HBA-BSM C.S.H.B. 3530 77(R)    BILL ANALYSIS


Office of House Bill AnalysisC.S.H.B. 3530
By: Wise
State Affairs
4/26/2001
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

When issuing a surety bond, a surety stands behind its principal
(contractor) and acts as a silent partner in representing to an owner that
prior to the bid the contractor is qualified to submit a responsible bid.
Being qualified by the surety through the pre-qualification process means
that a contractor has the experience, organization, financial resources,
and fixed assets to complete the work according to the plans and
specification at the price bid and within the allotted time.
Pre-qualification requires a relationship among a contractor, a surety bond
producer, and a surety company.  In this relationship, a contractor
provides the surety with confidential information regarding the financial
and operational condition of the firm and, in some cases, personal
financial information.   

Directed surety, also known as owner-controlled or owner-directed surety,
may interfere with these relationships.  Directed surety occurs when owners
designate a specific producer or surety company from which contractors must
obtain surety bonds for a specific project or series of projects.  C.S.H.B.
3530 prohibits a government entity from engaging in direct surety with
respect to any public building or construction contract. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

C.S.H.B. 3530 amends the Government Code to prohibit a government entity
including the General Services Commission (GSC) from requiring a contractor
or subcontrator with respect to any public building or construction
contract, to obtain a  surety bond from any particular insurance or surety
company, agent, or broker.  To the extent consistent with that law, GSC or
other agency are authorized to require a contractor or subcontractor to
meet part or all of the other insurance requirements for the project under
the negotiated arrangement.       

EFFECTIVE DATE

September 1, 2001.

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.H.B. 3530 modifies the original to conform to Texas Legislative Council
style and format.