Introduced Version
HOUSE BILL No. 1198
_____
DIGEST OF INTRODUCED BILL
Citations Affected:
IC 4-13.6-7
; IC 36-1-12.
Synopsis: Retainage and bonding for public works. Provides that a
public works contract may not contain provisions requiring both
retainage bonds and payment and performance bonds. Requires that the
amount of payment and performance bonds must be 150% of the cost
of the public works project.
Effective: July 1, 2000.
Cook
January 10, 2000, read first time and referred to Committee on Local Government.
Introduced
Second Regular Session 111th General Assembly (2000)
PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana
Constitution) is being amended, the text of the existing provision will appear in this style type,
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Additions: Whenever a new statutory provision is being enacted (or a new constitutional
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NEW will appear in that style type in the introductory clause of each SECTION that adds
a new provision to the Indiana Code or the Indiana Constitution.
Conflict reconciliation: Text in a statute in
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this style type reconciles conflicts
between statutes enacted by the 1999 General Assembly.
HOUSE BILL No. 1198
A BILL FOR AN ACT to amend the Indiana Code concerning state
and local administration.
Be it enacted by the General Assembly of the State of Indiana:
SOURCE: IC 4-13.6-7-1; (00)IN1198.1.1. -->
SECTION 1.
IC 4-13.6-7-1
IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 1. (a) The director may
apply this chapter to public works projects with an estimated cost less
than the amounts specified in section 2 or 7 of this chapter.
(b) A public works contract may not contain provisions
requiring both of the following:
(1) Retainage under section 2 of this chapter. If a public works
contract does not require retainage, the public works contract
must require payment and performance bonds under sections
6 and 7 of this chapter if those sections are otherwise
applicable to the public works contract.
(2) Payment and performance bonds under sections 6 and 7 of
this chapter. If a public works contract does not require
payment and performance bonds, the public works contract
must require retainage under section 2 of this chapter if that
section is otherwise applicable to the public works contract.
SOURCE: IC 4-13.6-7-2; (00)IN1198.1.2. -->
SECTION 2.
IC 4-13.6-7-2
IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 2. (a) If the estimated
cost of a public works project is one hundred fifty thousand dollars
($150,000) or more, the division shall, subject to section 1 of this
chapter, include as part of the public works contract provisions for the
retainage of portions of payments by the division to the contractor, by
the contractor to subcontractors, and for the payment of subcontractors
and suppliers by the contractor. The contract must provide that the
division may withhold from the contractor sufficient funds from the
contract price to pay subcontractors and suppliers as provided in
section 4 of this chapter.
(b) A public works contract and contracts between contractors and
subcontractors, if portions of the public works contract are
subcontracted, must include a provision that at the time any retainage
is withheld, the division or the contractor, as the case may be, shall
place the retainage in an escrow account, with:
(1) a bank;
(2) a savings and loan institution;
(3) the state of Indiana; or
(4) an instrumentality of the state of Indiana;
as escrow agent. The parties to the contract shall select the escrow
agent by mutual agreement. The parties to the agreement shall enter
into a written agreement with the escrow agent.
(c) The escrow agreement must provide the following:
(1) The escrow agent shall promptly invest all escrowed principal
in the obligations that the escrow agent selects, in its discretion.
(2) The escrow agent shall hold the escrowed principal and
income until it receives notice from both of the other parties to the
escrow agreement specifying the percentage of the escrowed
principal to be released from the escrow and the persons to whom
this percentage is to be released. When it receives this notice, the
escrow agent shall promptly pay the designated percentage of
escrowed principal and the same percentage of the accumulated
escrowed income to the persons designated in the notice.
(3) The escrow agent shall be compensated for its services as the
parties may agree. The compensation shall be a commercially
reasonable fee commensurate with fees being charged at the time
the escrow fund is established for the handling of escrow accounts
of like size and duration. The fee must be paid from the escrowed
income of the escrow account.
(d) The escrow agreement may include other terms and conditions
that are not inconsistent with subsection (c). Additional provisions may
include provisions authorizing the escrow agent to commingle the
escrowed funds held under other escrow agreements and provisions
limiting the liability of the escrow agent.
SOURCE: IC 4-13.6-7-6; (00)IN1198.1.3. -->
SECTION 3.
IC 4-13.6-7-6
IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 6. (a) If the estimated
cost of the public works project is at least one hundred fifty thousand
dollars ($150,000), the division shall, subject to section 1 of this
chapter, require the contractor to execute a good and sufficient
payment bond to the department for the state in an amount equal to one
hundred fifty percent (100%) (150%) of the total contract price. The
bond shall include at least the following provisions:
(1) The contractor, its successors and assigns, whether by
operation of law or otherwise, and all subcontractors, their
successors and assigns, whether by operation of law or otherwise,
shall pay all indebtedness that may accrue to any person on
account of any labor or service performed or materials furnished
in relation to the public work.
(2) The bond shall directly inure to the benefit of subcontractors,
laborers, suppliers, and those performing service or who may
have furnished or supplied labor, material, or service in relation
to the public work.
