Mississippi Expands Ability to Reprimand “Poor Performing” Contractors
June 16, 2015
Mississippi has passed two pieces of legislation of note this session. Mississippi SB2508 sees the state again taking steps to regulate and validate construction contractors in an attempt to ensure they are licensed. The state now has more ability to issue citations and reprimands on contractors deemed as poor performers, including the potential removal of contracts from the licensing board.
Material suppliers need to be mindful of this, as the board has broad oversight," said Chris Ring, of NACM's Secured Transaction Services. "A material supplier's lien rights can be called in to question when materials are being installed by contractors that do not meet licensing Requirements or are issued citations, reprimands or are removed from the project by the board."
Mississippi SB2364. meanwhile, focuses on its notice of contest language, clarifying the date in which a party needs to file said notice when a lien is deemed invalid.
Surety Update 2: Senators Try Two-Edged Approach to Move Individual Surety Language through Senate
June 16, 2015
Legislation that sets clearer standards for assets pledged by an individual surety on federal construction projects could face an uphill battle in the U.S. Senate after passing through the House last month.
"It has problems in the Senate—same as last Congress," said Jim Wise, NACM's Washington lobbyist and managing partner of PACE, LLP.
Although the U.S. House of Representative passed the National Defense Authorization Act for Fiscal Year 2016 on May 15, "some Senators have raised questions dealing with procedural objections," Wise said. Basically, they object to having provisions such as these in the defense authorization bill, he noted. Advocates, however, "point to the benefits for the government contracting community that this change would create," Wise added. As the legislation currently stands, Govtrack.us gave it a 25% chance of being enacted.
This section of the bill would require an individual surety to solely pledge those assets that the law currently allows directly to the government and place those assets in the care and custody of the federal government (i.e. the Secretary of Treasury, a
federal reserve bank or a depository designated by the secretary). It also increases the amount of surety bond guarantees from the Small Business Administration from 70% to 90%.
Proponents of the section's substance are taking a "belt and suspenders" approach in their support of it—via a standalone bill and an amendment to the House-passed bill, Wise said.
Surety Update 1: U.S. House Passes Proposed Law to Assure Assets Pledged Are Marketable, Valuable
June 16, 2015
The U.S. House of Representatives passed legislation May 15 to establish clear standards for assets pledged by an individual surety on a federal construction project.
"Individual sureties are 'natural persons' and are not subject to the same auditing procedures reserved for corporate sureties under the Federal Miller Act," said Chris Ring of NACM's Secured Transaction Services.
Individual sureties must post collateral in the care of the government, which will only accept cash, readily marketable assets or irrevocable letters of credit from a federally insured financial institution to satisfy underlying bond obligations, Ring noted. "By moving the ball forward on this legislation, it assures that individual sureties have adequate assets to pay potential claims."
The proposed provision is part of H.R. 1735, the National Defense Authorization Act for Fiscal Year 2016. Sec. 839 of the bill would require an individual surety to pledge solely those assets that the law currently allows to be pledged directly to the government and to place such assets in the care and custody of the federal government (i.e. the Secretary of Treasury, a federal reserve bank or a depository designated by the Secretary).
This section would also increase the amount of surety bond guarantees from the Small Business Administration from 70% to 90% and would require the U.S. comptroller general to study the surety bond program and to examine the impact of this amendment.
The provision would eliminate fraud and abuse by curbing the ability of an individual surety to pledge insufficient or illusory assets, Ring said. In addition, the federal government could pay claims to subcontractors and suppliers more easily and expeditiously if an individual surety bond is accepted. Read more.