SRC-JBJ S.B. 515 76(R)   BILL ANALYSIS


Senate Research Center   S.B. 515
By: Ogden
Infrastructure
3/5/1999
As Filed


DIGEST 

Currently, a public works contractor must execute a performance bond if the
contract lets for more than $100,000.  A performance bond protects a public
entity, by requiring an amount equal to the contract and conditioned on the
faithful performance of the work.  A contractor typically buys a bond from
an insurer backed by the contractor's assets to lay against the
requirement.   

In fiscal year 1998, over $80,000 of re-let Department of Transportation
(TxDOT) projects could have been saved if the performance bond contract
minimum had been set at $25,000.  A contractor must pay a payment bond on
contracts above $25,000.  The addition of a performance bond does not
usually add to a contractor's cost.  According to surety companies and
highway contractors surveyed by the TxDOT, a payment bond in the amount of
$25,000 or more costs a company the same to purchase both a payment and
performance bond.  Costs overall are reimbursed to the company via the
contractor's bid. S.B. 515 would require a performance bond to be posted
for state highway improvement contracts in excess of $25,000. 

PURPOSE

As proposed, S.B. 515 requires a performance bond to be posted for state
highway improvement contracts in excess of $25,000. 

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 223.006, Transportation Code, to provide that
the provisions of Chapter 2253, Government Code, apply to a bond required
by this section except that the Texas Department of Transportation shall
require a successful bidder to post a performance bond if the contract is
in excess of $25,000.  Deletes the requirement that a required bond be in
an amount provided by law. 

SECTION 2.Effective date: September 1, 1999.
  Makes application of this Act prospective.

SECTION 3. Emergency clause.