Bill Text: IL HB5035 | 2021-2022 | 102nd General Assembly | Chaptered

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Bill Title: Amends the Public Construction Bond Act. Provides that 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 specified bond requirements on contracts under $500,000. Provides that projects selected by the Department of Transportation for the pilot program must be classified by the Department as low-risk scope of work contracts. Provides for the adoption of rules concerning the criteria for pilot project selection and implementation of the pilot program.

Spectrum: Partisan Bill (Democrat 4-0)

Status: (Passed) 2022-05-27 - Public Act . . . . . . . . . 102-0968 [HB5035 Detail]

Download: Illinois-2021-HB5035-Chaptered.html

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Public Act 102-0968
HB5035 Enrolled LRB102 25035 RJF 34293 b
AN ACT concerning finance.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Public Construction Bond Act is amended by
changing Section 1 as follows:
(30 ILCS 550/1) (from Ch. 29, par. 15)
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,
commissioners or agents, and the bond, among other conditions,
shall be conditioned for the completion of the contract, for

the payment of material, apparatus, fixtures, and machinery
used in the work and for all labor performed in the work,
whether by subcontractor or otherwise.
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.
Each such bond is deemed to contain the following
provisions whether such provisions are inserted in such bond
or not:
"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,
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.".
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
post a cash bond or letter of credit in addition to or as a
substitute for the surety bond required by this Section.
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
letter of credit shall contain all provisions required for
bonds by this Section.
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.)