H.B. 1035: Performance and Payment Bond Modification


The American Subcontractors Association of the Carolinas is asking its members to contact Governor Perdue to veto the section of HB 1035 that eliminates an important remedy for non-payment for subcontractors on some public projects. The NC House and Senate have already passed the bill which may apply to construction contracts awarded on or after October 1, 2010.

The legislation will increase the threshold for required payment performance bonds on state projects to $500,000 from $300,000. View a copy of the bill Here.

In a letter to its members, ASAC says, “The construction industry has been particularly hard hit by the current recession. Even the most experienced contracting firms have seen their credit worthiness erode. Further, many contractors that historically have worked solely in the private sector have turned to public work, which is the only sector that has not suffered a severe contraction. Such contractors may not have the financial stability to successfully complete a government contract, particularly as other parts of their businesses continue to deteriorate. In order to bid on government construction, a prime contractor must pre-qualify for a surety bond by meeting the surety’s standards for capital, capacity and character. The surety bonds required by G.S. § 44A 26 protect taxpayers, as well as subcontractors and suppliers.”

In a letter to its membership, the Carolinas Electrical Contractors Association adds, “This bill is bad for taxpayers and for subcontractors. The burden of default by contractors on unbonded projects falls squarely on the taxpayers. Also, since subcontractors have no liens on public projects, eliminating the payment bond exposes the subcontractor on the project to nonpayment for work performed on the project.”

Contractors are encouraged to write: Governor Beverly Purdue, Office of the Governor, 20301 Mail Service Center, Raleigh, NC 27699-0301