GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1993

S	1 

SENATE BILL 1242

Short Title:  State Contract Bonding.	(Public)
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Sponsors: Senator Sherron.
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Referred to:  State Personnel and State Government.
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June 17, 1993

A BILL TO BE ENTITLED
AN ACT TO AMEND THE PAYMENT AND PERFORMANCE BOND LAWS AND TO PROVIDE ENHANCED OPPORTUNITIES FOR SMALL BUSINESS CONTRACTORS ON STATE PROJECTS.
The General Assembly of North Carolina enacts:
Section 1.  Article 3 of Chapter 44A of the General Statutes is amended by adding the following new sections to read:
"§ 44A-26.1.  State building contracts; bond waivers.
(a)	Notwithstanding the provisions of G.S. 44A-26, the Secretary of Administration may, with respect to any contract upon which a State agency other than the Department of Transportation is the contracting body, do one or more of the following:
(1)	Waive the performance bond requirement, the payment bond requirement, or both, for a contractor if:
a.	The contractor's contract is one hundred thousand dollars ($100,000) or less; and
b.	The total amount of contracts awarded for the project is two hundred fifty thousand dollars ($250,000) or less.
(2)	Accept from a contractor, in lieu of a payment or performance bond, a fee equal to the cost of a Small Business Administration guaranteed bond.
"§ 44A-26.2.  State highway contracts; bond waivers.
(a)	Notwithstanding the provisions of G.S. 44A-26, the Secretary of Transportation may, with respect to contracts awarded by the Department of Transportation, do one or more of the following:
(1)	Waive the performance bond requirement, the payment bond requirement, or both, for a contractor if:
a.	The contractor's contract is fifty thousand dollars ($50,000) or less; and
b.	The total amount of contracts awarded for the project is one hundred thousand dollars ($100,000) or less.
(2)	Establish for the contract a percentage of the payment bond, performance bond, or both, to be secured by the contractor.  The percentage of the contract to be secured shall be no less than fifty percent (50%) of and no greater than one hundred percent (100%) of the amount bid, based upon the Secretary's assessment of the risk presented to the State by the type of contract, past experience with the contractor, and other factors as set out by the Board of Transportation.
(3)	Accept from a contractor, in lieu of a payment or performance bond, a fee equal to the cost of a Small Business Administration guaranteed bond.
"§ 44A-26.3. Qualifications.  
Only a contractor that meets the following qualifications is eligible to participate under the bond programs listed in G.S. 44A-26.1 and G.S. 44A-26.2:
(1)	The contractor qualifies as a small business, in accordance with rules adopted by the State Building Commission or the Board of Transportation, as appropriate;
(2)	The contractor has been operating as the same business for a continuous period of three years;
(3)	The contractor has demonstrated the capability to perform its work in accordance with the terms of the contract without excessive delays, extensions, cost overruns, or changes for which the contractor or its subcontractor was held responsible;
(4)	The contractor does not have a documented record of past projects resulting in arbitration or litigation in which the contractor was found to be liable or at fault; and
(5)	With respect to the fee in lieu of bond under G.S. 44A-26.1(a)(3) or G.S. 44A-26.2(a)(3), the contractor has been denied guaranteed bond by the Small Business Administration or denied performance and payment bond by an established surety company legally authorized to do business in the State of North Carolina for reasons other than prior defaults.
"§ 44A-26.4. Bond Fund.
There is hereby established a State Projects Bond Fund (hereinafter 'Fund') within the Office of the State Treasurer, to consist of a Highway Account and a Building Account.  The Fund shall be the repository of all appropriations made by the General Assembly for the implementation of G.S. 44A-26.1 through G.S. 44A-26.4 and all fees collected pursuant to G.S. 44A-26.1(a)(3) and G.S. 44A-26.2(a)(3).  The monies in the Fund's Highway Account may be used by the Secretary of Transportation to wholly or partially indemnify surety companies that provide performance and payment bonds for construction contracts and to provide security for defaults by contractors.  The monies in the Fund's Building Account may be used by the Secretary of Administration to wholly or partially indemnify surety companies that provide performance and payment bonds for construction contracts and to provide security for defaults by contractors.
"§ 44A-26.5. Percentage of contract bonded.
Notwithstanding the provisions of G.S. 44A-26, the Secretary of Administration and the Secretary of Transportation, as appropriate, may establish a percentage of the contract to be secured by the contractor under a payment bond, performance bond, or both.  The percentage of the contract to be secured shall be no less than fifty percent (50%) of and no greater than one hundred percent (100%) of the amount bid, based upon the Secretary's assessment of the risk presented to the State by the type of contract, past experience with the contractor, and other factors as set out by the State Building Commission or the Board of Transportation, as appropriate."
Sec. 2.  This act is effective upon ratification.