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A/E Services Construction Bonds

A/E Services Construction Bonds. A/E Services. Brooks Act - 1972 - State Adopted Principles - Represented in Procurement Code. A/E Services. 63G-6A-1502 – Procurement of A/E Svces…. - Statement of Qualifications - Cost Not an Evaluation Factor

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A/E Services Construction Bonds

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  1. A/E ServicesConstructionBonds

  2. A/E Services Brooks Act - 1972 - State Adopted Principles - Represented in Procurement Code

  3. A/E Services 63G-6A-1502 – Procurement of A/E Svces…. - Statement of Qualifications - Cost Not an Evaluation Factor - Negotiations with Selected Firm

  4. A/E Services Requirements under $100,000 - Pre-Qualify Firms Pursuant to 63G-6a 403, 404 and 408 - Select and Evaluate Three Firms - Negotiate Price with Best Firm

  5. A/E Services 63G-6A-1503 - Evaluation Committee Selection Non–DFCM……..Refer to Rules From Appropriate Rule Making Authority

  6. A/E Services 63G-6A-1505 Negotiations on Costs Based On…. - Estimated Value - Scope, Complexity & Professional Nature

  7. A/E Services 63G-6A-1505 Negotiations Fail with Selected Firm - Terminate Discussions - Move to Next Selected Firm

  8. A/E Services Rule R33-15 Evaluation Committee Selection - Req. For Statements Of Qualification - Evaluate/Negotiate/and Award or Move On

  9. Construction Procurement Generally an IFB But Sometimes ……. - RFP or Two Step Appropriate

  10. Construction DFCM General Clauses http://dfcm.utah.gov/downloads/1const/2005_0525_gen_conditions.pdf OR: DFCM Home Page / DFCM Forms / Reference Documents - # 9. General Conditions

  11. Construction DFCM Clauses Incorporate by Reference Into IFB - Several Clauses Frequently Used

  12. Construction 4.1.2 – Field Conditions - Contractor Notifies A/E or PM on Inconsistencies/differences

  13. Construction 4.5.1 – Permits & Fees - Contractor Not Liable Unless Required in Supplemental Conditions

  14. Construction 4.7.13 – Delays - Part (2) Weather Related Delays Contractor to Plan for bad weather days Sometimes called “unusually severe”

  15. Construction 4.10.1 – Use of Site - Limits Staging Area - Protect Site & Work - Clean Up of Site – Associated Costs, Fines, Etc.

  16. Construction 6.1 – Safety of Persons & Property - Employees, Materials, State Property - Safety Requirements – OSHA - Other Safety Issues / Emergencies - Hazardous Materials

  17. Construction Article 7 – Modifications/Changes - Several Clauses Relative to Changes/Timing, Etc. - Change Orders Common – Usually Routine - 7.8.6 – Claim Filed? - Contractor Proceeds Diligently

  18. Construction 10.1 – Insurance - Standard $1,000,000 / $3,000,000

  19. Liquidated Damages • LIQUIDATED DAMAGES - DFCM GENERAL CLAUSE 4.7.16 • IN GENERAL - Should the Contractor fail to complete the Work within the Contract Time, there shall be deducted from any amount due or that may become due the Contractor, the sum as stated in the Contractor's Agreement. Such sum is fixed and agreed upon by the DFCM and Contractor as liquidated damages due the DFCM by reason of the inconvenience and added costs of administration, engineering, supervision and other costs resulting from the Contractor's default, and not as a penalty. Actual damages related to delay can not be ascertained at the time of execution of the Contract. To the extent that the liquidated damages exceed any amounts that would otherwise be due the Contractor, the Contractor shall be liable for such excess to the DFCM. DFCM may seek enforcement of such obligation by legal action, and if such is necessary, shall recover the related costs and attorney fees. Notwithstanding any other provision of these General Conditions, the availability of liquidated damages to the DFCM shall not limit the DFCM's right to seek damages or other remedies available under law or equity to the extent such damages or remedies are not based upon delay. • LEGAL REALITY… ….. • (enforcement in courts) • (mitigate damages)

  20. BONDS Bid Bonds Payment Bonds Performance Bonds

  21. Procurement Code • Bid Bond – 63-6a-1102 • Bid security in an amount equal to at least 5% of the amount of the bid shall be required for all competitive bidding for construction contracts • Bid security shall be a bond provided by a surety company authorized to do business in this state, the equivalent in cash, or any other form satisfactory to the state. (AG’s Office has determined that alternate forms of bonding are not acceptable--only a bid bond is acceptable)

  22. Procurement Code • When a bidder fails to comply with the requirement for bid security described in the invitation for bids, the bid shall be rejected unless, pursuant to rules of the applicable rulemaking authority, the issuing procurement unit determines that the failure to comply with the security requirements is nonsubstantial. • After bid-closing, irrevocable - 60 days – except per 63G-6a-605 (erroneous bids, etc.) • procurement office is not allowed to designate a specific insurance or surety company, producer, agent, or broker.

  23. Procurement Code • Performance / Payment Bonds • A performance bond satisfactory to the procurement unit that is in an amount equal to 100% of the price specified in the contract and is executed by a surety company authorized to do business in the state or any other form satisfactory to the procurement unit • A payment bond satisfactory to the procurement unit that is in an amount equal to 100% • Again…….procurement office is not allowed to designate a specific insurance or surety company, producer, agent, or broker.

