SFAA Annual New York State Legislative Report

 This year, there once again were a few big battles on state bond thresholds and bond waivers. Bonding issues surfaced early in

New York. Newly sworn-in Governor Cuomo worked to streamline and improve the state government in order to eliminate the State’s large budget deficit. The efforts included increasing the amount of state contracts awarded to small and emerging contractors, easing the bond restrictions that these contractors face, and expanding the 3

owner controlled insurance program model to provide more opportunities for them. We addressed all these issues in the legislature this year. The Governor’s plan also cited SFAA’s Model Contractor Development Program® (MCDP) as a model for a technical service program for all state agencies.

 To implement the Governor’s priorities, legislation was introduced in New York to increase the bond threshold from $100,000 to $150,000 for contracts subject to the Wicks Act requirement for multiple primes and from $200,000 to $300,000 for contracts not subject to the Wicks Act. This legislation also would have required the bond thresholds to be adjusted annually for the increases in the costs of construction. Legislation also was introduced to permit bonds to be waived for small and emerging contractors on public contracts under $500,000. We held these bills in committee this year. The New York budget bill, however, increases the bonding threshold for the State University of New York (SUNY) construction contracts, for both performance and payment bonds, from $50,000 to $250,000. Both the Governor and the SUNY were strong advocates for this provision, which was touted as a way to get more contracts to small and emerging contractors. The threshold increase is scheduled to sunset on June 30, 2016.

 

An eleventh-hour attempt that would have permitted New York public contracting entities to provide surety bonds or insurance policies without reimbursement was defeated. The contractor or subcontractor would not have to account for, or otherwise provide a credit in, his or her bid reflecting the amount he or she otherwise would have added if he or she provided his or her own insurance as required in bid specifications. This was an attempt to implement the Governor’s plan to expand the owner controlled insurance program.

 

Late in 2011, however, Governor Cuomo and the legislative leaders in New York reached an agreement behind closed doors on tax reform, casinos, and infrastructure spending and enacted a new budget bill over the course of two days in a special session of the legislature. The new law permits the use of best value contract awards, a cost-plus not to exceed guaranteed maximum price method, or a lump sum contract. When such alternative methods are used, the new law allows an “authorized state entity” to establish requirements for performance and payment bonds as it deems necessary in capital projects. The new law defines an “authorized state entity” and limits the impact of this new law to the New York State Thruway Authority, the Department of Transportation, the Office of Parks, Recreation and Historic Preservation, the Department of Environmental Conservation, and the New York State Bridge Authority.

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New York amended its statute of limitations for subcontractor actions on a payment bond for state contracts. Under prior law, the subcontractor could not commence an action after one year from the date on which final payment under the claimant’s subcontract became due. The new law provides that a subcontractor cannot commence an action after one year from the date on which the public improvement has been completed and the public owner accepts it. SFAA and AIA worked to defeat the bill in the legislature and sought a veto.

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Bond Thresholds

 

–Enactments

 

SB 2808, the budget bill, increases the bonding threshold for the State University of New York (SUNY) construction contracts, for both performance and payment bonds, from $50,000 to $250,000. Both the Governor and the SUNY were strong advocates for this provision, which was touted as a way to get more contracts to small and emerging contractors. The threshold increase is scheduled to sunset on June 30, 2016.

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–Carryover to 2012.

New York had several bills introduced to increase the state bond threshold, but none were considered this year. New York AB 301, SB 380, and SB 2830 would increase the state bond threshold. Under current law, the head of the state agency or commission may waive the bond requirements on contracts if the contracts exceed $100,000 or if it exceeds $200,000 for a contract not subject to state requirements for multiple awards under the Wicks Act. The bill would increase the bond threshold to $150,000, or $300,000 for contracts not 10

subject to the Wicks Act. The bill also provides that the head of the state agency or commission would have to adjust the threshold annually to account for the increases in the costs of construction. None of these bills were considered this year, and it is unlikely that they will move in the fall veto session.

 

AB 5463/ 5799/SB 1502/SB 2802/SB 3143 would establish a $250,000 bond threshold for the State University of New York at Buffalo. New York AB 5537 would increase the bond threshold for the State University of New York at Stony Brook from $50,000 to $250,000.

 

–Carryover to 2012.

New York SB 4457 provides that on public contracts under $500,000 that are awarded to small, minority-, and women-owned businesses, the performance and payment bond requirements in existing law under the State’s Little Miller Act could be waived. The provisions are part of a bill to assist small, minority-, and women-owned businesses. This bill was introduced in April and was not considered this year.

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Public Entities Issuing Bonds

 

–Carryover to 2012.

 

In the final days of the session in New York,

 

the provisions from SB 4952 and AB 7839 were added to SB 5758, which is a bill concerning school and local jurisdiction taxes. SB 5758 failed to pass.

