Bill Text: IL HB1404 | 2013-2014 | 98th General Assembly | Chaptered

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Bill Title: Amends the Public Construction Bond Act. Requires surety bonds on public construction projects by any political subdivision of the State costing over $50,000 (now, over $5,000). Makes surety bond requirements for any political subdivision of the State the same as those for the State. Effective immediately.

Spectrum: Partisan Bill (Democrat 4-0)

Status: (Passed) 2013-08-09 - Public Act . . . . . . . . . 98-0216 [HB1404 Detail]

Download: Illinois-2013-HB1404-Chaptered.html

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Public Act 098-0216
HB1404 Enrolled LRB098 04290 OMW 34317 b
AN ACT concerning finance.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Public Construction Bond Act is amended by
changing Section 1 as follows:
(30 ILCS 550/1) (from Ch. 29, par. 15)
Sec. 1. Except as otherwise provided by this Act, all
officials, boards, commissions, or agents of this State, or of
any political subdivision thereof, in making contracts for
public work of any kind costing over $50,000 to be performed
for the State, or of any political subdivision thereof, and all
officials, boards, commissions, or agents of any political
subdivision of this State in making contracts for public work
of any kind costing over $5,000 to be performed for the
political subdivision, shall require every contractor for the
work to furnish, supply and deliver a bond to the State, or to
the political subdivision thereof entering into the contract,
as the case may be, with good and sufficient sureties. The
amount of the bond shall be fixed by the officials, boards,
commissions, commissioners or agents, and the bond, among other
conditions, shall be conditioned for the completion of the
contract, for the payment of material used in the work and for
all labor performed in the work, whether by subcontractor or

otherwise.
If the contract is for emergency repairs as provided in the
Illinois Procurement Code, proof of payment for all labor,
materials, apparatus, fixtures, and machinery may be furnished
in lieu of the bond required by this Section.
Each such bond is deemed to contain the following
provisions whether such provisions are inserted in such bond or
not:
"The principal and sureties on this bond agree that all the
undertakings, covenants, terms, conditions and agreements of
the contract or contracts entered into between the principal
and the State or any political subdivision thereof will be
performed and fulfilled and to pay all persons, firms and
corporations having contracts with the principal or with
subcontractors, all just claims due them under the provisions
of such contracts for labor performed or materials furnished in
the performance of the contract on account of which this bond
is given, when such claims are not satisfied out of the
contract price of the contract on account of which this bond is
given, after final settlement between the officer, board,
commission or agent of the State or of any political
subdivision thereof and the principal has been made.".
Each bond securing contracts between the Capital
Development Board or any board of a public institution of
higher education and a contractor shall contain the following
provisions, whether the provisions are inserted in the bond or

not:
"Upon the default of the principal with respect to
undertakings, covenants, terms, conditions, and agreements,
the termination of the contractor's right to proceed with the
work, and written notice of that default and termination by the
State or any political subdivision to the surety ("Notice"),
the surety shall promptly remedy the default by taking one of
the following actions:
(1) The surety shall complete the work pursuant to a
written takeover agreement, using a completing contractor
jointly selected by the surety and the State or any
political subdivision; or
(2) The surety shall pay a sum of money to the obligee,
up to the penal sum of the bond, that represents the
reasonable cost to complete the work that exceeds the
unpaid balance of the contract sum.
The surety shall respond to the Notice within 15 working
days of receipt indicating the course of action that it intends
to take or advising that it requires more time to investigate
the default and select a course of action. If the surety
requires more than 15 working days to investigate the default
and select a course of action or if the surety elects to
complete the work with a completing contractor that is not
prepared to commence performance within 15 working days after
receipt of Notice, and if the State or any political
subdivision determines it is in the best interest of the State

to maintain the progress of the work, the State or any
political subdivision may continue to work until the completing
contractor is prepared to commence performance. Unless
otherwise agreed to by the procuring agency, in no case may the
surety take longer than 30 working days to advise the State or
political subdivision on the course of action it intends to
take. The surety shall be liable for reasonable costs incurred
by the State or any political subdivision to maintain the
progress to the extent the costs exceed the unpaid balance of
the contract sum, subject to the penal sum of the bond.".
The surety bond required by this Section may be acquired
from the company, agent or broker of the contractor's choice.
The bond and sureties shall be subject to the right of
reasonable approval or disapproval, including suspension, by
the State or political subdivision thereof concerned. In the
case of State construction contracts, a contractor shall not be
required to post a cash bond or letter of credit in addition to
or as a substitute for the surety bond required by this
Section.
When other than motor fuel tax funds, federal-aid funds, or
other funds received from the State are used, a political
subdivision may allow the contractor to provide a
non-diminishing irrevocable bank letter of credit, in lieu of
the bond required by this Section, on contracts under $100,000
to comply with the requirements of this Section. Any such bank
letter of credit shall contain all provisions required for

bonds by this Section.
(Source: P.A. 95-1011, eff. 12-15-08; 96-1000, eff. 7-2-10.)
Section 99. Effective date. This Act takes effect upon
becoming law.