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Illinois Senate Bill SB0133

Illinois 2023-2024 Regular Session

Illinois Senate Bill SB0133 Compare Versions

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11 103RD GENERAL ASSEMBLY State of Illinois 2023 and 2024 SB0133 Introduced 1/24/2023, by Sen. Linda Holmes SYNOPSIS AS INTRODUCED: 30 ILCS 550/1 from Ch. 29, par. 15 Amends the Public Construction Bond Act. Provides that a local governmental unit may not withhold retainage of more than 5% from any payment to a contractor who furnishes the bond or bond substitute required by the Act and that the contractor and its subcontractors may not withhold retainage of more than 5% from their subcontractors. Defines "local governmental unit". Effective Immediately. LRB103 03446 DTM 48452 b A BILL FOR 103RD GENERAL ASSEMBLY State of Illinois 2023 and 2024 SB0133 Introduced 1/24/2023, by Sen. Linda Holmes SYNOPSIS AS INTRODUCED: 30 ILCS 550/1 from Ch. 29, par. 15 30 ILCS 550/1 from Ch. 29, par. 15 Amends the Public Construction Bond Act. Provides that a local governmental unit may not withhold retainage of more than 5% from any payment to a contractor who furnishes the bond or bond substitute required by the Act and that the contractor and its subcontractors may not withhold retainage of more than 5% from their subcontractors. Defines "local governmental unit". Effective Immediately. LRB103 03446 DTM 48452 b LRB103 03446 DTM 48452 b A BILL FOR
22 103RD GENERAL ASSEMBLY State of Illinois 2023 and 2024 SB0133 Introduced 1/24/2023, by Sen. Linda Holmes SYNOPSIS AS INTRODUCED:
33 30 ILCS 550/1 from Ch. 29, par. 15 30 ILCS 550/1 from Ch. 29, par. 15
44 30 ILCS 550/1 from Ch. 29, par. 15
55 Amends the Public Construction Bond Act. Provides that a local governmental unit may not withhold retainage of more than 5% from any payment to a contractor who furnishes the bond or bond substitute required by the Act and that the contractor and its subcontractors may not withhold retainage of more than 5% from their subcontractors. Defines "local governmental unit". Effective Immediately.
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1111 1 AN ACT concerning finance.
1212 2 Be it enacted by the People of the State of Illinois,
1313 3 represented in the General Assembly:
1414 4 Section 5. The Public Construction Bond Act is amended by
1515 5 changing Section 1 as follows:
1616 6 (30 ILCS 550/1) (from Ch. 29, par. 15)
1717 7 (Text of Section before amendment by P.A. 102-968)
1818 8 Sec. 1. Except as otherwise provided by this Act, all
1919 9 officials, boards, commissions, or agents of this State, or of
2020 10 any political subdivision thereof, in making contracts for
2121 11 public work of any kind costing over $50,000 to be performed
2222 12 for the State, or of any political subdivision thereof, shall
2323 13 require every contractor for the work to furnish, supply and
2424 14 deliver a bond to the State, or to the political subdivision
2525 15 thereof entering into the contract, as the case may be, with
2626 16 good and sufficient sureties. The surety on the bond shall be a
2727 17 company that is licensed by the Department of Insurance
2828 18 authorizing it to execute surety bonds and the company shall
2929 19 have a financial strength rating of at least A- as rated by
3030 20 A.M. Best Company, Inc., Moody's Investors Service, Standard &
3131 21 Poor's Corporation, or a similar rating agency. The amount of
3232 22 the bond shall be fixed by the officials, boards, commissions,
3333 23 commissioners or agents, and the bond, among other conditions,
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3737 103RD GENERAL ASSEMBLY State of Illinois 2023 and 2024 SB0133 Introduced 1/24/2023, by Sen. Linda Holmes SYNOPSIS AS INTRODUCED:
3838 30 ILCS 550/1 from Ch. 29, par. 15 30 ILCS 550/1 from Ch. 29, par. 15
3939 30 ILCS 550/1 from Ch. 29, par. 15
4040 Amends the Public Construction Bond Act. Provides that a local governmental unit may not withhold retainage of more than 5% from any payment to a contractor who furnishes the bond or bond substitute required by the Act and that the contractor and its subcontractors may not withhold retainage of more than 5% from their subcontractors. Defines "local governmental unit". Effective Immediately.
