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| PRIOR PRINTER'S NO. 1104 | PRINTER'S NO. 1712 |
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| THE GENERAL ASSEMBLY OF PENNSYLVANIA |
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| SENATE BILL |
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| INTRODUCED BY PIPPY, TOMLINSON, FONTANA, FARNESE, SOLOBAY, SCHWANK, BLAKE, MENSCH, BREWSTER, COSTA, LEACH, KITCHEN, FERLO, HUGHES AND BROWNE, APRIL 25, 2011 |
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| SENATOR MCILHINNEY, STATE GOVERNMENT, AS AMENDED, OCTOBER 25, 2011 |
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| AN ACT |
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1 | Providing for the establishment of the Surety Bond Guarantee |
2 | Fund Program; imposing duties on the Department of Community |
3 | and Economic Development; and establishing the Surety Bond |
4 | Guarantee Fund. |
5 | The General Assembly of the Commonwealth of Pennsylvania |
6 | hereby enacts as follows: |
7 | Section 1. Short title. |
8 | This act shall be known and may be cited as the Surety Bond |
9 | Guarantee Fund Program Act. |
10 | Section 2. Definitions. |
11 | The following words and phrases when used in this act shall |
12 | have the meanings given to them in this section unless the |
13 | context clearly indicates otherwise: |
14 | "Applicant." A disadvantaged business as defined in this |
15 | act. |
16 | "Department." The Department of Community and Economic |
17 | Development of the Commonwealth. |
18 | "Disadvantaged business." A small business which is owned or |
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1 | controlled by a majority of persons, not limited to members of |
2 | minority groups, who have been deprived of the opportunity to |
3 | develop and maintain a competitive position in the economy |
4 | because of social disadvantages. |
5 | "Fund." The Surety Bond Guarantee Fund established in this |
6 | act. |
7 | "Program." The Surety Bond Guarantee Fund Program |
8 | established in this act. |
9 | "Secretary." The Secretary of Community and Economic |
10 | Development of the Commonwealth. |
11 | "Small business." A business in the United States which is |
12 | independently owned, is not dominant in its field of operation |
13 | and employs 250 or fewer employees. |
14 | "Surety bond." A guarantee in which the surety guarantees |
15 | that the contractor or principal in the bond will perform the |
16 | obligation stated in the bond. The term shall include the |
17 | following types of bonds: |
18 | (1) Bid bonds that guarantee the bidder will enter into |
19 | a contract and furnish the required payment and performance |
20 | bonds. |
21 | (2) Payment bonds that guarantee payment from the |
22 | contractor to parties who furnish labor, materials, equipment |
23 | and supplies. |
24 | (3) Performance bonds that guarantee the contractor will |
25 | fulfill the contract in accordance with terms and conditions. |
26 | (4) Ancillary bonds which may be incidental and |
27 | essential to the performance of the contract. |
28 | Section 3. Establishment of program. |
29 | The Surety Bond Guarantee Fund Program is established in the |
30 | department. The purpose of the program is to assist |
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1 | disadvantaged businesses to competitively bid for governmental |
2 | contracts. |
3 | Section 4. Surety Bond Guarantee Fund. |
4 | (a) Establishment.--The Surety Bond Guarantee Fund is |
5 | established within the State Treasury for the purpose of |
6 | assisting disadvantaged businesses to competitively bid for |
7 | certain Commonwealth contracts. |
8 | (b) Fund administration.--The fund shall be administered by |
9 | the department. All moneys in the fund shall be used to finance |
10 | guarantees to bonding companies against percentages of losses |
11 | sustained as a result of defaults by qualified disadvantaged |
12 | businesses on a contract or project. |
13 | (c) Payments from fund.--Surety bond guarantees made with | <-- |
14 | payments from the fund under the program shall not exceed the |
15 | sum of $1,000,000 for any one disadvantaged business. |
16 | (c) Authority of the fund to issue guarantee.--Any guarantee | <-- |
17 | or agreement to indemnify the surety shall not exceed 80% of the |
18 | loss incurred and paid by the surety on any qualified contract. |
19 | Section 5. Contract and bonds eligible for guarantee. | <-- |
20 | (a) Eligibility.--A bond guaranteeing the performance of a |
21 | contract shall be qualified and eligible for a surety bond |
22 | guarantee under the program if: |
23 | (1) The bond is listed in the contract bonds section of |
24 | the Surety and Fidelity Association of America's, or its |
25 | successor's, "Manual of Rules, Procedures and |
26 | Classifications." |
