PRINTER'S NO. 286
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
287
Session of
2015
INTRODUCED BY THOMAS, V. BROWN, COHEN AND BROWNLEE,
FEBRUARY 2, 2015
REFERRED TO COMMITTEE ON COMMERCE, FEBRUARY 2, 2015
AN ACT
Providing for the establishment of the Surety Bond Guarantee
Program; imposing duties on the Department of Community and
Economic Development; establishing the Surety Bond Guarantee
Fund; providing for contracts eligible for guarantee and for
participation by disadvantaged businesses; and making an
appropriation.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Surety Bond
Guarantee Fund Program Act.
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Applicant." A disadvantaged business.
"Department." The Department of Community and Economic
Development of the Commonwealth.
"Disadvantaged business." A small business which is owned or
controlled by a majority of persons, not limited to members of
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minority groups, who:
(1) have been deprived of the opportunity to develop and
maintain a competitive position in the economy because of
social disadvantages; or
(2) are veterans, including service-disabled veterans.
"Fund." The Surety Bond Guarantee Fund established in
section 4.
"Program." The Surety Bond Guarantee Fund Program
established in section 3.
"Secretary." The Secretary of Community and Economic
Development of the Commonwealth.
"Service-disabled veteran." A veteran who possesses either
an adjudication letter from the United States Veterans
Administration establishing a service-connected disability
rating or a disability determination from the United States
Department of Defense.
"Small business." A business in the United States which is
independently owned, is not dominant in its field of operation
and employs 250 or fewer employees.
"Surety bond." A guarantee in which the surety guarantees
that the contractor or principal in the bond will perform the
obligation stated in the bond. The term shall include the
following types of bonds:
(1) Bid bonds that guarantee the bidder will enter into
a contract and furnish the required payment and performance
bonds.
(2) Payment bonds that guarantee payment from the
contractor to parties who furnish labor, materials, equipment
and supplies.
(3) Performance bonds that guarantee the contractor will
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fulfill the contract in accordance with terms and conditions.
(4) Ancillary bonds which may be incidental and
essential to the performance of the contract.
"Veteran." An individual who:
(1) Served in the active United States military in any
of the four current branches and all previous branches,
including a reserve component or the National Guard.
(2) Was released or discharged from active military
service under conditions other than dishonorable.
(3) Possesses a certificate of release or discharge from
active duty.
Section 3. Establishment of program.
The Surety Bond Guarantee Fund Program is established, to the
extent funds are appropriated specifically for the purposes of
this act, in the department. The purpose of the program is to
assist disadvantaged businesses to competitively bid for
governmental contracts.
Section 4. Surety Bond Guarantee Fund.
(a) Fund established.--The Surety Bond Guarantee Fund is
established within the State Treasury for the purpose of
assisting disadvantaged businesses to competitively bid for
certain Commonwealth contracts.
(b) Fund administration.--The fund shall be administered by
the department. All money in the fund shall be used to finance
guarantees to bonding companies against percentages of losses
sustained as a result of defaults by qualified disadvantaged
businesses on a contract or project.
(c) Payments from fund.--Surety bond guarantees made with
payments from the fund under the program shall not exceed the
sum of $1,000,000 for any one disadvantaged business.
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Section 5. Contract eligible for guarantee.
(a) Eligibility.--A bond guaranteeing the performance of a
contract shall be qualified and eligible for a surety bond
guarantee under the program if:
(1) The bond is listed in the contract bonds section of
the Surety Association of America's "Manual of Rules,
Procedures and Classifications for Fidelity, Forgery and
Surety Bonds."
(2) The bond is required by the contract, invitation for
bid or request for proposal.
(3) The bond is executed by a surety company that is
acceptable to the Treasury Department and qualified by the
department.
(4) The bond meets any other requirements established by
the department.
(b) Required provision and notice of cancellation.--No bond
shall qualify or be eligible for a guarantee under the program
unless it contains a provision affirming that the bond shall not
be canceled for any cause unless notice of intention to cancel
is given to the department at least 30 days before the day upon
which cancellation shall take effect. Cancellation of the bond
shall not invalidate the bond regarding the period of time it
was in effect.
Section 6. Disadvantaged business participation.
(a) Application process.--A disadvantaged business shall
apply to participate in the program by filing an application
with the department. The department shall review the application
to determine if the applicant is eligible to participate in the
program within 30 days of receipt of the completed application.
The department may extend the review period for an additional 30
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days if the department determines that additional time is needed
to complete the review process. The department shall notify the
applicant in writing of the extended period, including the date
the department will reach its final decision.
(b) Investigation.--Upon receipt of a completed application,
the department may conduct an investigation of the applicant,
including an investigation of its owners, officers, directors,
principals or agents, in order to determine whether the
applicant is eligible to participate in the program. If the
investigation finds and the department determines that an
applicant is not eligible to participate in the program, it
shall notify the applicant in writing that the applicant will
not be approved for program participation. The notification of
ineligibility shall include the reason the application was not
approved and that the applicant has the right to appeal the
department's determination to the secretary within 30 days of
the date of the notice.
