1-1  By:  West, Lucio                                       S.B. No. 227
    1-2        (In the Senate - Filed February 1, 1993; February 2, 1993,
    1-3  read first time and referred to Committee on State Affairs;
    1-4  March 11, 1993, rereferred to Committee on Economic Development;
    1-5  April 6, 1993, reported adversely, with favorable Committee
    1-6  Substitute by the following vote:  Yeas 7, Nays 0; April 6, 1993,
    1-7  sent to printer.)
    1-8                            COMMITTEE VOTE
    1-9                          Yea     Nay      PNV      Absent 
   1-10        Parker             x                               
   1-11        Lucio                                          x   
   1-12        Ellis              x                               
   1-13        Haley              x                               
   1-14        Harris of Dallas                               x   
   1-15        Harris of Tarrant  x                               
   1-16        Leedom                                         x   
   1-17        Madla              x                               
   1-18        Rosson             x                               
   1-19        Shapiro            x                               
   1-20        Wentworth                                      x   
   1-21  COMMITTEE SUBSTITUTE FOR S.B. No. 227                   By:  Parker
   1-22                         A BILL TO BE ENTITLED
   1-23                                AN ACT
   1-24  relating to a bond executed in connection with a public works or
   1-25  public construction contract.
   1-26        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
   1-27        SECTION 1.  Article 5160, Revised Statutes, is amended by
   1-28  amending Sections A, E, G, and I and by adding Section J to read as
   1-29  follows:
   1-30        A.  Any person or persons, firm, or corporation, hereinafter
   1-31  referred to as "prime contractor," entering into a formal contract
   1-32  in excess of $100,000 <$25,000> with this State, any department,
   1-33  board or agency thereof; or any county of this State, department,
   1-34  board or agency thereof; or any municipality of this State,
   1-35  department, board or agency thereof; or any school district in this
   1-36  State, common or independent, or subdivision thereof; or any other
   1-37  governmental or quasi-governmental authority whether specifically
   1-38  named herein or not, authorized under any law of this State,
   1-39  general or local, to enter into contractual agreements for the
   1-40  construction, alteration or repair of any public building or the
   1-41  prosecution or completion of any public work, shall be required
   1-42  before commencing such work to execute to the aforementioned
   1-43  governmental authority or authorities, as the case may be, the
   1-44  statutory bond <bonds> as hereinafter prescribed, but no
   1-45  governmental authority may require a bond if the contract does not
   1-46  exceed the sum of $100,000 <$25,000>.  Each such bond shall be
   1-47  executed by a corporate surety or corporate sureties in accordance
   1-48  with Section 1, Chapter 87, Acts of the 56th Legislature, Regular
   1-49  Session, 1959 (Article 7.19-1, Vernon's Texas Insurance Code).  In
   1-50  the case of contracts of the State or a department, board, or
   1-51  agency thereof, the aforesaid bond <bonds> shall be payable to the
   1-52  State and shall be approved by the Attorney General as to form.  In
   1-53  case of all other contracts subject to this Act, the bond <bonds>
   1-54  shall be payable to the governmental awarding authority concerned,
   1-55  and shall be approved by it as to form.  Any bond furnished by any
   1-56  prime contractor in an attempted compliance with this Act shall be
   1-57  treated and construed as in conformity with the requirements of
   1-58  this Act as to rights created, limitations thereon, and remedies
   1-59  provided.  Any provision in any bond furnished by a prime
   1-60  contractor in attempted compliance with this Act that expands or
   1-61  restricts the rights or liabilities provided under this Act shall
   1-62  be disregarded and the provisions of this Act shall be read into
   1-63  that bond.
   1-64              <(a)  A Performance Bond in the amount of the contract
   1-65  conditioned upon the faithful performance of the work in accordance
   1-66  with the plans, specifications, and contract documents.  Said bond
   1-67  shall be solely for the protection of the State or the governmental
   1-68  authority awarding the contract, as the case may be.>
    2-1              <(b)>  A Payment Bond shall be executed, in the amount
    2-2  of the contract, solely for the protection of all claimants
    2-3  supplying labor and material as hereinafter defined, in the
    2-4  prosecution of the work provided for in said contract, for the use
    2-5  of each such claimant.
    2-6        Notwithstanding any provision in this Act or in Chapter 252
    2-7  or 262, Local Government Code, if the governmental authority fails
    2-8  to obtain from the prime contractor a payment bond in compliance
    2-9  with this Act covering a contract in excess of $100,000 <$25,000>,
   2-10  the authority is subject to the same liability as that of a surety
   2-11  who had issued a valid bond if the authority had complied with this
   2-12  section, and a claimant is entitled to a lien on funds due the
   2-13  prime contractor in the same manner and to the same extent as if
   2-14  the contract were subject to Subchapter J, Chapter 53, Property
   2-15  Code.