27 | (2) The bond is required by the contract, invitation for |
28 | bid or request for proposal. |
29 | (3) The bond is executed by a surety company that is |
30 | acceptable to the Treasury Department and qualified by the | <-- |
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1 | department. |
2 | (4) The bond meets any other requirements established by |
3 | the department. |
4 | (b) Required provision; notice of cancellation.-- |
5 | (1) No bond shall qualify or be eligible for a guarantee |
6 | under the program unless it contains a provision affirming |
7 | that the bond shall not be canceled for any cause unless |
8 | notice of intention to cancel is given to the department at |
9 | least 30 days before the day upon which cancellation shall |
10 | take effect. |
11 | (2) Cancellation of the bond shall not invalidate the |
12 | bond regarding the period of time it was in effect. licensed | <-- |
13 | and in good standing with the Insurance Department. |
14 | (b) Eligibility of contracts.--No surety bond guarantee |
15 | under the program may be issued unless: |
16 | (1) The person who would be the principal on the bond |
17 | has been found eligible under section 6(c). |
18 | (2) The total amount of the contract at the time of |
19 | execution of the bond is less than $1,000,000. |
20 | Section 6. Disadvantaged business participation. |
21 | (a) Application process.-- |
22 | (1) A disadvantaged business may apply to participate in |
23 | the program by filing an application with the department. |
24 | (2) The department shall review the application to |
25 | determine if the applicant is eligible to participate in the |
26 | program within 30 days of receipt of the completed |
27 | application. The department may extend the review period for |
28 | an additional 30 days if it determines that additional time |
29 | is needed to complete the review process. |
30 | (3) The department shall notify the applicant in writing |
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1 | of the extended period, including the date it will reach its |
2 | final decision. |
3 | (b) Investigation.-- |
4 | (1) Upon receipt of a completed application, the |
5 | department may conduct an investigation of the applicant, |
6 | including an investigation of its owners, officers, |
7 | directors, principals or agents, in order to determine |
8 | whether the applicant is eligible to participate in the |
9 | program. |
10 | (2) If the investigation finds and the department |
11 | determines that an applicant is not eligible to participate |
12 | in the program, it shall notify the applicant in writing that |
13 | the applicant will not be approved for program participation. |
14 | The notification of ineligibility shall include the reason |
15 | the application was not approved and that the applicant has |
16 | the right to appeal the department's determination to the |
17 | secretary within 30 days of the date of the notice. |
18 | (c) Criteria for determining eligibility.--An applicant |
19 | shall be deemed eligible to participate in the program if the |
20 | department determines that an applicant meets all of the |
21 | following qualifications: |
22 | (1) The applicant is a disadvantaged business certified |
23 | by the department Department of General Services. | <-- |
24 | (2) The applicant's business is in the construction or |
25 | building trade industry. |
26 | (3) The applicant has been actively operating its |
27 | business for at least one year prior to the application date. |
28 | (4) The applicant has the experience and financial |
29 | fitness appropriate to a qualified contract. |
30 | (5) The applicant has agreed to subcontract no more than |
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1 | 75% of the work to be performed under a qualified contract. |
2 | (6) The applicant has demonstrated an inability to | <-- |
3 | secure bonding under normal market conditions. |
4 | (6) The applicant who would be the principal on the bond | <-- |
5 | is unable to obtain the bond on reasonable terms and |
6 | conditions without a guarantee. |
7 | (7) There is a reasonable expectation that the principal |
8 | will perform the covenants and conditions of the contract |
9 | with respect to which the bond is required and the terms and |
10 | conditions of the bond are reasonable in the light of the |
11 | risks involved and the extent of the surety's participate. |
12 | (7) (8) The applicant or one of its owners, officers, | <-- |
13 | directors, principals or agents has not committed or been |
14 | convicted of any of the activities set forth specified in | <-- |
15 | section 7. |
16 | (8) (9) The business meets any other program | <-- |
17 | requirements that establish criteria for eligibility that the |
18 | department shall adopt by regulation within 180 days of the |
19 | effective date of this section. |
