Legislation Moving in Pennsylvania to Clarify Bonding Requirements
Legislation was introduced this session in Pennsylvania to statutorily require performance and payment bonds on public works projects in one of the Commonwealth’s two Little Miller Acts. As currently written, 8 Pa. Stat. § 193.1, the statute that governs performance and payment security on non-Commonwealth agency projects, requires “any financial security, acceptable to and approved by the contracting body, including, but not limited to, Federal or Commonwealth chartered lending institution irrevocable letters of credit and restrictive or escrow accounts in such lending institutions.”
S.B. 344 (Eichelberger) would amend this language to specifically reference performance and payment bonds. This legislation is seen as a response to the Harrisburg Incinerator incident, in which the town of Harrisburg failed to obtain performance and payment bonds for the retrofitting of the incinerator. The contractor hired to perform the work was not qualified for or capable of the work and defaulted, leaving Harrisburg on the hook and bankrupting the city.
S.B. 344 was introduced in February and was finally reported from the Committee on Local Government on October 28. Most recently, it was re-referred to the Appropriations Committee on November 17, where it remains.
The lead article in the November 4, 2015 issue of NASBP SmartBrief (See the Patriot-News article) covered this legislation and the current situation in Harrisburg.
NY Governor Vetoes Bond Threshold Increase Legislation
On December 11, Governor Cuomo vetoed the bills, A.7513-C (People-Stokes) S.5713-B (DeFrancisco), which would have raised the bonding threshold in New York’s State Finance Law §137 from $100,000 to $200,000. This provision was included among many others in a broader procurement overhaul bill.
On July 29, NASBP contacted the Office of the Governor of New York to encourage it to reconsider the bond threshold increase. NASBP's letter stated that it was pleased that the bill sponsors amended the legislation from its original wording, which would have increased the threshold to $500,000. However, NASBP indicated the smaller increase still would have been detrimental to businesses throughout the state and would give New York State the highest threshold in the Northeast.
NASBP sources have indicated that a veto override is highly unlikely, due to the strong support of the labor unions in the state. NASBP relies on its membership to help watch for state laws and regulations that could adversely impact the surety industry.
Keep NASBP apprised of legislation in your state by contacting Shannon Crawford, Manager of State Relations at scrawford@nasbp.org or 202.464.1170.