What Is Performance Bond For | How Do I Get A Performance Bond
Topic:
CONTRACTS; CONSTRUCTION INDUSTRIES; BONDS;
Location:
BONDS;

OLR Research Report


July 22, 2003

 

2003-R-0498

SURETY BONDS ON STATE CONSTRUCTION CONTRACTS

 

By: Sandra Norman-Eady, Chief Attorney

You asked for proof that the state received surety bonds on construction contracts awarded by the (1) Department of Public Works (DPW) (a) during the past fiscal year and valued at over $500,000 and (b) for the completion of the non-bid projects listed in CGS 4b-91 and (2) Department of Transportation (DOT) during the past four years for the completion of buildings, not roads or bridges, and valued at over $8 million.

SUMMARY

The law requires contractors to furnish proof of performance and payment bonds as a condition of being awarded most state construction contracts valued at over $500,000. As a matter of practice, the DPW and DOT commissioners keep a copy of the bonds, which must be in the amount of the contract, with the contract. We have attached a copy of these bonds for your review.

The law does not specifically require the recipient of contracts the DPW commissioner awards on a total cost basis to furnish proof of these bonds even though these contacts can exceed $500,000. The commissioner awards these contracts to construction managers who employ various subcontractors to do the actual work.

DPW CONSTRUCTION CONTRACTS

With a few exceptions, the DPW commissioner is the authority charged with awarding state construction contracts that will cost the state over $500,000. The law covers reconstruction, alteration, remodeling, repairs, and demolition of any state building. The Legislative Management Committee is responsible for construction, alterations, or repairs to buildings under its supervision; public colleges and universities for such construction of buildings under their supervision or control up to $2 million (except there is no cap on UCONN 2000); and DOT for the construction of highways, bridges, and mass transit, marine, or aviation transportation facilities.

As a general rule, the public works commissioner must publicly advertise construction contracts estimated to cost more than $ 500,000 and award them to the lowest, responsible qualified bidder on the basis of competitive bids. Contractors awarded these contracts are required by law to furnish two bonds: one for performance and the other to insure that laborers and material suppliers are paid (CGS 4b-91(a)).

The DPW commissioner awarded seven construction contracts valued at over $500,000 in FY 2002-03. Table 1 shows each of these contracts, the contract recipients, the name of the surety, and the bond amount.

Table 1: Bonds Filed on DPW Projects in FY 2002-03

Contract

Contractor

Surety

Bond

UCONN Natatorium

B.W. Dexter, Inc.

Peerless Insurance

$ 615,494

State Police Academy

Konover Construction

National Fire Insurance

$6,375,900

Cedarcrest Hospital

LaRosa Building Group

U.S. Fidelity & Guaranty Company

$ 720,300

Hospitality Tech. Blue Print Room

MCC Construction

Great American Ins.

$ 736,500

Ct. Valley Hospital

Manafort Brothers

U.S. Fidelity & Guaranty

$ 998,102

Platt Reg. Voc. Tech.

Silktown Roofing

Liberty Mutual Ins.

$ 357,800

Western St. Univ.

Fusco Corp.

Casualty & Surety Co.

$31,615,000

Source: DPW

The commissioner also has the authority to expedite the process when awarding contracts for certain specified projects. These contracts are not awarded based on competitive bids. Instead the commissioner may negotiate a contract with any one of three general contractors taken from a short list of responsible and qualified contractors. Contractors awarded these contracts are subject to the same bonding requirements as those awarded a contract that is competitively bid (CGS 4b-91(b)).

The General Assembly has placed eight projects on the fast-track in the past nine years: Hartford Community Court, Connecticut Juvenile Training School, Capital Community College in downtown Hartford, Homer Babbidge Library, Fort Trumbull State Park, MacDougall Correctional Facility, Juvenile Detention Center in Hartford and Bridgeport, and Connecticut State University Student Residential Facility. Of the eight, seven are listed in CGS 4b-91. The eighth, Fort Trumbull State Park, is designated in SA 99-2. Table 2 shows each project, the contractor selected to complete it, and the surety company and amount.

As is shown in Table 2, the DPW commissioner awarded three of these projects on a total cost basis to a construction manager under CGS 4b-24. This method of awarding contracts allows the commissioner to select a single contractor most qualified to perform all phases of the project rather than the lowest responsible qualified bidder for each project component. The particular statute authorizing total cost basis contracting does not require the contract recipient to file surety bonds with the commissioner. And the department cannot verify that individual subcontractors on the projects obtained bonds, according to Steven Kitowitz, DPW legislative liaison. However another statute (CGS 49-41) requires anyone awarded a construction contract valued at more than $50,000 to furnish a payment bond.

TABLE 2: Fast-Track Projects 1994 to Present

Contract

Contractor

Surety

Bond

Babbidge Library

C. R. Klewin

Not Found*

_____

Hartford Community Court

Konover

Travelers Casualty and Surety Company

$4,313,415**

CT. Juvenile Training School

Tomasso Brothers

Construction Management Project

_____

Fort Trumbull State Park

Downes

Construction Management Project

_____

Capital Community College

Gilbane

Construction Management Project

_____

Bridgeport Juv. Detention Center

Tomasso Brothers

Travelers Casualty and Surety Company

$29,509,145

Hartford Juvenile Detention Center

Konover

Not Found*

____

MacDougall Correctional Institution

O&G

American Home Assurance

$29,487,200

Connecticut State University Dormitories

Contract not yet finalized

_____

_____

Source: DPW

*DPW could not locate proof of these bonds

**Bond rounded to the nearest dollar

DOT BUILDING CONSTRUCTION CONTRACTS

As stated earlier, the DOT commissioner is responsible for awarding contracts for the construction of real assets required for the development and operation of a safe and efficient system of highway, mass transit, marine, and aviation transportation (CGS 13b-4 (12)). While highway and bridge construction contracts represent the vast majority of those the commissioner awards, he also awards contracts for the construction of buildings. During the immediate past four years, the commissioner has awarded contracts for seven buildings with contract values over $8 million. Table 3 shows five of these contracts, the selected contractor, and the surety company and amount. DOT did not provide us with information on the remaining two, the Bradley Airport Terminal and Parking garage, in time for this report. We will forward it once we receive it.

TABLE 3: DOT Building Contracts Over $8 Million 1998-2003

Contract

Contractor

Surety

Bond*

New Haven Rail Yard Storage Demolition

O & G

American Home Assurance

$39,530,498

Stamford Transportation Center Parking Garage

Manafort Brothers

U.S. Fidelity & Guaranty Company

$23,928,303

New Haven Rail Yard Diesel Shop

O & G

Travelers Casualty and Surety Company

$17,827,093

Bradley Remote Deicing Facility

Lane Construction

St. Paul Fire and Marine

$13,859,913

Stamford Bus Facility

Frank Mercede & Sons

Lumberman's Mutual Casualty Company

$9,267,827

Source: DOT

*Rounded to the nearest dollar

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