 

SB 4952 would have revised an existing law that prohibits a state officer or employee from negotiating, applying for, obtaining, or procuring surety bonds or contracts of insurance that can be obtained by the bidder, contractor, or subcontractor. Instead, the bill would have permitted the State, a public corporation, or public authority to provide surety bonds or insurance policies without reimbursement. The contractor or subcontractor would not have to account for or otherwise provide a credit in his or her bid reflecting the amount he or she otherwise would have added if he or she provided his or her own insurance as required in bid specifications. AB 7839 would have allowed a city with a population of one million or more to provide surety bonds or insurance policies that are required for public building or construction contracts for a contractor or subcontractor without reimbursement for contracts subject to a project labor agreement. The bill also would have permitted such cities to require a contractor or subcontractor to account for or provide a credit in his or her bid that reflected the amount that otherwise would be added if he or she had provided his or her insurance. Neither one of these bills had moved this year. The eleventh-hour attempt to pass them by including them in another bill that appeared failed. The property-casualty industry was united in opposition to these bills because of their impact on many lines of insurance, including surety.

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Claims Issues

 

–Enactments

 

 

. New York

SB 3182 changes the statute of limitations for subcontractor actions on a payment bond. Under prior law, the subcontractor shall not commence an action after one year from the date on which final payment under the claimant’s subcontract became due. The new law provides that the subcontractor shall not commence an action after one year from the date on which the public improvement has been completed and the public owner accepts it. SFAA and AIA worked to defeat the bill in the Assembly and Senate but received no support from the general contractors, who have helped us every year since this bill was first introduced in 2007. We sought a veto and got some traction in the Governor’s office, but in the end, only one 18

 

small part of the insurance industry opposed the bill and no objection was heard from contractors. The Governor’s office has asked that we monitor the impact of the new law for future discussions.

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–Carryover to 2012.

New York SB 5445 would authorize the use of PPPs for transportation infrastructure projects for the Commissioner of Transportation, the New York State Thruway Authority, the Metropolitan Transportation Authority, and the New York State Bridge Authority. The bill provides that the project agreement “may” provide for insurance or surety requirements for the project. South Carolina SB 103 would permit the DOT to enter into a PPP for public transportation projects. The bill provides that the DOT shall require appropriate performance guarantees and security and appropriate payment bonds for the protection of persons supplying labor and materials to projects subject to a partnership agreement. The bill did not move this year.

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Effective Date:

Enacted bills become effective as specified in the bill. Please see the bill summary for an effective date of these new laws.

Senate Bill No. 2808: State University of New York Bond Threshold

 

ENACTED:

03/31/2011

SB 2808 increases the bond threshold for all State University of New York (SUNY) construction contracts to $250,000. Prior law required such bonds on all SUNY construction contracts that exceed $50,000. SFAA worked with the AIA to oppose this bill. The new law became effective upon enactment.

 

Senate Bill No. 3281: Payment Bond Claims

 

ENACTED:

08/03/2011

SB 3281 changed the statute of limitations for subcontractor actions on a payment bond for state 50

 

contracts. Under prior law, the subcontractor shall not commence an action after one year from the date on which final payment under the claimant’s subcontract became due. The new law provides that the subcontractor shall not commence an action after one year from the date on which the public improvement has been completed and the public owner accepts it. SFAA and AIA worked to defeat this bill during the session and sought a veto from the Governor, but ultimately, our efforts were not successful.

 

Assembly Bill No. 340: Leasing Contracts—State University of New York

 

ENACTED:

08/17/2011

AB 340 requires performance and payment bonds on construction contracts let in connection with leasing contracts of the State University of New York. The bonds would have to conform to the requirements of New York’s general municipal law. The new law became effective upon enactment.

 

Senate Bill No. 50002: Performance and Payment Bonds

 

ENACTED:

12/09/2011

SB 50002 is a budget bill that was enacted in an expedited process that took place over the course of two days in a special session of the legislature. The new law includes alternative construction awarding process that allows “authorized state entities” to establish requirements for performance and payment bonds as it deems necessary for capital projects. The new law permits the use of best value contract awards, a cost-plus not to exceed guaranteed maximum price method or a lump sum contract. Use of the cost-plus method would permit the state authority to audit all project costs under the new law.

 

The new law defines an “authorized state entity” as the New York State Thruway Authority, the Department of Transportation, the Office of Parks, Recreation and Historic Preservation, the Department of Environmental Conservation and the New York State Bridge Authority. The projects eligible for such alternative award processes are those under the existing law’s definition of “capital project.” Current law defines such projects as “the acquisition, construction, demolition or replacement of a fixed asset or assets; the major repair or renovation of a fixed asset, or assets which materially extends its useful life or materially improves or increases its capacity; or the planning or design of the acquisition, construction, demolition, replacement, major repair or renovation of a fixed asset or assets.” The new law became effective upon

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