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6868 1 shall be conditioned for the completion of the contract, for
6969 2 the payment of material, apparatus, fixtures, and machinery
7070 3 used in the work and for all labor performed in the work,
7171 4 whether by subcontractor or otherwise.
7272 5 If the contract is for emergency repairs as provided in
7373 6 the Illinois Procurement Code, proof of payment for all labor,
7474 7 materials, apparatus, fixtures, and machinery may be furnished
7575 8 in lieu of the bond required by this Section.
7676 9 Each such bond is deemed to contain the following
7777 10 provisions whether such provisions are inserted in such bond
7878 11 or not:
7979 12 "The principal and sureties on this bond agree that all
8080 13 the undertakings, covenants, terms, conditions and agreements
8181 14 of the contract or contracts entered into between the
8282 15 principal and the State or any political subdivision thereof
8383 16 will be performed and fulfilled and to pay all persons, firms
8484 17 and corporations having contracts with the principal or with
8585 18 subcontractors, all just claims due them under the provisions
8686 19 of such contracts for labor performed or materials furnished
8787 20 in the performance of the contract on account of which this
8888 21 bond is given, when such claims are not satisfied out of the
8989 22 contract price of the contract on account of which this bond is
9090 23 given, after final settlement between the officer, board,
9191 24 commission or agent of the State or of any political
9292 25 subdivision thereof and the principal has been made.".
9393 26 Each bond securing contracts between the Capital
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104104 1 Development Board or any board of a public institution of
105105 2 higher education and a contractor shall contain the following
106106 3 provisions, whether the provisions are inserted in the bond or
107107 4 not:
108108 5 "Upon the default of the principal with respect to
109109 6 undertakings, covenants, terms, conditions, and agreements,
110110 7 the termination of the contractor's right to proceed with the
111111 8 work, and written notice of that default and termination by
112112 9 the State or any political subdivision to the surety
113113 10 ("Notice"), the surety shall promptly remedy the default by
114114 11 taking one of the following actions:
115115 12 (1) The surety shall complete the work pursuant to a
116116 13 written takeover agreement, using a completing contractor
117117 14 jointly selected by the surety and the State or any
118118 15 political subdivision; or
119119 16 (2) The surety shall pay a sum of money to the obligee,
120120 17 up to the penal sum of the bond, that represents the
121121 18 reasonable cost to complete the work that exceeds the
122122 19 unpaid balance of the contract sum.
123123 20 The surety shall respond to the Notice within 15 working
124124 21 days of receipt indicating the course of action that it
125125 22 intends to take or advising that it requires more time to
126126 23 investigate the default and select a course of action. If the
127127 24 surety requires more than 15 working days to investigate the
128128 25 default and select a course of action or if the surety elects
129129 26 to complete the work with a completing contractor that is not
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140140 1 prepared to commence performance within 15 working days after
141141 2 receipt of Notice, and if the State or any political
142142 3 subdivision determines it is in the best interest of the State
143143 4 to maintain the progress of the work, the State or any
144144 5 political subdivision may continue to work until the
145145 6 completing contractor is prepared to commence performance.
146146 7 Unless otherwise agreed to by the procuring agency, in no case
147147 8 may the surety take longer than 30 working days to advise the
148148 9 State or political subdivision on the course of action it
149149 10 intends to take. The surety shall be liable for reasonable
150150 11 costs incurred by the State or any political subdivision to
151151 12 maintain the progress to the extent the costs exceed the
152152 13 unpaid balance of the contract sum, subject to the penal sum of
153153 14 the bond.".
154154 15 The surety bond required by this Section may be acquired
155155 16 from the company, agent or broker of the contractor's choice.
156156 17 The bond and sureties shall be subject to the right of
157157 18 reasonable approval or disapproval, including suspension, by
158158 19 the State or political subdivision thereof concerned. In the
159159 20 case of State construction contracts, a contractor shall not
160160 21 be required to post a cash bond or letter of credit in addition
161161 22 to or as a substitute for the surety bond required by this
162162 23 Section.