(c) Criteria for determining eligibility.--An applicant
shall be deemed eligible to participate in the program if the
department determines that an applicant meets all of the
following criteria:
(1) The applicant is a disadvantaged business certified
by the Department of General Services.
(2) The applicant's business is in the construction or
building trade industry.
(3) The applicant has been actively operating its
business for at least one year prior to the application date.
(4) The applicant has the experience and financial
fitness appropriate of a qualified contractor.
(5) The applicant has agreed to subcontract no more than
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75% of the work to be performed under a qualified contract.
(6) The applicant has demonstrated an inability to
secure bonding under normal market conditions.
(7) The applicant or one of its owners, officers,
directors, principals or agents is not subject to section 7.
(8) The applicant and the applicant's business meets any
other program requirements that establish criteria for
eligibility that the department shall adopt by regulation,
guideline or statement of policy within 180 days of the
effective date of this act.
Section 7. Criteria for denying program participation.
The department may deny an application for program
participation if it determines that the applicant or one of its
owners, officers, directors, principals or agents:
(1) Made a material misstatement in the application or
any other document required to be submitted by the department
under a provision of this act and by the Department of
General Services under Title 62 (relating to procurement).
(2) Failed to comply with or violated any provision of
this act or any regulation, order or statement of policy
issued by the department under this act or any regulation,
order or statement of policy issued by the Department of
General Services under Title 62.
(3) Engaged in unfair or unethical conduct in connection
with the construction or building trade industry or in
violation of 62 Pa.C.S. Ch. 23 (relating to ethics in public
contracting).
(4) Does not possess the financial fitness, character,
reputation, integrity and general fitness sufficient to
warrant reasonable belief that the applicant's business will
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be conducted lawfully, honestly and in the public interest.
(5) Notwithstanding any other provision of law to the
contrary, been convicted of or pleaded guilty or nolo
contendere to a crime of moral turpitude or to an offense
graded as a felony.
(6) Been enjoined by a court of competent jurisdiction
from engaging in the construction or building trade industry.
(7) Has had a license issued by the department or any
other Federal, state or local agency denied, not renewed,
suspended or revoked.
(8) Has had the certification as a disadvantaged
business issued by the Department of General Services
revoked.
(9) Became the subject of a United States Postal Service
fraud order.
(10) Demonstrated negligence or incompetence in
performing an act for which the applicant is required to hold
a license under any law of this Commonwealth.
(11) Has an outstanding debt to the Federal Government,
the Commonwealth or any Federal or Commonwealth agency or a
political subdivision of the Commonwealth or agency of a
political subdivision.
(12) Became insolvent at any time prior to the
application date, meaning that the liabilities of the
applicant exceeded the assets of the applicant or that the
applicant could not meet the obligations of the applicant as
they matured or was in such financial condition that the
applicant could not continue in business without jeopardizing
the health, safety and welfare of its customers.
(13) At any time prior to application, has failed to
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disburse payments to subcontractors in a timely manner as
agreed to under a contract for any reason other than the
owner's failure to make the agreed-to-payments to the
applicant or because such disbursement would constitute a
violation of applicable law or an order issued by a court or
administrative body of competent jurisdiction.
Section 8. Duties of department.
(a) Technical assistance.--The department shall, in
consultation with the Department of General Services, provide
technical assistance to enable disadvantaged businesses to
competitively bid on State and other governmental contracts.
Technical assistance shall include, but not be limited to,
assisting disadvantaged businesses in responding to bid
requests, strengthening financial condition and addressing other
concerns raised or likely to be raised by a bonding company.
(b) Monitoring program.--The department shall establish a
monitoring program to monitor the activities of disadvantaged
businesses participating in the program. The monitoring program
shall include inspections of projects approved for bond
guarantees to minimize the risk of calls on the fund. The
department shall promptly advise the disadvantaged business of
any deficiencies identified during an inspection. In the event
the deficiencies noted in the report are not promptly addressed
by the disadvantaged business to the satisfaction of the
department, the department may give the disadvantaged business a
reasonable period to correct the deficiencies or may report such
deficiencies to the issuing bond company.
Section 9. Regulations.
(a) Adoption of regulations.--The department shall
administer and enforce the provisions of this act and shall
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adopt and promulgate regulations, guidelines or policy
statements necessary to carry out the provisions of this act.
(b) Department of General Services.--The department shall
consult with the Department of General Services to carry out the
provisions of this act. The Department of General Services shall
provide any technical or staff assistance as may be, from time
to time, required to assist the department in carrying out the
provisions of this act.
Section 10. Appropriation.
The sum of $5,000,000, or as much as may be necessary, is
appropriated to the Department of Community and Economic
Development for deposit into the fund for the operation of the
program. The department is authorized to expend up to 10% of the
money so appropriated for administrative costs.
Section 11. Publication of notice.
The secretary shall, upon the effective date of an act making
an appropriation under section 3 to the department, submit for
publication in the Pennsylvania Bulletin notice of the
appropriation.
Section 12. Effective date.
This act shall take effect as follows:
(1) The following provisions shall take effect
immediately:
(i) This section.
(ii) Section 10.
(2) The remainder of this act shall take effect upon
publication of the notice under section 10.
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