(3) No change, modification, omission, or addition in or to the
terms or conditions of the contract, plans, specifications,
drawings, or profile or any irregularity or defect in the contract or
in the procedures preliminary to the letting and awarding of the
contract shall affect or operate to release or discharge the surety
in any way.
(4) The provisions and conditions of this chapter shall be a part of
the terms of the contract and bond.
(b) The division may permit the bond given by the contractor to
provide for incremental bonding in the form of multiple or
chronological bonds that, if taken as a whole, equal one hundred fifty
percent (150%) of the total contract price.
(c) The division may accept bonds provided on forms specified by
the division or on forms given by surety companies.
(d) The division shall hold the bond of a contractor for the use and
benefit of any claimant having an interest in it and entitled to its
benefits.
(e) The division shall not release sureties of a contractor until the
expiration of one (1) year after the final settlement with the contractor.
(f) If the estimated cost of the public works project is less than one
hundred fifty thousand dollars ($150,000) the director may require only
one (1) of the following:
(1) The contractor must execute a good and sufficient payment
bond. The director may determine the amount of the bond to be
any percentage, but no more than one hundred fifty percent
(100%), (150%), of the cost of the project.
(2) The division will withhold retainage under this chapter in an
amount of ten percent (10%) of the dollar value of all payments
made to the contractor until the public work is substantially
completed.
SOURCE: IC 4-13.6-7-7; (00)IN1198.1.4. -->
SECTION 4.
IC 4-13.6-7-7
IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 7. (a) If the estimated
cost of the public works project is at least one hundred fifty thousand
dollars ($150,000) the division shall, subject to section 1 of this
chapter, require the contractor to execute a good and sufficient
performance bond to the department for the state in an amount equal
to one hundred fifty percent (100%) (150%) of the total contract price.
The bond shall include at least the following provisions:
(1) The contractor shall well and faithfully perform the contract.
(2) No change, modification, omission, or addition in or to the
terms or conditions of the contract, plans, specifications,
drawings, or profile or any irregularity or defect in the contract or
in the procedures preliminary to the letting and awarding of the
contract shall affect or operate to release or discharge the surety
in any way.
(3) The provisions and conditions of this chapter shall be a part of
the terms of the contract and bond.
(b) The division may permit the bond given by the contractor to
provide for incremental bonding in the form of multiple or
chronological bonds that, if taken as a whole, equal one hundred fifty
percent (150%) of the total contract price.
(c) The division may accept bonds provided on forms specified by
the division or on forms given by surety companies.
(d) The division shall not release sureties of a contractor until the
expiration of one (1) year after the final settlement with the contractor.
SOURCE: IC 36-1-12-4.5; (00)IN1198.1.5. -->
SECTION 5.
IC 36-1-12-4.5
IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 4.5. (a) A bond or a
certified check shall be filed with each bid by a bidder in the amount
determined and specified by the board in the notice of the letting.
(b) The amount of the bond or certified check may not be set at
more than ten percent (10%) of the contract price. The bond or certified
check shall be made payable to the political subdivision or agency.
(c) All checks of unsuccessful bidders shall be returned to them by
the board upon selection of successful bidders. Checks of successful
bidders shall be held until delivery of the performance bond, as
provided in section 14(e) of this chapter. the bidder enters into the
public work contract under this chapter.
SOURCE: IC 36-1-12-13; (00)IN1198.1.6. -->
SECTION 6.
IC 36-1-12-13
IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 13. (a) A contract for
public work must contain a provision for the payment of
subcontractors, laborers, material suppliers, and those performing
services.
(b) This subsection does not apply if the public work contract
requires a payment bond under section 13.1 of this chapter. The
board shall withhold money from the contract price in a sufficient
amount to pay the subcontractors, laborers, material suppliers, and
those furnishing services.
(c) A public work contract may not contain provisions requiring
both of the following:
(1) Retainage under section 14 of this chapter. If a public
work contract does not require retainage, the public work
contract must require payment and performance bonds under
sections 13.1 and 13.3 of this chapter, if those sections are
otherwise applicable to the public work contract.
(2) Payment and performance bonds under sections 13.1 and
13.3 of this chapter. If a public work contract does not require
payment and performance bonds, the public work contract
must require retainage under section 14 of this chapter if that
section is otherwise applicable to the public work contract.
SOURCE: IC 36-1-12-13.1; (00)IN1198.1.7. -->
SECTION 7.
IC 36-1-12-13.1
IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 13.1. (a) This section
applies to contracts for public work only if both of the following
apply:
(1) The cost of the public work is estimated to be more than one
hundred thousand dollars ($100,000).
(2) The public work contract does not require retainage under
section 14 of this chapter.
