Illinois General Assembly - Full Text of SB0157
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Full Text of SB0157  103rd General Assembly




State of Illinois
2023 and 2024


Introduced 1/31/2023, by Sen. Ram Villivalam


30 ILCS 550/1  from Ch. 29, par. 15

    Amends the Public Construction Bond Act. Provides that public construction bonds are required only for those public work construction contracts that are valued over $5,000,000. Authorizes any official, board, commission, agent of the State, or any political subdivision of the State to create a self-insured risk pool for contracts of $5,000,000 or less. Defines "self insured risk pool".

LRB103 25392 DTM 51738 b





SB0157LRB103 25392 DTM 51738 b

1    AN ACT concerning finance.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 5. The Public Construction Bond Act is amended by
5changing Section 1 as follows:
6    (30 ILCS 550/1)  (from Ch. 29, par. 15)
7    Sec. 1. Except as otherwise provided by this Act, all
8officials, boards, commissions, or agents of this State, or of
9any political subdivision thereof, in making contracts for
10public work of any kind costing over $5,000,000 $50,000 to be
11performed for the State, or of any political subdivision
12thereof, shall require every contractor for the work to
13furnish, supply and deliver a bond to the State, or to the
14political subdivision thereof entering into the contract, as
15the case may be, with good and sufficient sureties. The surety
16on the bond shall be a company that is licensed by the
17Department of Insurance authorizing it to execute surety bonds
18and the company shall have a financial strength rating of at
19least A- as rated by A.M. Best Company, Inc., Moody's
20Investors Service, Standard & Poor's Corporation, or a similar
21rating agency. The amount of the bond shall be fixed by the
22officials, boards, commissions, commissioners or agents, and
23the bond, among other conditions, shall be conditioned for the



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1completion of the contract, for the payment of material,
2apparatus, fixtures, and machinery used in the work and for
3all labor performed in the work, whether by subcontractor or
5    If the contract is for emergency repairs as provided in
6the Illinois Procurement Code, proof of payment for all labor,
7materials, apparatus, fixtures, and machinery may be furnished
8in lieu of the bond required by this Section.
9    Each such bond is deemed to contain the following
10provisions whether such provisions are inserted in such bond
11or not:
12    "The principal and sureties on this bond agree that all
13the undertakings, covenants, terms, conditions and agreements
14of the contract or contracts entered into between the
15principal and the State or any political subdivision thereof
16will be performed and fulfilled and to pay all persons, firms
17and corporations having contracts with the principal or with
18subcontractors, all just claims due them under the provisions
19of such contracts for labor performed or materials furnished
20in the performance of the contract on account of which this
21bond is given, when such claims are not satisfied out of the
22contract price of the contract on account of which this bond is
23given, after final settlement between the officer, board,
24commission or agent of the State or of any political
25subdivision thereof and the principal has been made.".
26    Each bond securing contracts between the Capital



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1Development Board or any board of a public institution of
2higher education and a contractor shall contain the following
3provisions, whether the provisions are inserted in the bond or
5    "Upon the default of the principal with respect to
6undertakings, covenants, terms, conditions, and agreements,
7the termination of the contractor's right to proceed with the
8work, and written notice of that default and termination by
9the State or any political subdivision to the surety
10("Notice"), the surety shall promptly remedy the default by
11taking one of the following actions:
12        (1) The surety shall complete the work pursuant to a
13    written takeover agreement, using a completing contractor
14    jointly selected by the surety and the State or any
15    political subdivision; or
16        (2) The surety shall pay a sum of money to the obligee,
17    up to the penal sum of the bond, that represents the
18    reasonable cost to complete the work that exceeds the
19    unpaid balance of the contract sum.
20    The surety shall respond to the Notice within 15 working
21days of receipt indicating the course of action that it
22intends to take or advising that it requires more time to
23investigate the default and select a course of action. If the
24surety requires more than 15 working days to investigate the
25default and select a course of action or if the surety elects
26to complete the work with a completing contractor that is not



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1prepared to commence performance within 15 working days after
2receipt of Notice, and if the State or any political
3subdivision determines it is in the best interest of the State
4to maintain the progress of the work, the State or any
5political subdivision may continue to work until the
6completing contractor is prepared to commence performance.
7Unless otherwise agreed to by the procuring agency, in no case
8may the surety take longer than 30 working days to advise the
9State or political subdivision on the course of action it
10intends to take. The surety shall be liable for reasonable
11costs incurred by the State or any political subdivision to
12maintain the progress to the extent the costs exceed the
13unpaid balance of the contract sum, subject to the penal sum of
14the bond.".
15    The surety bond required by this Section may be acquired
16from the company, agent or broker of the contractor's choice.
17The bond and sureties shall be subject to the right of
18reasonable approval or disapproval, including suspension, by
19the State or political subdivision thereof concerned. Except
20as otherwise provided in this Section, in the case of State
21construction contracts, a contractor shall not be required to
22post a cash bond or letter of credit in addition to or as a
23substitute for the surety bond required by this Section.
24    When other than motor fuel tax funds, federal-aid funds,
25or other funds received from the State are used, a political
26subdivision may allow the contractor to provide a



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1non-diminishing irrevocable bank letter of credit, in lieu of
2the bond required by this Section, on contracts under $100,000
3to comply with the requirements of this Section. Any such bank
4letter of credit shall contain all provisions required for
5bonds by this Section.
6    In order to reduce barriers to entry for diverse and small
7businesses, the Department of Transportation may implement a
85-year pilot program to allow a contractor to provide a
9non-diminishing irrevocable bank letter of credit in lieu of
10the bond required by this Section on contracts under $500,000.
11Projects selected by the Department of Transportation for this
12pilot program must be classified by the Department as low-risk
13scope of work contracts. The Department shall adopt rules to
14define the criteria for pilot project selection and
15implementation of the pilot program.
16    Beginning on the effective date of this amendatory Act of
17the 103rd General Assembly, any official, board, commission,
18agent of this State, or any political subdivision of this
19State may create a self-insured risk pool to cover any claims
20or damages arising under a public works construction contract
21valued at $5,000,000 or less as a consequence of a
22contractor's failure to perform for the State, or of any
23political subdivision thereof, work in accordance with the
24terms of that contract.
25    In For the purposes of this Section:
26        "Material", , the terms "material", "labor",



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1    "apparatus", "fixtures", and "machinery" include those
2    rented items that are on the construction site and those
3    rented tools that are used or consumed on the construction
4    site in the performance of the contract on account of
5    which the bond is given.
6        "Self-insured risk pool" means a legal entity through
7    which officials, boards, commissions, agents of this
8    State, or political subdivisions of the State can
9    collectively purchase claims administration services and
10    excess insurance to provide coverage for claims and
11    damages arising as a consequence of a contractor's failure
12    to perform for the State, or of any political subdivision
13    thereof, work in accordance with the terms of a public
14    works construction contract valued at $5,000,000 or less.
15(Source: P.A. 101-65, eff. 1-1-20; 102-968, eff. 1-1-23.)