ARIZONA STATE SENATE
Phoenix, Arizona
state construction
projects; bonds; insurance
Requires any state agency that is exempt from construction project procurement code regulations to enter into a contract with an insurance producer to assist small businesses in obtaining bonds and insurance as a condition to qualify for future state contracts.
The Department of Administration (DOA) provides support to government agencies and state employees through the administration of data processing, payroll, procurement, insurance, employment and employee benefits. DOA also manages state-owned or leased buildings and oversees many public service programs. The Arizona Procurement Code is outlined in statute and governs the procurement and management of goods and services for the State. Certain state agencies and institutions are exempt from the Procurement Code for the purpose of procuring construction, including universities, the Legislature and the courts.
Current statute requires payment and performance bonds for any state government construction contract with at least a $35,000 value. Payment bonds guarantee payments by a general contractor to all suppliers and subcontractors hired for a job. Performance bonds guarantee a contract’s completion. The agents who supply these bonds (usually sureties or insurance providers) evaluate financial capacity, past performance, experience, assets, credit history and other factors to determine the risk of supplying a firm with a bond. Small businesses are usually considered higher risk firms and are either less likely to be supplied with bonds or are forced to pay higher fees for comparable coverage. Arizona statute defines small businesses as firms with gross revenues of $4 million or less or 100 or fewer employees.
The fiscal impact from this legislation is unknown at this time. A fiscal note has been requested and is forthcoming.
1. Requires any state agency or institution that is exempt from the procurement regulations regarding construction contracts, to jointly or separately enter into a competitively bid contract with an insurance producer that has experience in surety bond support services.
2. Requires the insurance contracts to:
a) Require the contracted insurance producer to aggressively assist small businesses in obtaining bonds and/or insurance that are necessary to qualify for state contracts or subcontracts.
b) Be renewed each state fiscal biennium;
c) Provide that any evaluations conducted on contracted insurance producers, at least in part, be based on the numbers of bonds and/or insurance obtained for small businesses.
3. Stipulates that departments covered by this measure conduct annual audits and performance reviews of the effected insurance contracts.
4. Prohibits any state body from mandating that bonds and insurance be obtained from a specific insurance producer.
5. Provides for a general effective date.
House Action
RGO 3/19/02 DPA 8-0-0-2-0
FII 3/27/02 DP 9-0-0-1-0
3rd Read 4/8/02 50-0-10-0
Prepared by Senate Staff
April 11, 2002