– Rep. Valerie Gaydos (R-Allegheny) applauded the members of the state Senate for unanimously passing her legislation that would amend the Public Works Contractors’ Bond Law of 1967 requiring certain financial securities for public contracts in excess of $10,000. The bill overwhelming passed the House in July.
“House Bill 885
eliminates alternative security instruments, which do not adequately protect local governments when public projects go bad,” said Gaydos. “Because the legislation requires security equal to the contract amount in the form of a performance bond, payment bond, irrevocable letter of credit, or escrow account, my legislation will prevent local government units from losing money because of inadequate security on public projects.”
Gaydos’ legislation removes the ability of contracting bodies to accept alternative securities and limits contracting bodies to the following acceptable options:
• Performance Bonds.
• Federal or Commonwealth chartered lending institution irrevocable letter of credit.
• Funds in an escrow or restrictive account in a lending institution.
The contractor must secure two of the approved financial security options:
• One equal to 100% of the contract amount, conditioned on the performance of the contract. This is for the protection of the governing body that awarded the contract.
• One equal to 100% of the contract amount, to cover the cost of materials and labor. This is for the protection of the subcontractor against failure to receive payment from the prime contractor.
The Public Works Contractor’s Bond Law of 1967 establishes a uniform and mandatory system governing the requirement of bonds to be furnished by contractors in the prosecution of any public building or other public work or public improvement, including road work. Under current law, the posting of “any financial security, acceptable to and approved by the contracting body” has enabled projects to go forward at the local level with inadequate security.
Gaydos’ legislation is part of a series of bills on municipal government reform in conjunction with the Senate to ensure an effective and broad approach to municipal government for the 21st century.
House Bill 885 is now on Gov. Tom Wolf’s desk awaiting his signature.
Representative Valerie Gaydos
44th Legislative District
Pennsylvania House of Representatives
Media Contact: Rick Leiner