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| Public Act 102-0968 | ||||
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AN ACT concerning finance.
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Be it enacted by the People of the State of Illinois,
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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)
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Sec. 1. Except as otherwise provided by this Act, 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,
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shall be
conditioned for the completion of the contract, for | ||||
the payment of material, apparatus, fixtures, and machinery
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used in the work and for all labor performed in the work, | ||
whether by
subcontractor or otherwise.
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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.
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Each such bond is deemed to contain the following | ||
provisions whether
such provisions are inserted in such bond | ||
or not:
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"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,
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commission or agent of the State or of any political | ||
subdivision thereof
and the principal has been made.". | ||
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 | ||
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.".
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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 In the
case of State | ||
construction contracts, a contractor shall not be required to
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post a cash bond or letter of credit in addition to or as a | ||
substitute for the
surety bond required by this Section.
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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
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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. | ||
For the purposes of this Section, the terms "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. | ||
(Source: P.A. 101-65, eff. 1-1-20.)
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