House of Representatives

HB 2574

State construction projects; bonds; insurance

Sponsors: Avelar

DPA	Committee on Retirement & Government Operations
DPA	Committee on Public Institutions & Rural affairs
X	Caucus and COW
	As Passed the House

HB 2574 requires the Department of Administration (DOA), the State Transportation Board (Board), the Arizona Department of Transportation (ADOT), the Arizona Board of Regents (ABOR) and the Legislative and Judicial branches to enter into contracts with an authorized insurer or surety and requires the insurer or surety to aggressively assist underutilized businesses.

History

Currently, the federal government offers assistance through their Surety Bond Guarantee Program (SBG). SBG is administered by the Office of Surety Guarantees (OSG) and was developed to provide contracting opportunities to small and minority contractors who would otherwise be unqualified for bidding. Assistance is given for contracts up to $2 million or less where a surety bond is required but not available privately. The Small Business Administration’s (SBA) guarantee of payment for a percentage of the contract provides incentive to sureties to provide bonding and gives small businesses greater access to contracting opportunities.

SBG is divided into two programs. One program is the Prior Approval Program (PAP) and requires each participant to obtain SBA’s approval for each bond guarantee issued and guarantees up to 90% of a surety’s loss. The other program is the Preferred Surety Bond (PSB) program. It guarantees up to 70% of a surety’s loss and sureties are authorized to issue, service and monitor bonds without prior approval from the SBA. Assistance offered by both programs is limited to contractors with gross receipts that have not averaged more than $5,000,000 for the last three fiscal years and manufacturers whose number of employees do not exceed the small business standards specified in federal regulations.

Provisions

· Requires DOA, the Board, ADOT, ABOR and the Legislative and Judicial branches to jointly or separately enter into competitively bid contracts with a surety or insurer that is authorized to do business in Arizona and experienced in surety bond support services.

· Requires the qualified surety or insurer to aggressively assist historically underutilized businesses and small businesses to obtain bonds or insurance.

· Requires the contract between currently exempt departments, state agencies or institutions and sureties or insurers to meet the following specifications:

1. Renew at least once each state fiscal biennium.

2. Requires the surety or insurer to aggressively take steps to assist historically underutilized businesses and small businesses to obtain bonds, insurance or both.

3. Provides that an evaluation on the surety or insurer’s performance under the contract shall partially be on the basis of the number of underutilized businesses and small businesses that was obtained through bonds, insurance or both.

· Requires departments, state agencies or institutions under the contracts to conduct annual audits and performance reviews.

HB 2574 was verbally amended in the Retirement and Government Operations Committee as follows:

· Adds insurance brokerage firms or agencies to the group that can enter into competitively bid contracts with specified entities.

HB 2574 was amended in the Public Institutions & Rural Affairs Committee as follows:

· Replaces surety or insurer with insurance producer.

·

·

· ---------- DOCUMENT FOOTER ---------

· 45th Legislature

· First Regular Session 2 March 7, 2001

·

· ---------- DOCUMENT FOOTER ---------