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Public Act 104-0168
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| HB1224 Enrolled | LRB104 06221 JRC 16256 b |
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AN ACT concerning government.
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Be it enacted by the People of the State of Illinois, |
represented in the General Assembly:
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Section 5. The Public Construction Bond Act is amended by |
changing Section 1 as follows:
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(30 ILCS 550/1) (from Ch. 29, par. 15) |
Sec. 1. Except as otherwise provided by this Act, until |
January 1, 2029, all officials, boards, commissions, or agents |
of this State, or of any political subdivision thereof, in |
making contracts for public work of any kind costing over |
$150,000 to be performed for the State, or of any political |
subdivision thereof, shall require every contractor for the |
work to furnish, supply and deliver a bond to the State, or to |
the political subdivision thereof entering into the contract, |
as the case may be, with good and sufficient sureties. The |
surety on the bond shall be a company that is licensed by the |
Department of Insurance authorizing it to execute surety bonds |
and the company shall have a financial strength rating of at |
least A- as rated by A.M. Best Company, Inc., Moody's |
Investors Service, Standard & Poor's Corporation, or a similar |
rating agency. The amount of the bond shall be fixed by the |
officials, boards, commissions, commissioners or agents, and |
the bond, among other conditions, shall be conditioned for the |
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completion of the contract, for the payment of material, |
apparatus, fixtures, and machinery used in the work and for |
all labor performed in the work, whether by subcontractor or |
otherwise. |
Until January 1, 2029, when making contracts for public |
works to be constructed, the Department of Transportation and |
the Illinois State Toll Highway Authority shall require every |
contractor for those works to furnish, supply, and deliver a |
bond to the Department or the Authority, as the case may be, |
with good and sufficient sureties only if the public works |
contract will cost more than $500,000. The Department of |
Transportation and the Illinois State Toll Highway Authority |
shall publicly display the following information by website or |
annual report and shall provide that information to interested |
parties upon request: |
(1) a list of each of its defaulted public works |
contracts, including the value of the award, the adjusted |
contract value, and the amount remaining unpaid by the |
Department or Authority, as applicable; |
(2) the number and the aggregate amount of payment |
claims made under the Mechanics Lien Act along with the |
number of contracts in which payment claims are made under |
the Mechanics Lien Act; |
(3) for each of its public improvement contracts, |
regardless of the contract value, the aggregate annual |
revenue of the contractor derived from contracts with the |
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State; |
(4) for each of its public works contracts, regardless |
of contract value, the identity of the surety providing |
the contract bond, payment and performance bond, or both; |
and |
(5) for each of its public works contracts, regardless |
of the bond threshold, a list of bidders for each public |
works contract, and the amount bid by each bidder. |
Until January 1, 2029, local governmental units may |
require a bond, by ordinance or resolution, for public works |
contracts valued at $150,000 or less. |
On and after January 1, 2029, all officials, boards, |
commissions, or agents of this State, or of any political |
subdivision thereof, in making contracts for public work of |
any kind costing over $50,000 to be performed for the State, or |
of any political subdivision thereof, shall require every |
contractor for the work to furnish, supply and deliver a bond |
to the State, or to the political subdivision thereof entering |
into the contract, as the case may be, with good and sufficient |
sureties. The surety on the bond shall be a company that is |
licensed by the Department of Insurance authorizing it to |
execute surety bonds and the company shall have a financial |
strength rating of at least A- as rated by A.M. Best Company, |
Inc., Moody's Investors Service, Standard & Poor's |
Corporation, or a similar rating agency. The amount of the |
bond shall be fixed by the officials, boards, commissions, |
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commissioners or agents, and the bond, among other conditions, |
shall be conditioned for the completion of the contract, for |
the payment of material, apparatus, fixtures, and machinery |
used in the work and for all labor performed in the work, |
whether by subcontractor or otherwise. |
If the contract is for emergency repairs as provided in |
the Illinois Procurement Code, proof of payment for all labor, |
materials, apparatus, fixtures, and machinery may be furnished |
in lieu of the bond required by this Section. |
Each such bond is deemed to contain the following |
provisions whether such provisions are inserted in such bond |
or not: |
"The principal and sureties on this bond agree that all |
the undertakings, covenants, terms, conditions and agreements |
of the contract or contracts entered into between the |
principal and the State or any political subdivision thereof |
will be performed and fulfilled and to pay all persons, firms |
and corporations having contracts with the principal or with |
subcontractors, all just claims due them under the provisions |
of such contracts for labor performed or materials furnished |
in the performance of the contract on account of which this |
bond is given, when such claims are not satisfied out of the |
contract price of the contract on account of which this bond is |
given, after final settlement between the officer, board, |
commission or agent of the State or of any political |
subdivision thereof and the principal has been made.". |
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Each bond securing contracts between the Capital |
Development Board or any board of a public institution of |
higher education and a contractor shall contain the following |
provisions, whether the provisions are inserted in the bond or |
not: |
"Upon the default of the principal with respect to |
undertakings, covenants, terms, conditions, and agreements, |
the termination of the contractor's right to proceed with the |
work, and written notice of that default and termination by |
the State or any political subdivision to the surety |
("Notice"), the surety shall promptly remedy the default by |
taking one of the following actions: |
(1) The surety shall complete the work pursuant to a |
written takeover agreement, using a completing contractor |
