NASBP Focal Point - February 17, 2022

Legislative News at a Glance

Forty-four state legislatures, DC, and U.S. Congress are currently in session: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Federal, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.

Territories: Guam, Northern Mariana Islands, Puerto Rico, and U.S. Virgin Islands.

*Click here for a complete 2022 calendar of the states’ legislative session dates.

In This Issue

Federal Report
Federal Update
State Report
Alternate Design
Bond Forms
False Claims
Public-Private Partnerships
Subcontractor Default Insurance

Federal Report

Federal Update

As we go to press, the Senate continues to debate a short-term spending bill, aka a continuing resolution (CR), which cleared the House last week. The CR would fund the government through March 11, giving appropriators time to finalize an omnibus spending package for the Fiscal Year 2022, which began on October 1, 2021. The Senate is in recess next week, so expect the Senate to pass a short-term CR by Friday’s deadline.

Meanwhile, the House Small Business Subcommittee on Underserved, Agricultural, and Rural Business Development held a Zoom hearing on February 15 to address the specific benefits to small business from the passage of the Infrastructure Investment and Jobs Act (IIJA). The hearing focused on how small businesses can utilize IIJA funds to grow their businesses. One of the witnesses who testified before the Subcommittee was Ed Mortimer, Vice President, Transportation Infrastructure, at the U.S. Chamber of Commerce. Mortimer offered a word of caution in his closing statement: “To ensure the full benefits of the IIJA, Congress must promptly approve, and the President must sign a full, Fiscal Year 2022 Appropriations. Without a full year of appropriations, up to $15 billion of increased investment called for in the IIJA cannot take place.” Last week, the Chamber sent a letter to Congress urging members to do just that – finalize the FY22 Appropriations bills. NASBP was among those twenty national trade associations who signed on as a supporter to this request.

State Report

Alternate Design

New Mexico Senate Bill 84

NM S.84 (Shendo) Establishes the “Construction Manager General Contractor Act” to permit the Secretary of Transportation to use a construction manager general contractor delivery method on a project, if the Department makes a written determination that it is appropriate and in the best interest of the Department to use this method of project delivery to procure an eligible project. The Department’s request for proposals for a construction manager general contractor contract shall contain, at a minimum, the following elements, such as identification of requirements for liability insurance, a proposal bond pursuant to Section 13-1-146 NMSA 1978, and performance and payment bonds pursuant to Section 13-4-18 NMSA 1978.

Bond Forms

Comment Letter on City of Wilsonville’s Bond Forms

Early this month, NASBP was forwarded a copy of the bond forms required for a project by the city of Wilsonville, Oregon. We noted that the bond terms and conditions are counter to prevailing surety and construction industry practices and to the market reputation of the City as a desirable procurer of construction services. Such onerous terms and conditions will restrict competition for City projects and ensure the City pays more for the work.

Therefore, NASBP sent a comment letter to the City of Wilsonville laying out our concerns, which includes the increase of risk to both the contractor and the surety as well as overly broad and ambiguous contract terms.

False Claims

Colorado House Bill 1119

CO H.1119 (Gray) The bill establishes the “Colorado False Claims Act.” Pursuant to the act, a person is liable to the state or a political subdivision for civil penalty if the person commits, conspires to commit, or aids and abets the commission of any of the following (collectively, “false claims”). H.1119 has similar language to the federal act regarding what constitutes a false claim and uses the same definitions for “knowing” and “knowingly,” meaning sureties are still potentially exposed. The bill also outlines the state attorney general’s role as well as the rights of a relator. On Wednesday, February 23, the House Judiciary Committee will hold a hearing on this bill.

Public-Private Partnerships

Colorado Senate Bill 130

CO S.130 (Rankin) Amends Article 94 of the CO Administrative Organization Act to authorize a state public entity to enter into a P3 agreement. “State public entity” includes the executive, legislative, and judicial branches of state government, but excludes the Department of Transportation and any institution of higher education. The bill does not impact the authority of the Department of Transportation or any institution of higher education to enter into a public-private partnership or similar agreement as otherwise authorized by law.