   2-16        E.  In the event any contractor<, who shall have furnished
   2-17  the bonds provided in this Statute,> shall abandon performance of
   2-18  his contract or the awarding authority shall lawfully terminate his
   2-19  right to proceed with performance thereof because of a default or
   2-20  defaults on his part, no further proceeds of the contract shall be
   2-21  payable to him except as <unless and until all costs of completion
   2-22  of the work shall have been paid by him or his surety.  Any balance
   2-23  remaining shall be payable to him or his surety as their interest
   2-24  may appear, as may be> established by agreement or judgment of a
   2-25  court of competent jurisdiction.  A surety that <completes a
   2-26  contract or otherwise> incurs a loss under a <any> bond required by
   2-27  this Act has a priority claim to the proceeds of the contract, to
   2-28  the full extent of the surety's loss, over all other creditors of
   2-29  the prime contractor.  That priority does not excuse the surety
   2-30  from paying any obligations that it may have under its payment
   2-31  bonds.
   2-32        G.  All suits instituted under the provisions of this Act
   2-33  shall be brought in a court of competent jurisdiction in the county
   2-34  in which the project or work, or any part thereof, is situated. <No
   2-35  suit shall be instituted on the performance bond after the
   2-36  expiration of one (1) year after the date of final completion,
   2-37  abandonment, or termination of such contract.>  No suit shall be
   2-38  instituted by a claimant on the payment bond after the expiration
   2-39  of one (1) year after the date of the filing of a claim as provided
   2-40  by this Act.  The State of Texas shall not be liable for the
   2-41  payment of any cost or the expenses of any suit instituted by any
   2-42  party or parties on the payment bond.
   2-43        I.  (a)  A prime contractor, on written request, shall
   2-44  furnish the following information within a reasonable time, but not
   2-45  later than the 10th day after the date the request is received, to
   2-46  any person who has furnished labor or materials for the prosecution
   2-47  of the work to be performed under the prime contract:
   2-48              (1)  the name and last known address of the department,
   2-49  board, agency, or other governmental authority with whom the prime
   2-50  contractor contracted for the construction; and
   2-51              (2)  a copy of the payment bond <and performance bonds>
   2-52  that relates <relate> to the construction<, including bonds
   2-53  furnished by or to the prime contractor>.
   2-54        (b)  A subcontractor, on written request by the public body,
   2-55  the prime contractor, a surety on a bond covering the prime
   2-56  contract, or a person furnishing work under the subcontract, shall
   2-57  furnish to that party the following information within a reasonable
   2-58  time, but not later than the 10th day after the date the request is
   2-59  received:
   2-60              (1)  the name and last known address of each person
   2-61  from whom the subcontractor purchased labor or materials for the
   2-62  construction project, other than materials that were furnished to
   2-63  the project from the subcontractor's inventory;
   2-64              (2)  the name and last known address of each person to
   2-65  whom the subcontractor furnished labor or materials on the
   2-66  construction project; and
   2-67              (3)  whether the subcontractor has furnished a bond for
   2-68  the benefit of its subcontractors or materialmen and if so, the
   2-69  name and last known address of the surety and a copy of the bond.
   2-70        (c)  Not later than the 30th day after the date a written
    3-1  request is received from the prime contractor or a surety on a bond
    3-2  on which a claim is made, a claimant shall furnish to the
    3-3  requesting person a copy of any applicable written agreement,
    3-4  purchase order, or contract and any billing, statement, or payment
    3-5  request of the claimant reflecting the amount claimed and the work
    3-6  performed by the claimant for which the claim is made.  If
    3-7  requested, the claimant shall provide the estimated amount due for
    3-8  each calendar month in which the claimant has performed labor or
    3-9  furnished materials.
   3-10        (d)  If a person from whom information is requested does not
   3-11  have a direct contractual relationship on the project with the
   3-12  person requesting the information, the person from whom information
   3-13  is requested, other than a claimant requested to furnish
   3-14  information under Subsection (c) of this section, may require
   3-15  payment of the actual costs, not to exceed $25, for furnishing the
   3-16  requested information.
   3-17        (e)  A person, other than a claimant requested to furnish
   3-18  information under Subsection (c) of this section, who fails to
   3-19  furnish information as required by this section is liable to the
   3-20  requesting person for that person's reasonable and necessary costs
   3-21  incurred in procuring the requested information.
