SENATE BILL REPORT

ESB 5756

BYSenators McCaslin, Warnke and DeJarnatt

Changing provisions relating to sureties for public works bonds.

Senate Committee on Governmental Operations

Senate Hearing Date(s):February 21, 1989

Majority Report:  Do pass.

      Signed by Senators McCaslin, Chairman; Thorsness, Vice Chairman; Sutherland.

Senate Staff:Desley Brooks (786-7443); Sam Thompson (786-7754)

                  March 17, 1989

AS PASSED SENATE, MARCH 13, 1989

BACKGROUND:

Statutory law establishes requirements for contractors' bonds on public works projects.  The statute allows for individual sureties, as well as surety companies.  An individual surety is an individual or group of individuals who serve as surety for the debt, default or miscarriage of a contractor.

Surety companies are regulated by the Insurance Commissioner, but individual sureties are not.  When a contracting agency accepts individual surety, the agency has assumed the burden of determining that the individual is financially able and willing to perform if the contractor defaults.  This requires the contracting agency to expend extensive time and effort to make this determination, and also exposes the agency to added costs if the individual surety defaults.

SUMMARY:

A public entity may accept a full payment and performance bond from an individual surety for contracts of $100,000 or less.  The surety must agree to be bound by the laws of the state of Washington and subjected to the jurisdiction of the state of Washington.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Senate Committee - Testified: Jack Brown, Department of General Administration (pro); Jim Bush, Department of Transportation (pro); Doug Bohlke, Contractors Bonding and Insurance Company (pro)