  24. Procurement Code • A person can make take claim action on a payment bond for any unpaid amount due to the person for labor, service, equipment, or material…..IF…. the person has not been paid in full within 90 days of work completion. • (define labor)

  25. Procurement Rules • R33-5-312 – Bid Security General • Acceptable bid security shall be limited to a bid bond in a form satisfactory to the State underwritten by a company licensed to issue bid bonds in this State; • OR ??? - a cashier's, certified, or official check drawn by a federally insured financial institution; or cash.(AG Position)

  26. Procurement Rules • R33-5-313 – Bid Security: Non-substantial Failure to Comply • If a bid does not comply with the security requirements of this Rule, the bid shall be rejected as nonresponsive except where the procurement officer determines otherwise (See Ree-5-313 parts 1a, b, & c) • Only one bid received, • Low vs. next high bid within bond amount, • Obvious mistake in bid changes bid requirement—48 hours to correct

  27. Procurement Rules • R33-5-321 Performance Bonds: General • A performance bond is required for all construction contracts in excess of $50,000, in the amount of 100% of the contract price. Deliver within 14 days of notice to provide it. Failure = bid rejection & Bid bond enforced—next low bid awarded—same bonding requirement)

  28. Procurement Rules • R33-5-331 – Payment Bonds: General • A payment bond is required for all construction contracts in excess of $50,000, in the amount of 100% of the contract price. The payment bond shall be delivered with performance bond – same timing requirements--same action if failure

  29. Procurement Rules • R33-5-341 – Bond Forms • All bonding forms used must be those most recently adopted by the Board and on file with the Chief Procurement Officer (except bid bonds for projects under $1,000,000 if acceptable to the State)

  30. Procurement Rules • R33-5-350 & R33-5-355Waiver of Bonding Requirements • Waiver is possible under certain circumstances by The Chief Procurement Officer pursuant to R33-5-350 and R33-5-355.

  31. Bonds – General Information • Authorized Bonding Companies • U.S. Department of the Treasury (Circular 570, Companies Holding Certificates of Authority and Acceptable Securities on Federal Bonds and as Acceptable Reinsuring Companies….(referred to as “Surety”). • Per AG - Alternate forms of bonding no longer allowed. (Examples that used to be allowed: cash deposit, certified check or irrevocable letter of credit)

  32. Bid Bond - General • Must be 5% of Bid Amount • Bid Bond must remain in effect up to 60 days • Standard Notarize Signature Process • Usually includes a Power of Attorney Form attached to the Bid Bond.

  33. Bid Bond – Pertinent Language • “..if the said principal does not execute a contract and give bond to be approved by the Obligee for the faithful performance thereof within ten (10) days after being notified in writing of such contract to the principal, then the sum of the amount stated above will be forfeited to the State of Utah as liquidated damages and not as a penalty; if the said principal shall execute a contract and give bond to be approved by the Obligee for the faithful performance thereof within ten (10) days after being notified in writing of such contract to the Principal, then this obligation shall be null and void.”

  34. Bid Bond – State Action • Collection on the bond is possible by the State as a result of: • 1. Unauthorized or unapproved (by the State) backing out of bid after bid closing….or • 2. Failure to obtain required performance and payment bonds..

  35. Performance Bond –Pertinent Language • ”…..the condition of this obligation is such that if the said Principal shall faithfully perform the Contract in accordance with the Contract Documents, including, but not limited to, the Plans, Specifications and conditions thereof, the one year performance warranty, and the terms of the Contract as said Contract may be subject to Modifications or changes, then this obligation shall be void; otherwise it shall remain in full force and effect. No right of action shall accrue on this bond to or for the use of any person or corporation other than the state named herein or the heirs, executors, administrators or successors of the Owner.”

  36. Performance Bond –Pertinent Language – Continued • The parties agree that the dispute provisions provided in the Contract Documents apply and shall constitute the sole dispute procedures of the parties. PROVIDED, HOWEVER, that this Bond is executed pursuant to the Provisions of Title 63, Chapter 56, Utah Code Annotated, 1953, as amended, and all liabilities on this Bond shall be determined in accordance with said provisions to the same extent as if it were copied at length herein.

  37. Payment Bond – Pertinent Language • Principal shall pay all claimants supplying labor or materials to Principal or Principal's Subcontractors in compliance with the provisions of Title 63, Chapter 56, of Utah Code Annotated, l953, as amended, and in the prosecution of the Work provided for in said Contract, then, this obligation shall be void; otherwise it shall remain in full force and effect.

  38. Payment Bond – Pertinent Language - Continued • PROVIDED, HOWEVER, that this Bond is executed pursuant to the provisions of Title 63, Chapter 56, Utah Code Annotated, 1953, as amended, and all liabilities on this Bond shall be determined in accordance with said provisions to the same extent as if it were copied at length herein. .

  39. Payment Bond – General • State’s obligation is to provide bonding information to any subcontractors or material providers who indicate they have not been paid and ask for the information. • There may always be exceptions, but….… The State does not withhold funds from the general contractor unless court ordered to do so, or if the bonding company requests it.

  40. Payment Bond – General • Generally, the State’s obligation to sub-contractors ends when payment bond has been secured and any potential claimant against the bond has been provided with bonding company information. • To take other action on behalf of either the bonding company or the claimant would put the state at an unnecessary risk.

  41. Bonding Company Action Payments by bonding companies are not automatic!

  42. A/E – CONSTRUCTION - BONDS QUESTIONS?

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