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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 AND FERLO, APRIL 25, 2011 |
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| REFERRED TO STATE GOVERNMENT, APRIL 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 | Section 5. Contract eligible for guarantee. |
17 | (a) Eligibility.--A bond guaranteeing the performance of a |
18 | contract shall be qualified and eligible for a surety bond |
19 | guarantee under the program if: |
20 | (1) The bond is listed in the contract bonds section of |
21 | the Surety and Fidelity Association of America's, or its |
22 | successor's, "Manual of Rules, Procedures and |
23 | Classifications." |
24 | (2) The bond is required by the contract, invitation for |
25 | bid or request for proposal. |
26 | (3) The bond is executed by a surety company that is |
27 | acceptable to the Treasury Department and qualified by the |
28 | department. |
29 | (4) The bond meets any other requirements established by |
30 | the department. |
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1 | (b) Required provision; notice of cancellation.-- |
2 | (1) No bond shall qualify or be eligible for a guarantee |
3 | under the program unless it contains a provision affirming |
4 | that the bond shall not be canceled for any cause unless |
5 | notice of intention to cancel is given to the department at |
6 | least 30 days before the day upon which cancellation shall |
7 | take effect. |
8 | (2) Cancellation of the bond shall not invalidate the |
9 | bond regarding the period of time it was in effect. |
10 | Section 6. Disadvantaged business participation. |
11 | (a) Application process.-- |
12 | (1) A disadvantaged business may apply to participate in |
13 | the program by filing an application with the department. |
14 | (2) The department shall review the application to |
15 | determine if the applicant is eligible to participate in the |
16 | program within 30 days of receipt of the completed |
17 | application. The department may extend the review period for |
18 | an additional 30 days if it determines that additional time |
19 | is needed to complete the review process. |
20 | (3) The department shall notify the applicant in writing |
21 | of the extended period, including the date it will reach its |
22 | final decision. |
23 | (b) Investigation.-- |
24 | (1) Upon receipt of a completed application, the |
25 | department may conduct an investigation of the applicant, |
26 | including an investigation of its owners, officers, |
27 | directors, principals or agents, in order to determine |
28 | whether the applicant is eligible to participate in the |
29 | program. |
30 | (2) If the investigation finds and the department |
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1 | determines that an applicant is not eligible to participate |
2 | in the program, it shall notify the applicant in writing that |
3 | the applicant will not be approved for program participation. |
4 | The notification of ineligibility shall include the reason |
5 | the application was not approved and that the applicant has |
6 | the right to appeal the department's determination to the |
7 | secretary within 30 days of the date of the notice. |
8 | (c) Criteria for determining eligibility.--An applicant |
9 | shall be deemed eligible to participate in the program if the |
10 | department determines that an applicant meets all of the |
11 | following qualifications: |
12 | (1) The applicant is a disadvantaged business certified |
13 | by the department. |
14 | (2) The applicant's business is in the construction or |
15 | building trade industry. |
16 | (3) The applicant has been actively operating its |
17 | business for at least one year prior to the application date. |
18 | (4) The applicant has the experience and financial |
19 | fitness appropriate to a qualified contract. |
20 | (5) The applicant has agreed to subcontract no more than |
21 | 75% of the work to be performed under a qualified contract. |
22 | (6) The applicant has demonstrated an inability to |
23 | secure bonding under normal market conditions. |
24 | (7) The applicant or one of its owners, officers, |
25 | directors, principals or agents has not committed or been |
26 | convicted of any of the activities set forth in section 7. |
27 | (8) The business meets any other program requirements |
28 | that establish criteria for eligibility that the department |
29 | shall adopt by regulation within 180 days of the effective |
30 | date of this section. |
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1 | Section 7. Criteria for denying program participation. |
2 | The department may not approve or may deny an application for |