20 | Section 7. Criteria for denying program participation. |
21 | The department may not approve or may deny an application for |
22 | program participation if it determines that the applicant or one |
23 | of its owners, officers, directors, principals or agents |
24 | committed or has been convicted of the following: |
25 | (1) Made a material misstatement in the application or |
26 | any other document required to be submitted by the department |
27 | or under a provision of this act. |
28 | (2) Failed to comply with or violated any provision of |
29 | this act or any regulation, order or statement of policy |
30 | issued by the department under this act. |
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1 | (3) Engaged in unfair or unethical conduct in connection |
2 | with the construction or building trade industry or in |
3 | violation of 62 Pa.C.S. Ch. 23 (relating to ethics in public |
4 | contracting). |
5 | (4) Does not possess the financial fitness, character, |
6 | reputation, integrity and general fitness sufficient to |
7 | warrant reasonable belief that the applicant's business will |
8 | be conducted lawfully, honestly and in the public interest. |
9 | (5) Notwithstanding any other provision of law to the |
10 | contrary, been convicted of or pleaded guilty or nolo |
11 | contendere to a crime of moral turpitude or to an offense |
12 | graded as a felony. |
13 | (6) Been enjoined by a court of competent jurisdiction |
14 | from engaging in the construction or building trade industry. |
15 | (7) Has had a license issued by the department or any |
16 | other Federal, state or local agency denied, not renewed, |
17 | suspended or revoked. |
18 | (8) Became the subject of a United States Postal Service |
19 | fraud order. |
20 | (9) Demonstrated negligence or incompetence in |
21 | performing an act for which the applicant is required to hold |
22 | a license under an act enacted by this Commonwealth. |
23 | (10) Has an outstanding debt to the Federal Government, |
24 | the Commonwealth or any Federal or Commonwealth agency or a |
25 | political subdivision of the Commonwealth or agency of a |
26 | political subdivision. |
27 | (11) Became insolvent at any time prior to the |
28 | application date, meaning that the liabilities of the |
29 | applicant exceeded the assets of the applicant or that the |
30 | applicant could not meet the obligations of the applicant as |
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1 | they matured or was in such financial condition that the |
2 | applicant could not continue in business without jeopardizing |
3 | the health, safety and welfare of its customers. |
4 | (12) At any time prior to application, has failed to |
5 | disburse payments to subcontractors in a timely manner as |
6 | agreed to under a contract for any reason other than the |
7 | owner's failure to make the agreed-to payments to the |
8 | applicant or because such disbursement would constitute a |
9 | violation of applicable law or an order issued by a court or |
10 | administrative body of competent jurisdiction. |
11 | Section 8. Duties of department. |
12 | (a) Technical assistance.--The department shall provide |
13 | technical assistance to enable disadvantaged businesses to |
14 | competitively bid on State and other governmental contracts. |
15 | Technical assistance shall include, but not be limited to, |
16 | assisting disadvantaged businesses in responding to bid |
17 | requests, strengthening financial condition and addressing other |
18 | concerns raised or likely to be raised by a bonding company. |
19 | (b) Monitoring program.-- |
20 | (1) The department shall establish a monitoring program |
21 | to monitor the activities of disadvantaged businesses |
22 | participating in the program. The monitoring program shall |
23 | include inspections of projects approved for bond guarantees |
24 | to minimize the risk of calls on the fund. |
25 | (2) The department shall promptly advise the |
26 | disadvantaged business of any deficiencies identified during |
27 | an inspection. |
28 | (3) In the event the deficiencies noted in the report |
29 | are not promptly addressed by the disadvantaged business to |
30 | the satisfaction of the department, the department may give |
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1 | the disadvantaged business a reasonable period to correct the |
2 | deficiencies or may report such deficiencies to the issuing |
3 | bond company. |
4 | Section 9. Regulations. |
5 | The department shall administer and enforce the provisions of |
6 | this act and shall adopt and promulgate regulations, guidelines |
7 | or policy statements necessary to carry out the provisions of |
8 | this act. |
9 | Section 10. Effective date. |
10 | This act shall take effect immediately. |
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