the duties in the public works contract and to insure that the contractor pays its employees and suppliers.  The law allows bonds for public works projects to be financed by either a surety company or an individual.  An individual surety may be a single person or a group of individuals serving as a financial surety for debt, default, or miscarriage of the contract.  Surety companies are regulated by the Insurance Commissioner, while individual sureties are not.  If a state agency accepts an individual surety on a public works project the agency assumes the responsibility of determining if the individual is financially able to perform should the contractor default.  State agencies have no guidelines and are unable to substantiate the assets of an individual surety without extensive time and expense.  Lacking the ability to assess the financial resources of an individual surety the agency is exposed to potential project delays, financial loss, and legal challenge.

SUMMARY:

The option allowed under the contractor bonding requirements to have a bond with two or more sureties who are other than corporate sureties is deleted.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

SUMMARY OF PROPOSED SENATE AMENDMENT:

Public entities are able to accept full payment and performance bonds from individual sureties for public works contracts of less than $100,000 if the surety agrees to be bound by Washington State law.

Senate Committee - Testified: Senator Alan Bluechel; Keith Johnson, Department of General Administration (pro)