Illinois General Assembly - Full Text of HB4769
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Full Text of HB4769  98th General Assembly




State of Illinois
2013 and 2014


Introduced , by Rep. Daniel V. Beiser


30 ILCS 550/1  from Ch. 29, par. 15

    Amends the Public Construction Bond Act. Provides that the surety on a bond shall be a company with a certificate of authority from the Department of Insurance specifically authorizing it to execute surety bonds and a financial strength rating of at least A as rated by A.M. Best or a similar rating agency. Effective immediately.

LRB098 17614 JWD 52726 b






HB4769LRB098 17614 JWD 52726 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 $50,000 to be performed
11for the State, or of any political subdivision thereof, shall
12require every contractor for the work to furnish, supply and
13deliver a bond to the State, or to the political subdivision
14thereof entering into the contract, as the case may be, with
15good and sufficient sureties. The surety on the bond shall be a
16company that has a certificate of authority from the Department
17of Insurance specifically authorizing it to execute surety
18bonds and the company shall have a financial strength rating of
19at least A as rated by A.M. Best Company Inc. or a similar
20rating agency. The amount of the bond shall be fixed by the
21officials, boards, commissions, commissioners or agents, and
22the bond, among other conditions, shall be conditioned for the
23completion of the contract, for the payment of material used in



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1the work and for all labor performed in the work, whether by
2subcontractor or otherwise.
3    If the contract is for emergency repairs as provided in the
4Illinois Procurement Code, proof of payment for all labor,
5materials, apparatus, fixtures, and machinery may be furnished
6in lieu of the bond required by this Section.
7    Each such bond is deemed to contain the following
8provisions whether such provisions are inserted in such bond or
10    "The principal and sureties on this bond agree that all the
11undertakings, covenants, terms, conditions and agreements of
12the contract or contracts entered into between the principal
13and the State or any political subdivision thereof will be
14performed and fulfilled and to pay all persons, firms and
15corporations having contracts with the principal or with
16subcontractors, all just claims due them under the provisions
17of such contracts for labor performed or materials furnished in
18the performance of the contract on account of which this bond
19is given, when such claims are not satisfied out of the
20contract price of the contract on account of which this bond is
21given, after final settlement between the officer, board,
22commission or agent of the State or of any political
23subdivision thereof and the principal has been made.".
24    Each bond securing contracts between the Capital
25Development Board or any board of a public institution of
26higher education and a contractor shall contain the following



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1provisions, whether the provisions are inserted in the bond or
3    "Upon the default of the principal with respect to
4undertakings, covenants, terms, conditions, and agreements,
5the termination of the contractor's right to proceed with the
6work, and written notice of that default and termination by the
7State or any political subdivision to the surety ("Notice"),
8the surety shall promptly remedy the default by taking one of
9the following actions:
10        (1) The surety shall complete the work pursuant to a
11    written takeover agreement, using a completing contractor
12    jointly selected by the surety and the State or any
13    political subdivision; or
14        (2) The surety shall pay a sum of money to the obligee,
15    up to the penal sum of the bond, that represents the
16    reasonable cost to complete the work that exceeds the
17    unpaid balance of the contract sum.
18    The surety shall respond to the Notice within 15 working
19days of receipt indicating the course of action that it intends
20to take or advising that it requires more time to investigate
21the default and select a course of action. If the surety
22requires more than 15 working days to investigate the default
23and select a course of action or if the surety elects to
24complete the work with a completing contractor that is not
25prepared to commence performance within 15 working days after
26receipt of Notice, and if the State or any political



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1subdivision determines it is in the best interest of the State
2to maintain the progress of the work, the State or any
3political subdivision may continue to work until the completing
4contractor is prepared to commence performance. Unless
5otherwise agreed to by the procuring agency, in no case may the
6surety take longer than 30 working days to advise the State or
7political subdivision on the course of action it intends to
8take. The surety shall be liable for reasonable costs incurred
9by the State or any political subdivision to maintain the
10progress to the extent the costs exceed the unpaid balance of
11the contract sum, subject to the penal sum of the bond.".
12    The surety bond required by this Section may be acquired
13from the company, agent or broker of the contractor's choice.
14The bond and sureties shall be subject to the right of
15reasonable approval or disapproval, including suspension, by
16the State or political subdivision thereof concerned. In the
17case of State construction contracts, a contractor shall not be
18required to post a cash bond or letter of credit in addition to
19or as a substitute for the surety bond required by this
21    When other than motor fuel tax funds, federal-aid funds, or
22other funds received from the State are used, a political
23subdivision may allow the contractor to provide a
24non-diminishing irrevocable bank letter of credit, in lieu of
25the bond required by this Section, on contracts under $100,000
26to comply with the requirements of this Section. Any such bank



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1letter of credit shall contain all provisions required for
2bonds by this Section.
3(Source: P.A. 98-216, eff. 8-9-13.)
4    Section 99. Effective date. This Act takes effect upon
5becoming law.