HR0234 97TH GENERAL ASSEMBLY

HR0234 LRB097 11386 PJG 53682 r

HOUSE RESOLUTION

WHEREAS, Small business growth is at the heart of any economic recovery as most new jobs are created by small businesses; and

WHEREAS, Minority-owned and women-owned small businesses (M/WBEs) are particularly important drivers of job growth for African-Americans and Latinos who experience disproportionately high unemployment rates; and

WHEREAS, It has long been a strategic objective of the State of Illinois to support the development of minority-owned and women-owned businesses through the M/WBE programs for State procurement, particularly in construction; and

WHEREAS, During the recent credit crunch, one of the single largest barriers to growth for women-owned and minority-owned construction businesses has been bonding requirements and the very stringent financial terms imposed upon M/WBE businesses by the bonding companies; and

WHEREAS, It is not uncommon for a bonding company to require a construction company to deposit half the amount of the total value of a construction contract in an escrow account in order for the bonding company to sell to the construction company a performance bond for the project; and

WHEREAS, As M/WBE construction firms tend not to be heavily capitalized, the rates charged to the M/WBE firms by the bonding companies tend to be far higher than the rates charged to large legacy firms; and

WHEREAS, The purpose of a bond requirement is to financially reimburse the State in the event of default by the construction company, not to suppress competition or enrich bond companies; and

WHEREAS, There may be more efficient alternative methods to protect the State from any financial loss in the event of lack of performance by M/WBE firms on a construction project; and

WHEREAS, The members of the Federation of Women Contractors believe that the current state of the bond market and the bond requirements are among very significant impediments to growth; therefore, be it

RESOLVED, BY THE HOUSE OF REPRESENTATIVES OF THE NINETY-SEVENTH GENERAL ASSEMBLY OF THE STATE OF ILLINOIS, that the Department of Commerce and Economic Opportunity consider whether a surety program successfully administered years ago be resurrected in order to provide a financial guarantee to bonding companies for projects conducted by M/WBE firms in order to lower the costs to M/WBE firms and increase their access to capital; and be it further

RESOLVED, That the Department of Insurance, which regulates bond issuing companies, consider how it can help identify and encourage bond companies to participate in a program for M/WBE construction firms; and be it further

RESOLVED, That the Department of Transportation and the Capital Development Board review their bonding requirements for M/WBE participants in light of the actual number of defaults by M/WBE companies over the last 5 years to determine whether the bonding requirements are more stringent than necessary to protect against risk; and be it further

RESOLVED, That the Department of Commerce and Economic Opportunity, the Department of Insurance, the Department of Transportation, and the Capital Development Board report to the General Assembly with recommendations to reform bonding requirements for M/WBE firms in public construction projects by January 15, 2012.