   3-22        J.  A governmental authority that awards the contract for the
   3-23  construction, alteration, or repair of a public building or for the
   3-24  prosecution or completion of any public work may provide for
   3-25  payment of the prime contractor in installments based on completion
   3-26  of work under the contract.
   3-27        SECTION 2.  Section 252.044, Local Government Code, is
   3-28  amended to read as follows:
   3-29        Sec. 252.044.  CONTRACTOR'S BOND; INSTALLMENT PAYMENTS.
   3-30  <(a)>  If the contract is for the construction of public works, the
   3-31  <bidder to whom the contract is awarded must execute a good and
   3-32  sufficient bond.  The bond must be:>
   3-33              <(1)  in the full amount of the contract price;>
   3-34              <(2)  conditioned that the contractor will faithfully
   3-35  perform the contract; and>
   3-36              <(3)  executed, in accordance with Article 5160,
   3-37  Revised Statutes, by a surety company authorized to do business in
   3-38  the state.>
   3-39        <(b)  If the contract requires an expenditure of less than
   3-40  $100,000, the bond is not required if the contract provides that
   3-41  payment is not due to the contractor until the work is completed
   3-42  and is accepted by the municipality.>
   3-43        <(c)  The> governing body of a home-rule municipality <by
   3-44  ordinance> may:
   3-45              (1)  by ordinance adopt the provisions of <this section
   3-46  and> Article 5160, Revised Statutes, relating to contractors'
   3-47  payment <surety> bonds, regardless of a conflicting provision in
   3-48  the municipality's charter; and
   3-49              (2)  provide that a contractor will be paid in
   3-50  installments based on completion of work under the contract.
   3-51        SECTION 3.  The heading of Section 262.032, Local Government
   3-52  Code, is amended to read as follows:
   3-53        Sec. 262.032.  BID <OR PERFORMANCE> BOND; PAYMENT UNDER
   3-54  CONTRACT.
   3-55        SECTION 4.  Subsections (b) and (d), Section 262.032, Local
   3-56  Government Code, are amended to read as follows:
   3-57        (b)  The county may provide in the bid notice or request for
   3-58  proposals that money will be paid to the contractor in installments
   3-59  based on completion of work under the contract <Within 10 days
   3-60  after the date of the signing of a contract or issuance of a
   3-61  purchase order following the acceptance of a bid or proposal, the
   3-62  bidder or proposal offeror shall furnish a performance bond to the
   3-63  county for the full amount of the contract if that contract exceeds
   3-64  $50,000>.
   3-65        (d)  A bidder or proposal offeror whose rates are subject to
   3-66  regulation by a state agency may not be required to furnish a
   3-67  <performance bond or a> bid bond under this section.
   3-68        SECTION 5.  This Act takes effect September 1, 1993, and
   3-69  applies only to a contract entered into on or after that date.  A
   3-70  contract entered into before the effective date of this Act is
    4-1  governed by the law in effect when the contract was entered into,
    4-2  and the former law is continued in effect for that purpose.
    4-3        SECTION 6.  The importance of this legislation and the
    4-4  crowded condition of the calendars in both houses create an
    4-5  emergency and an imperative public necessity that the
    4-6  constitutional rule requiring bills to be read on three several
    4-7  days in each house be suspended, and this rule is hereby suspended.
    4-8                               * * * * *
    4-9                                                         Austin,
   4-10  Texas
   4-11                                                         April 6, 1993
   4-12  Hon. Bob Bullock
   4-13  President of the Senate
   4-14  Sir:
   4-15  We, your Committee on Economic Development to which was referred
   4-16  S.B. No. 227, have had the same under consideration, and I am
   4-17  instructed to report it back to the Senate with the recommendation
   4-18  that it do not pass, but that the Committee Substitute adopted in
   4-19  lieu thereof do pass and be printed.
   4-20                                                         Parker,
   4-21  Chairman
   4-22                               * * * * *
   4-23                               WITNESSES
   4-24                                                  FOR   AGAINST  ON
   4-25  ___________________________________________________________________
   4-26  Name:  Sol Villasana                             x
   4-27  Representing:  Tx Dept. of Commerce
   4-28  City:  Austin
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   4-30  Name:  Larry Casto                               x
   4-31  Representing:  City of Dallas
   4-32  City:  Dallas
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   4-34  Name:  Bob McFarland                             x
   4-35  Representing:  City of Arlington
   4-36  City:  Austin
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   4-38  Name:  David Pinkus                              x
   4-39  Representing:  Small Business United of Tx
   4-40  City:  Austin
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