jointly selected by the surety and the State or any |
political subdivision; or |
(2) The surety shall pay a sum of money to the obligee, |
up to the penal sum of the bond, that represents the |
reasonable cost to complete the work that exceeds the |
unpaid balance of the contract sum. |
The surety shall respond to the Notice within 15 working |
days of receipt indicating the course of action that it |
intends to take or advising that it requires more time to |
investigate the default and select a course of action. If the |
surety requires more than 15 working days to investigate the |
default and select a course of action or if the surety elects |
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to complete the work with a completing contractor that is not |
prepared to commence performance within 15 working days after |
receipt of Notice, and if the State or any political |
subdivision determines it is in the best interest of the State |
to maintain the progress of the work, the State or any |
political subdivision may continue to work until the |
completing contractor is prepared to commence performance. |
Unless otherwise agreed to by the procuring agency, in no case |
may the surety take longer than 30 working days to advise the |
State or political subdivision on the course of action it |
intends to take. The surety shall be liable for reasonable |
costs incurred by the State or any political subdivision to |
maintain the progress to the extent the costs exceed the |
unpaid balance of the contract sum, subject to the penal sum of |
the bond.". |
The surety bond required by this Section may be acquired |
from the company, agent or broker of the contractor's choice. |
The bond and sureties shall be subject to the right of |
reasonable approval or disapproval, including suspension, by |
the State or political subdivision thereof concerned. Except |
as otherwise provided in this Section, in the case of State |
construction contracts, a contractor shall not be required to |
post a cash bond or letter of credit in addition to or as a |
substitute for the surety bond required by this Section. |
Prior to the completion of 50% of the contract for public |
works, the State or a local governmental unit, except for the |
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Department of Transportation, may not withhold retainage from |
any payment to a contractor who furnishes the bond or bond |
substitute required by this Act in an amount in excess of 10% |
of any payment made prior to the date of completion of 50% of |
the contract for public works. When a contract for public |
works is 50% complete, the State or the local governmental |
unit, except for the Department of Transportation, shall |
reduce the retainage so that no more than 5% is held. After the |
contract is 50% complete, no more than 5% of the amount of any |
subsequent payments made under the contract for public works |
may be withheld as retainage. |
Subject to the limitations in this Section, a State agency |
may withhold as retainage a portion of the moneys from the |
payment of a contract that is entered into on or after the |
effective date of this amendatory Act of the 104th General |
Assembly if and only if the State agency determines that |
satisfactory progress has not been achieved by a contractor or |
subcontractor during any period for which a payment is to be |
made. Satisfactory progress shall be clearly provided for in |
the contract between the State agency and the contractor or |
subcontractor. Retainage may not be used as a substitute for |
good contract management, and the State agency may not |
withhold funds without cause. Determinations to retain and the |
specific amount to be withheld must be made by the State agency |
on a case-by-case basis based on the performance of milestones |
under the current contract as provided for in the contract |
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between the State agency and the contractor. A contractor may |
not withhold retainage from a subcontractor except to the |
extent a State agency has withheld retainage from the |
contractor which is attributable to that subcontractor's |
subcontract. This paragraph does not apply to the Illinois |
State Toll Highway Authority. |
Prior to the completion of 50% of the contract for public |
works, the contractor and their respective subcontractors |
shall not withhold from their subcontractors retainage in |
excess of 10% of any payment made prior to the date of |
completion of 50% of the contract for public works. When the |
contract for public works is 50% complete, the contractor and |
its subcontractors shall reduce the retainage so that no more |
than 5% is withheld from their respective subcontractors. |
After the contract is 50% complete, the contractor and its |
subcontractors shall not withhold more than 5% of the amount |
of any subsequent payments made under the contract to their |
respective subcontractors. |
When other than motor fuel tax funds, federal-aid funds, |
or other funds received from the State are used, a political |
subdivision may allow the contractor to provide a |
non-diminishing irrevocable bank letter of credit, in lieu of |
the bond required by this Section, on contracts under $100,000 |
to comply with the requirements of this Section. Any such bank |
letter of credit shall contain all provisions required for |
bonds by this Section. |
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In order to reduce barriers to entry for diverse and small |
businesses, the Department of Transportation may implement a |
5-year pilot program to allow a contractor to provide a |
non-diminishing irrevocable bank letter of credit in lieu of |
the bond required by this Section on contracts under $500,000. |
Projects selected by the Department of Transportation for this |
pilot program must be classified by the Department as low-risk |
scope of work contracts. The Department shall adopt rules to |
define the criteria for pilot project selection and |
implementation of the pilot program. |
In this Section: |
"Local governmental unit" has the meaning ascribed to it |
in Section 2 of the Local Government Prompt Payment Act. |
"Material", "labor", "apparatus", "fixtures", and |
"machinery" include those rented items that are on the |
construction site and those rented tools that are used or |
consumed on the construction site in the performance of the |
contract on account of which the bond is given. |
"Retainage" means a portion of money withheld from a |
payment, including, but not limited to, a payment as defined |
in the Local Government Prompt Payment Act or the State Prompt |
Payment Act, made to a contractor or subcontractor intended to |
ensure that the contractor or subcontractor completes the |
requirements of the contract or subcontract. "Retainage" does |
not include (i) moneys withheld due to violations of local, |
State, or federal laws or (ii) moneys withheld from grants to |