Surety Issues Throughout the U.S.

In spite of the fact that many of the state legislatures have already adjourned for the year, NASBP’s state advocacy efforts have continued with numerous requests from members to assist with local or project specific issues. This summer NASBP has already responded to issues throughout the country.

Bond Threshold Increase

On July 29, NASBP contacted the Office of the Governor of New York to encourage it to reconsider the bond threshold increase proposed in A.7513-C People-Stokes / S.5713-B DeFrancisco. This legislation would increase the current performance and payment bond threshold from $100,000 to $200,000. NASBP was pleased that the bill sponsor’s amended the legislation from its original wording, which would have increased the threshold to $500,000. However, the smaller increase still would be detrimental to businesses throughout the state and would give New York State the highest threshold in the Northeast. 

Onerous Contract Terms

The original solicitation documents for a river project in Western Pennsylvania would have restricted competition and increased the overall pricing of bids received. These issues included extended project duration, as well as extended warranties. Due to the complex nature of this project, it is believed that bids will come back highly inflated. On July 29, NASBP wrote to the U.S. Army Corps of Engineers to encourage it to re-consider including such onerous terms and conditions on this project. This issue was brought to NASBP’s attention by Jay Black of the NASBP member firm of Seubert Associates.

Subcontractor Default Insurance

The Dougherty County Board of Education (Board) in Georgia issued contract documents for a project that would have required the CM/GC to obtain Subguard insurance in addition to performance and payment bonds. On August 20, NASBP contacted the Board to encourage it to drop the requirement as it would unfairly restrict competition on the project, as only the largest of CM/GCs would be able to qualify for Subguard; this restriction would in turn lead to increased bid prices. NASBP received word from Eric Matlaga of NASBP affiliate ACE Surety, who brought the issue to the attention of NASBP, that the Board has dropped the requirement. 

Surety Rating Issues

The city of Columbia, Missouri, has requested bid bonds be issued by sureties rated A+ or higher by A.M. Best. On July 28, NASBP contacted the city and encouraged it to consider using the A- A.M. best rating  as a minimum for bid bonds, instead of the highly restrictive A+ rating. Using the A+ rating would lessen competition on the project, increase bid prices, and decrease minority and disadvantaged business participation. This issue was brought to NASBP’s attention by Monica Donatelli of NASBP member firm of IMA Corp.

Douglas County’s Department of Transportation (County DOT) in Georgia has begun requiring A+ ratings on bonds. On June 29, NASBP contacted the County DOT to comment on the decreased competition that is inevitable due to this change. The County DOT responded to NASBP and indicated it was comfortable proceeding with using the A+ rating. This issue was brought to NASBP’s attention by Eric Matlaga of NASBP affiliate ACE Surety. 

If you become aware of any similar issues in your jurisdiction, contact NASBP Manager of State Relations Shannon Crawford at scrawford@nasbp.org.