There is legislation pending, Senate Bill 948, that would permit the Department of Administrative Services (the “DAS”) to waive the public bonding requirements for small, emerging and minority contractors. The Act would apply to projects less than $500,000 and would require participation by the contractor in a surety bond guarantee program – also created by the Act. The specifics surrounding how the guarantee program will actually be funded are not spelled out in the Act.
There is no question that increasing the participation level of small and minority contractors in public works projects is both good for the economy and makes sense for our communities. But eliminating the protections provided by bonds on public works projects required by Conn. Gen. Stat. 49-41a – 49-43 et al. may expose the public to substantial costs associated with defaulted contractors and unfinished projects. Senate Bill 948 does not include adequate protections should a contractor who has obtained such a wavier fails to perform.
The underwriting requirements of the sureties who issue these bonds act as safeguard prequalifying contractors to ensure they have the financial wherewithal and experience to complete the project that is to be bonded. Waiving these requirements may permit contractors to obtain public works projects that they cannot perform, and could lead to default situations without adequate protection for the public entity.
The Surety and Fidelity Association of America has expressed opposition to the proposed Act. Instead, it proposes a Model Contractor Development Program (MCDP)® which would provide small and minority contractors with education, training and the opportunity to meet and work with surety bond producers to assist them in implementing a bonding program. A summary of the MCDP is attached.
As it stands today, Senate Bill 948 is being held in committee pending further consideration. We will keep you apprised of future developments but we would love to hear your thoughts or comments regarding Senate Bill 948 as well as the proposed MCDP.