3 | program participation if it determines that the applicant or one |
4 | of its owners, officers, directors, principals or agents |
5 | committed or has been convicted of the following: |
6 | (1) Made a material misstatement in the application or |
7 | any other document required to be submitted by the department |
8 | or under a provision of this act. |
9 | (2) Failed to comply with or violated any provision of |
10 | this act or any regulation, order or statement of policy |
11 | issued by the department under this act. |
12 | (3) Engaged in unfair or unethical conduct in connection |
13 | with the construction or building trade industry or in |
14 | violation of 62 Pa.C.S. Ch. 23 (relating to ethics in public |
15 | contracting). |
16 | (4) Does not possess the financial fitness, character, |
17 | reputation, integrity and general fitness sufficient to |
18 | warrant reasonable belief that the applicant's business will |
19 | be conducted lawfully, honestly and in the public interest. |
20 | (5) Notwithstanding any other provision of law to the |
21 | contrary, been convicted of or pleaded guilty or nolo |
22 | contendere to a crime of moral turpitude or to an offense |
23 | graded as a felony. |
24 | (6) Been enjoined by a court of competent jurisdiction |
25 | from engaging in the construction or building trade industry. |
26 | (7) Has had a license issued by the department or any |
27 | other Federal, state or local agency denied, not renewed, |
28 | suspended or revoked. |
29 | (8) Became the subject of a United States Postal Service |
30 | fraud order. |
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1 | (9) Demonstrated negligence or incompetence in |
2 | performing an act for which the applicant is required to hold |
3 | a license under an act enacted by this Commonwealth. |
4 | (10) Has an outstanding debt to the Federal Government, |
5 | the Commonwealth or any Federal or Commonwealth agency or a |
6 | political subdivision of the Commonwealth or agency of a |
7 | political subdivision. |
8 | (11) Became insolvent at any time prior to the |
9 | application date, meaning that the liabilities of the |
10 | applicant exceeded the assets of the applicant or that the |
11 | applicant could not meet the obligations of the applicant as |
12 | they matured or was in such financial condition that the |
13 | applicant could not continue in business without jeopardizing |
14 | the health, safety and welfare of its customers. |
15 | (12) At any time prior to application, has failed to |
16 | disburse payments to subcontractors in a timely manner as |
17 | agreed to under a contract for any reason other than the |
18 | owner's failure to make the agreed-to payments to the |
19 | applicant or because such disbursement would constitute a |
20 | violation of applicable law or an order issued by a court or |
21 | administrative body of competent jurisdiction. |
22 | Section 8. Duties of department. |
23 | (a) Technical assistance.--The department shall provide |
24 | technical assistance to enable disadvantaged businesses to |
25 | competitively bid on State and other governmental contracts. |
26 | Technical assistance shall include, but not be limited to, |
27 | assisting disadvantaged businesses in responding to bid |
28 | requests, strengthening financial condition and addressing other |
29 | concerns raised or likely to be raised by a bonding company. |
30 | (b) Monitoring program.-- |
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1 | (1) The department shall establish a monitoring program |
2 | to monitor the activities of disadvantaged businesses |
3 | participating in the program. The monitoring program shall |
4 | include inspections of projects approved for bond guarantees |
5 | to minimize the risk of calls on the fund. |
6 | (2) The department shall promptly advise the |
7 | disadvantaged business of any deficiencies identified during |
8 | an inspection. |
9 | (3) In the event the deficiencies noted in the report |
10 | are not promptly addressed by the disadvantaged business to |
11 | the satisfaction of the department, the department may give |
12 | the disadvantaged business a reasonable period to correct the |
13 | deficiencies or may report such deficiencies to the issuing |
14 | bond company. |
15 | Section 9. Regulations. |
16 | The department shall administer and enforce the provisions of |
17 | this act and shall adopt and promulgate regulations, guidelines |
18 | or policy statements necessary to carry out the provisions of |
19 | this act. |
20 | Section 10. Effective date. |
21 | This act shall take effect immediately. |
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