163163 24 When other than motor fuel tax funds, federal-aid funds,
164164 25 or other funds received from the State are used, a political
165165 26 subdivision may allow the contractor to provide a
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176176 1 non-diminishing irrevocable bank letter of credit, in lieu of
177177 2 the bond required by this Section, on contracts under $100,000
178178 3 to comply with the requirements of this Section. Any such bank
179179 4 letter of credit shall contain all provisions required for
180180 5 bonds by this Section.
181181 6 For the purposes of this Section, the terms "material",
182182 7 "labor", "apparatus", "fixtures", and "machinery" include
183183 8 those rented items that are on the construction site and those
184184 9 rented tools that are used or consumed on the construction
185185 10 site in the performance of the contract on account of which the
186186 11 bond is given.
187187 12 (Source: P.A. 101-65, eff. 1-1-20.)
188188 13 (Text of Section after amendment by P.A. 102-968)
189189 14 Sec. 1. Except as otherwise provided by this Act, all
190190 15 officials, boards, commissions, or agents of this State, or of
191191 16 any political subdivision thereof, in making contracts for
192192 17 public work of any kind costing over $50,000 to be performed
193193 18 for the State, or of any political subdivision thereof, shall
194194 19 require every contractor for the work to furnish, supply and
195195 20 deliver a bond to the State, or to the political subdivision
196196 21 thereof entering into the contract, as the case may be, with
197197 22 good and sufficient sureties. The surety on the bond shall be a
198198 23 company that is licensed by the Department of Insurance
199199 24 authorizing it to execute surety bonds and the company shall
200200 25 have a financial strength rating of at least A- as rated by
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211211 1 A.M. Best Company, Inc., Moody's Investors Service, Standard &
212212 2 Poor's Corporation, or a similar rating agency. The amount of
213213 3 the bond shall be fixed by the officials, boards, commissions,
214214 4 commissioners or agents, and the bond, among other conditions,
215215 5 shall be conditioned for the completion of the contract, for
216216 6 the payment of material, apparatus, fixtures, and machinery
217217 7 used in the work and for all labor performed in the work,
218218 8 whether by subcontractor or otherwise.
219219 9 If the contract is for emergency repairs as provided in
220220 10 the Illinois Procurement Code, proof of payment for all labor,
221221 11 materials, apparatus, fixtures, and machinery may be furnished
222222 12 in lieu of the bond required by this Section.
223223 13 Each such bond is deemed to contain the following
224224 14 provisions whether such provisions are inserted in such bond
225225 15 or not:
226226 16 "The principal and sureties on this bond agree that all
227227 17 the undertakings, covenants, terms, conditions and agreements
228228 18 of the contract or contracts entered into between the
229229 19 principal and the State or any political subdivision thereof
230230 20 will be performed and fulfilled and to pay all persons, firms
231231 21 and corporations having contracts with the principal or with
232232 22 subcontractors, all just claims due them under the provisions
233233 23 of such contracts for labor performed or materials furnished
234234 24 in the performance of the contract on account of which this
235235 25 bond is given, when such claims are not satisfied out of the
236236 26 contract price of the contract on account of which this bond is
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247247 1 given, after final settlement between the officer, board,
248248 2 commission or agent of the State or of any political
249249 3 subdivision thereof and the principal has been made.".
250250 4 Each bond securing contracts between the Capital
251251 5 Development Board or any board of a public institution of
252252 6 higher education and a contractor shall contain the following
253253 7 provisions, whether the provisions are inserted in the bond or
254254 8 not:
255255 9 "Upon the default of the principal with respect to
256256 10 undertakings, covenants, terms, conditions, and agreements,
257257 11 the termination of the contractor's right to proceed with the
258258 12 work, and written notice of that default and termination by
259259 13 the State or any political subdivision to the surety
260260 14 ("Notice"), the surety shall promptly remedy the default by
261261 15 taking one of the following actions:
262262 16 (1) The surety shall complete the work pursuant to a
263263 17 written takeover agreement, using a completing contractor
264264 18 jointly selected by the surety and the State or any
265265 19 political subdivision; or
266266 20 (2) The surety shall pay a sum of money to the obligee,
267267 21 up to the penal sum of the bond, that represents the
268268 22 reasonable cost to complete the work that exceeds the
269269 23 unpaid balance of the contract sum.
