Virginia State legislators seem to be rather lax when it comes to public funds within their state. They recently proposed a new law that will heavily affect both the construction industry and taxpayer’s alike. The potential new law, which is named HB 1951 Public Procurement Act, boosts the minimum contract amount required for bid, performance, or payment bonds from $100,000 to $500,000. This means jobs that fall under $500,000 are not required to obtain a surety bond to guarantee their work; it’s risky business for both contractors and taxpayer’s.
When it comes to trying to rationalize the proposed bill, it does give previously unqualified contractor’s more opportunities to work on bigger jobs that formerly required a surety bond. But whose interest does that serve? Just because some contractors may not have been able to qualify for Performance Surety bonds doesn’t mean it’s a clever idea to raise the minimum contract amount so they have more chances to work on larger projects. There are reasons why certain contractors that weren’t underwritten by a bonding company didn’t qualify to attain a surety bond. I will agree that surety underwriting is rather conservative these days, but that only lends to an environment of financially sound contractors getting good public work.
HB 1951 is essentially lowering the bar to put contractors who have contracts under $500,000 free of having to post a surety bond; the bond as you might know, would guarantee the completion of the job while protecting public funds should a contractor default. Let’s remember, we as Americans pay taxes that run to the State and Federal level who end up paying these contractors on public jobs. The whole point of the bond is to guarantee the work being done on any given job. Let’s say a contractor does default on a project that was protected with a surety bond, the surety company backing the bond would pay out for the remainder of the uncompleted work so no one is stuck with a half completed building, stadium, parking garage, etc. This new enactment prevents the pay out from happening on contracts up to $499,999 simply by raising the minimum contract amount that requires a surety bond; that’s a large amount of taxpayer cash being gambled with.
Plain and simple, the point of a surety bond is to guarantee something. In this case, it’s to guarantee the success of a construction contract. The HB 1951 Public Procurement Act that changes the surety bond requirements threatens taxpayer’s dollars and future construction projects.