HOUSE BILL No. 6173

May 22, 2008, Introduced by Rep. Farrah and referred to the Committee on Regulatory Reform.

 

     A bill to amend 1963 PA 213, entitled

 

"An act to provide a procedure for bonding contractors for public

buildings and public works of governmental units; and to repeal

certain acts and parts of acts,"

 

by amending the title and sections 1, 2, 3, 6, 7, and 8 (MCL

 

129.201, 129.202, 129.203, 129.206, 129.207, and 129.208), section

 

1 as amended by 1982 PA 11.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

TITLE

 

     An act to provide a procedure for bonding contractors for

 

certain public buildings and certain public works of governmental

 

units; to provide for certain penalties and remedies; and to repeal

 

certain acts and parts of acts.

 

     Sec. 1. (1) Before any contract, exceeding $50,000.00 for the

 


construction, alteration, or repair of any public building or

 

public work or improvement of the state or a county, city, village,

 

township, school district, public educational institution, other

 

political subdivision, public authority, or public agency

 

hereinafter referred to as the "governmental unit", for a

 

governmental unit is awarded, the proposed contractor , hereinafter

 

referred to as the "principal contractor", shall furnish to the

 

governmental unit, at his or her its own cost, to the governmental

 

unit a performance bond and a payment bond which shall become that

 

is binding upon the award of the contract to the principal

 

contractor. However, if the principal contractor is a common

 

carrier as defined in section 3 of Act No. 300 of the Public Acts

 

of 1909, as amended, being section 462.3 of the Michigan Compiled

 

Laws 1909 PA 300, MCL 462.3, or the designated operator of a state

 

subsidized railroad, the principal contractor may provide an

 

irrevocable letter of credit from a state or national bank or a

 

state or federally chartered savings and loan association instead

 

of the bonds. Neither the invitation for bids, nor any person

 

acting , or purporting to act , on behalf of the governmental unit,

 

shall require that the bonds to be furnished by a particular bank

 

or surety company, or through a particular agent or broker, or

 

through a bank, company, agent, or broker in any particular

 

locality.

 

     (2) If a governmental unit enters into a contract with a

 

construction manager, the construction manager shall furnish to the

 

governmental unit, at its own expense, performance and payment

 

bonds as provided in subsection (1). The governmental unit shall

 


determine the amount of the bonds, as provided in sections 2 and 3,

 

based upon the greater of the total estimated cost of the work,

 

guaranteed maximum price, or the actual aggregate dollar value of

 

all agreements entered into by the construction manager for the

 

complete construction, alteration, demolition, or repair of the

 

public facility of the governmental unit. The bonds furnished by

 

the construction manager to the governmental unit shall comply

 

with, and are subject to, the requirements of sections 2, 3, 4, and

 

5.

 

     Sec. 2. (1) The performance bond shall be in an amount fixed

 

determined by the governmental unit but that is not less than 25%

 

or more than 100% of the contract amount , and shall be conditioned

 

upon the faithful performance of the contract in accordance with

 

the plans, specifications, and terms thereof of the contract.

 

     (2) The performance bond shall be solely for the protection of

 

the governmental unit awarding the contract.

 

     Sec. 3. The payment bond shall be in an amount fixed

 

determined by the governmental unit but that is not less than 25%

 

or more than 100% of the contract amount and be solely for the

 

protection of claimants , as defined in section 6, supplying

 

furnishing labor, supplies, equipment, or materials to the

 

principal contractor, or his construction manager, or

 

subcontractors in the prosecution of the work provided for in the

 

contract.

 

     Sec. 6. A "claimant" As used in this act:

 

     (a) "Claimant" means a person having furnished labor,

 

supplies, equipment, or material, or both, used or reasonably

 


required for use in the performance of the a contract for all or

 

part of the construction, alteration, demolition, or repair of a

 

public facility. "Labor and material" includes that part of water,

 

gas, power, light, heat, oil, gasoline, telephone service or rental

 

of equipment directly applicable to the contract.

 

     (b) "Construction manager" means an individual, sole

 

proprietorship, partnership, corporation, limited liability

 

company, joint venture, or other legal entity that, pursuant to an

 

agreement with a governmental unit and acting primarily in a

 

managerial or administrative capacity, procures and enters into 1

 

or more contracts for the construction, alteration, demolition, or

 

repair of a public facility for the governmental unit.

 

     (c) "Contract" means either of the following:

 

     (i) A written agreement between a contractor and a governmental

 

unit having a dollar value in excess of $50,000.00 for the

 

construction, alteration, demolition, or repair of a public

 

facility.

 

     (ii) A written agreement between a construction manager and a

 

governmental unit for the procurement and delivery of the

 

construction, alteration, demolition, or repair of a public

 

facility of the governmental unit having a stated or estimated

 

value in excess of $50,000.00.

