HOUSE 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

Majority Report:  Do pass.  (13)

      Signed by Representatives H. Sommers, Chair; Rasmussen, Vice Chair; Schoon, Ranking Republican Member; Beck, Betrozoff, Bowman, Braddock, Bristow, Fraser, Jacobsen, Peery, Wang and Winsley.

House Staff:Bill Robinson (786-7136)

AS PASSED HOUSE MARCH 14, 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 State 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:

Deletes the option from the contractor bonding requirements to have a bond with two or more sureties who are other than corporate sureties.

Fiscal Note:      No Impact.

House Committee ‑ Testified For:    Jack Brown, Department of General Administration; Doug Bohlke, Contractors' Bonding Company; Jim Bush, Department of Transportation.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    The state currently prohibits individual sureties for public works projects, but the statutes allow them causing an inconsistency in state policy.  Corporate sureties are selective in providing surety to only the financially stable contractors.  This selectively provides a valuable service to the state.

House Committee - Testimony Against:      None Presented.