NASBP touts bonding requirements in public-private partnership laws

By Kathy Hoffman posted 02-25-2015 04:22 PM

NASBP is watching legislation related to public-private partnerships (P3s) in several states and is encouraging requirements for bonding where such provisions remain discretionary or are nonexistent.

Such partnerships for public works projects still have the same need for bonding as traditionally delivered projects do, said Shannon Crawford, Manager of State Relations at NASBP.

“On traditionally delivered projects, you want to make sure you have the best qualified contractors that have been vetted by the surety, and make sure you have payment for subs, suppliers and materialmen,” Crawford said. “All the reasons you need bonding on a traditionally delivered project, you'd want on a public-private partnership.” 

The financing of public-private projects, or P3s, differs from traditional delivery, but it still needs bonding to protect taxpayers because such projects ultimately involve some level of public funds, whether upfront through grants or back-end user fees collected, such as on toll roads, Crawford said.

Currently, 32 states have laws enabling P3s, and NASBP is monitoring legislation related to such projects in Maryland, Georgia, Pennsylvania and several other states.

P3-related bills in Arkansas, New Mexico and Georgia are a key issue for NASBP. New Mexico, which has no P3 program, is a priority. In New Mexico in 2013, NASBP worked with the sponsor of a P3 bill to amend that measure with a reference to the state's Little Miller Act, Crawford said. The legislation is back up for consideration this year. That act sets a requirement for prime contractors on state construction projects to obtain bonding.

Arkansas has several P3 statutes, none of which includes bonding language, and Georgia's single P3 law is also silent on surety requirements for P3s, she said.

In Maryland, NASBP is tracking a technical correction to legislation that does not specifically mention performance bonds, which currently leaves room for discretion regarding security for P3s, Crawford said.

“We're constantly looking at states that are trying to obtain more discretion with respect to bonding, and that's regardless of whether or not it's related to P3s,” she said.

Pennsylvania, which authorized P3s in recent years, also allows leeway in not specifying that performance and payment bonds are required, and cleaning up the language will be a priority for NASBP in the coming years, she said. The discretion allowed the state's Rapid Bridge Replacement Project to proceed without a bonding requirement, although the contractor that was selected demonstrated its bonding capacity anyway, she said.

NASBP generally focuses on P3 measures at the state and federal level, although it also learns from members, news reports and other sources about potentially precedent-setting measures at the local-government level, Crawford said. NASBP has commented on legislation at all levels, including county ordinances. For more information about states that authorize P3s, the NASBP membership can visit the NASBP P3 map