 

     (d) "Contractor" means an individual, sole proprietorship,

 

partnership, corporation, limited liability company, joint venture,

 

or other legal entity that is a party to a contract with a

 

governmental unit for the construction of a public facility.

 

     (e) "Governmental unit" means this state, or a county, city,

 


township, village, school district, public educational institution,

 

other political subdivision, public authority, or public agency.

 

     (f) "Public facility" means any building, structure,

 

transportation or utility infrastructure, roadway, bridge, sewer,

 

school, drain, ditch, levee, or other structure or work of a

 

governmental unit that is paid for with public funds or a special

 

assessment.

 

     Sec. 7. (1) A claimant who has furnished labor or material in

 

the prosecution of the work provided for in such contract in

 

respect of which payment bond is furnished under the provisions of

 

section 3, and who has not been paid in full therefor before the

 

expiration of a period of 90 days after the day on which the last

 

of the labor was done or performed by him or her or material was

 

furnished or supplied by him or her for which claim is made, may

 

sue on the payment bond for the amount, or the balance thereof,

 

unpaid at the time of institution of the civil action, prosecute

 

such the action to final judgment for the sum justly due, him and

 

have execution thereon.

 

     (2) A claimant not having a direct contractual relationship

 

with the principal contractor named in the bond shall not have a

 

right of action upon the payment bond unless (a) he both of the

 

following occur:

 

     (a) He or she has, within 30 days after furnishing the first

 

of such the material or performing the first of such the labor,

 

served on the principal contractor named in the bond a written

 

notice, which shall inform the principal of the nature of the

 

materials being furnished or to be furnished, or labor being

 


performed or to be performed and identifying the party contracting

 

for such labor or materials and the site for the performance of

 

such labor or the delivery of such materials. , and (b) he

 

     (b) He or she has given written notice to the principal

 

contractor named in the bond and the governmental unit involved

 

within 90 days from after the date on which the claimant performed

 

the last of the labor or furnished or supplied the last of the

 

material for which the claim is made, stating with substantial

 

accuracy the amount claimed and the name of the party to whom the

 

material was furnished or supplied or for whom the labor was done

 

or performed.

 

     (3) Each notice sent under subsection (2) shall be served by

 

mailing the same by certified mail, postage prepaid, in an envelope

 

addressed to the principal contractor named in the bond, the

 

governmental unit involved, at any place at which said parties

 

maintain a business or residence.

 

     (4) The principal contractor or construction manager shall not

 

be required to make payment to a subcontractor of sums due from the

 

subcontractor to parties performing labor or furnishing materials

 

or supplies to the subcontractor, except upon the receipt of the

 

written orders of such parties to pay to the subcontractor the sums

 

due such parties.

 

     (5) In any action brought under this section, the prevailing

 

party shall be entitled to recover from the nonprevailing party the

 

reasonable costs and attorney fees incurred in the action. If, in

 

such action, it is determined by the finder of fact that there was

 

no good faith basis for the nonpayment of the amount sought by the

 


claimant, the claimant shall be entitled to recover interest at the

 

rate of 12% per annum on the amount found to be due by the finder

 

of fact from the date that payment was due until fully paid.

 

     Sec. 8. (1) The agent in charge of the office of the

 

governmental unit shall furnish a certified copy of the bond and

 

the contract for which it was given to anyone making application

 

therefor applying for such a copy and who submits an affidavit

 

written certification that he or she will be supplying labor,

 

materials, or equipment for that work or that he or she has

 

supplied labor or materials for such that work and payment therefor

 

has not been made, or that he or she is being sued on any such

 

bond, or that it he or she is the surety thereon. , a certified

 

copy of the bond and the contract for which it was given, which

 

     (2) The furnished copy shall be prima facie evidence of the

 

contents, execution, and delivery of the original.

 

     (3) An applicant for a certified copy furnished under

 

subsection (1) shall pay such reasonable fees for such the

 

certified copies as the agent in charge of the office of the

 

governmental unit fixes determines to cover the actual cost of its

 

preparation. thereof.

 

     Enacting section 1. (1) This amendatory act takes effect

 

January 1, 2009.

 

     (2) This amendatory act applies to any contracts entered into

 

on or after January 1, 2009.

 

     Enacting section 2. This amendatory act does not take effect

 

unless all of the following bills of the 94th Legislature are

 

enacted into law:

 


     (a) Senate Bill No.____ or House Bill No. 6176(request no.

 

04828'07).

 

     (b) Senate Bill No.____ or House Bill No. 6175(request no.

 

04829'07).

 

     (c) Senate Bill No.____ or House Bill No. 6174(request no.

 

04830'07).