There is no bonding provision unlike the 2019 law, which amended CO state and local LMAs to require bonds on P3s for construction contracts that are situated or located on public real property using private money, public or private financing, or public real property.

On Wednesday, February 23, the Senate Business, Labor, and Technology Committee will hold a hearing on this bill.

New Mexico House Bill 55

UPDATE NM H.55 (Garrett) Establishes the Public Private Partnership Act for public-private agreements (P3) for the construction or improvement of a public transportation facility or public transportation infrastructure, other than a toll road; or for public construction or improvement of broadband telecommunications network facilities. Prior to entering a P3 agreement, the private partner shall provide performance and payment bonds pursuant to Section 13-4-18 NMSA (LMA); require a private partner to provide guarantees, letters of credit or other acceptable forms of security, the amount of which may be less than one hundred percent of the value of the contract involved based on the determination of the public partner, or for public-private partnership agreements requiring board approval, based on the determination by the board. H.55 has passed the House and was referred to the Senate Committees on Judiciary and Finance.

Click here for a state-by-state breakdown of P3 statutes.

Subcontractor Default Insurance (SDI)

Last year, NASBP submitted a letter to Massachusetts’ Joint Committee on State Administration and Regulatory Oversight, requesting that the Committee vote against the two bills highlighted below. These bills are very similar, except for the additional bolded language below in H.3225. NASBP opposes these bills for several reasons, one of which is because SDI benefits neither the owner nor the unpaid trade contractors, unlike performance and payment bonds. Both bills were referred to a Study Committee

Massachusetts House Bill 3113

MA H.3113 (Cahill) Amends Section 8 (a) of Chapter 149A of the General Laws as appearing in the 2018 Official Edition is hereby amended by striking out paragraph 2 and inserting in place thereof the following new paragraph: “All trade contracts entered into in accordance with this chapter shall be secured by performance and payment bonds in the full amount of the trade contract from a surety company licensed to do business in the commonwealth and whose name appears on United States Treasury Department Circular 570; provided that the bonds are subject to subsection (3) of section 44F of chapter 149 except for those subcontracts subject to a subcontractor default insurance policy obtained by the construction management at risk firm. The construction manager at risk firm [sic] to obtain a subcontractor default insurance policy in lieu of the requirement that all trade contractors obtain payment and performance bonds. The intention to use a subcontractor default insurance policy shall be made known by the awarding authority and construction manager at risk firm prior to the receipt of trade contractor bids pursuant to subsection (g) of this section.”

Massachusetts House Bill 3225

MA H.3225 (Rogers) Section 8 (a) of Chapter 149A of the General Laws as appearing in the 2012 Official Edition is hereby amended by striking out paragraph 2 and inserting in place thereof the following new paragraph: “All trade contracts entered into in accordance with this chapter shall be secured by performance and payment bonds in the full amount of the trade contract from a surety company licensed to do business in the commonwealth and whose name appears on United States Treasury Department Circular 570; provided that the bonds are subject to subsection (3) of section 44F of chapter 149 except for those subcontracts subject to a subcontractor default insurance policy obtained by the construction management at risk firm. The construction manager at risk firm shall have the option to obtain a subcontractor default insurance policy in lieu of payment and performance bonds for some or all trade contractors. The intention to use a subcontractor default insurance policy shall be made known by the construction manager at risk firm and the awarding authority after the receipt of trade contractor bids pursuant to subsection (g) of this section. Any trade contractor not covered through the subcontractor default insurance policy program must submit a payment and performance bond at no additional cost to the construction manager at risk firm or the awarding authority. All trade contractor bidders shall include anticipated bonding costs in their bids and, in the event of inclusion in a subcontractor default insurance program, trade contractors shall remit to the construction manager at risk firm a credit equivalent to those anticipated bonding costs.”

If you are aware of any bills impacting the industry, please reach out to Larry LeClair, NASBP’s Director of Government Relations, and let us know.

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Focal Point is an e-bulletin sent to members and friends of the National Association of Surety Bond Producers when most state legislatures are in session and as needed thereafter. To obtain copies of Bills or other materials discussed above, contact advocacy@nasbp.org. Copyright © 2021. NASBP. All rights reserved.