270270 24 The surety shall respond to the Notice within 15 working
271271 25 days of receipt indicating the course of action that it
272272 26 intends to take or advising that it requires more time to
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283283 1 investigate the default and select a course of action. If the
284284 2 surety requires more than 15 working days to investigate the
285285 3 default and select a course of action or if the surety elects
286286 4 to complete the work with a completing contractor that is not
287287 5 prepared to commence performance within 15 working days after
288288 6 receipt of Notice, and if the State or any political
289289 7 subdivision determines it is in the best interest of the State
290290 8 to maintain the progress of the work, the State or any
291291 9 political subdivision may continue to work until the
292292 10 completing contractor is prepared to commence performance.
293293 11 Unless otherwise agreed to by the procuring agency, in no case
294294 12 may the surety take longer than 30 working days to advise the
295295 13 State or political subdivision on the course of action it
296296 14 intends to take. The surety shall be liable for reasonable
297297 15 costs incurred by the State or any political subdivision to
298298 16 maintain the progress to the extent the costs exceed the
299299 17 unpaid balance of the contract sum, subject to the penal sum of
300300 18 the bond.".
301301 19 The surety bond required by this Section may be acquired
302302 20 from the company, agent or broker of the contractor's choice.
303303 21 The bond and sureties shall be subject to the right of
304304 22 reasonable approval or disapproval, including suspension, by
305305 23 the State or political subdivision thereof concerned. Except
306306 24 as otherwise provided in this Section, in the case of State
307307 25 construction contracts, a contractor shall not be required to
308308 26 post a cash bond or letter of credit in addition to or as a
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319319 1 substitute for the surety bond required by this Section.
320320 2 A local governmental unit may not withhold retainage of
321321 3 more than 5% from any payment to a contractor who furnishes the
322322 4 bond or bond substitute required by this Act, and the
323323 5 contractor and its subcontractors may not withhold retainage
324324 6 of more than 5% from their subcontractors.
325325 7 When other than motor fuel tax funds, federal-aid funds,
326326 8 or other funds received from the State are used, a political
327327 9 subdivision may allow the contractor to provide a
328328 10 non-diminishing irrevocable bank letter of credit, in lieu of
329329 11 the bond required by this Section, on contracts under $100,000
330330 12 to comply with the requirements of this Section. Any such bank
331331 13 letter of credit shall contain all provisions required for
332332 14 bonds by this Section.
333333 15 In order to reduce barriers to entry for diverse and small
334334 16 businesses, the Department of Transportation may implement a
335335 17 5-year pilot program to allow a contractor to provide a
336336 18 non-diminishing irrevocable bank letter of credit in lieu of
337337 19 the bond required by this Section on contracts under $500,000.
338338 20 Projects selected by the Department of Transportation for this
339339 21 pilot program must be classified by the Department as low-risk
340340 22 scope of work contracts. The Department shall adopt rules to
341341 23 define the criteria for pilot project selection and
342342 24 implementation of the pilot program.
343343 25 In For the purposes of this Section: , the terms
344344 26 "material"
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355355 1 "Local governmental unit" has the meaning ascribed to it
356356 2 in Section 2 of the Local Government Prompt Payment Act.
357357 3 "Material", "labor", "apparatus", "fixtures", and
358358 4 "machinery" include those rented items that are on the
359359 5 construction site and those rented tools that are used or
360360 6 consumed on the construction site in the performance of the
361361 7 contract on account of which the bond is given.
362362 8 (Source: P.A. 101-65, eff. 1-1-20; 102-968, eff. 1-1-23.)
363363 9 Section 95. No acceleration or delay. Where this Act makes
364364 10 changes in a statute that is represented in this Act by text
365365 11 that is not yet or no longer in effect (for example, a Section
366366 12 represented by multiple versions), the use of that text does
367367 13 not accelerate or delay the taking effect of (i) the changes
368368 14 made by this Act or (ii) provisions derived from any other
369369 15 Public Act.
370370 16 Section 99. Effective date. This Act takes effect upon
371371 17 becoming law.
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