(b) The contractor shall execute a payment bond to the appropriate
political subdivision or agency, approved by and for the benefit of the
political subdivision or agency, in an amount equal to one hundred
fifty percent (150%) of the contract price. The payment bond is
binding on the contractor, the subcontractor, and their successors and
assigns for the payment of all indebtedness to a person for labor and
service performed, material furnished, or services rendered. The
payment bond must state that it is for the benefit of the subcontractors,
laborers, material suppliers, and those performing services.
(c) The payment bond shall be deposited with the board. The
payment bond must specify that:
(1) a modification, omission, or addition to the terms and
conditions of the public work contract, plans, specifications,
drawings, or profile;
(2) a defect in the public work contract; or
(3) a defect in the proceedings preliminary to the letting and
awarding of the public work contract;
does not discharge the surety. The surety of the payment bond may not
be released until one (1) year after the board's final settlement with the
contractor.
(d) A person to whom money is due for labor performed, material
furnished, or services provided shall, within sixty (60) days after the
completion of the labor or service, or within sixty (60) days after the
last item of material has been furnished, file with the board signed
duplicate statements of the amount due. The board shall forward to the
surety of the payment bond one (1) of the signed duplicate statements.
However, failure of the board to forward a signed duplicate statement
does not affect the rights of a person to whom money is due. In
addition, a failure to forward the statement does not operate as a
defense for the surety.
(e) An action may not be brought against the surety until thirty (30)
days after the filing of the signed duplicate statements with the board.
If the indebtedness is not paid in full at the end of that thirty (30) day
period the person may bring an action in court. The court action must
be brought within sixty (60) days after the date of the final completion
and acceptance of the public work.
SOURCE: IC 36-1-12-13.3; (00)IN1198.1.8. -->
SECTION 8.
IC 36-1-12-13.3
IS ADDED TO THE INDIANA
CODE AS A
NEW SECTION TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2000]:
Sec. 13.3. (a) This section applies to a
public work contract if all of the following apply:
(1) The amount of the public work contract is more than one
hundred thousand dollars ($100,000).
(2) The public work contract is for a project other than
highways, roads, streets, alleys, bridges, and appurtenant
structures situated on streets, alleys, and dedicated highway
rights-of-way.
(3) The public work contract does not require retainage under
section 14 of this chapter.
(b) The contractor shall furnish the board with a performance
bond equal to one hundred fifty percent (150%) of the contract
price. If acceptable to the board, the performance bond may
provide for incremental bonding in the form of multiple or
chronological bonds that, if taken as a whole, equal one hundred
fifty percent (150%) of the total contract price. The surety on the
performance bond may not be released until one (1) year after the
date of the board's final settlement with the contractor. The
performance bond must specify that:
(1) a modification, an omission, or an addition to the terms
and conditions of the public work contract, plans,
specifications, drawings, or profile;
(2) a defect in the public work contract; or
(3) a defect in the proceedings preliminary to the letting and
awarding of the public work contract;
does not discharge the surety.
(c) Actions against a surety on a performance bond must be
brought within one (1) year after the date of the board's final
settlement with the contractor.
(d) This subsection applies to public work contracts of less than
two hundred fifty thousand dollars ($250,000). The board may
waive the performance bond requirement of this section and accept
from a contractor an irrevocable letter of credit for an equivalent
amount from an Indiana financial institution approved by the
department of financial institutions instead of a performance bond.
Subsections (b) through (c) and section 14.5 of this chapter apply
to a letter of credit submitted under this subsection.
SOURCE: IC 36-1-12-14; (00)IN1198.1.9. -->
SECTION 9.
IC 36-1-12-14
IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 14. (a) This section
applies to
a public work
contracts contract if all of the following
apply:
(1) The amount of the public work contract is in excess of one
hundred thousand dollars ($100,000).
(2) The public work contract is for
projects a project other than
highways, roads, streets, alleys, bridges, and appurtenant
structures situated on streets, alleys, and dedicated highway
rights-of-way.
(3) The public work contract does not require payment and
performance bonds under sections 13.1 and 13.3 of this
chapter.
This section also applies to a lessor corporation qualifying under
IC 21-5-11
or
IC 21-5-12
or any other lease-back arrangement
containing an option to purchase, notwithstanding the statutory
provisions governing those leases.
(b) A board that enters into a contract for public work, and a
contractor who subcontracts parts of that contract, shall include in their
respective contracts provisions for the retainage of portions of
payments by the board to contractors, by contractors to subcontractors,
and for the payment of subcontractors. Either the board or contractor,
or both, shall place the retainage in an escrow account, with a bank,
savings and loan institution, or the state as the escrow agent. The
escrow agent shall be selected by mutual agreement between board and
contractor or contractor and subcontractor under a written agreement
among the bank or savings and loan institution and:
(1) the board and the contractor; or
(2) the subcontractor and the contractor.
(c) To determine the amount of retainage to be withheld, the board
shall:
(1) withhold no more than ten percent (10%) of the dollar value
of all work satisfactorily completed until the public work is fifty
percent (50%) completed, and nothing further after that; or
(2) withhold no more than five percent (5%) of the dollar value of
all work satisfactorily completed until the public work is
substantially completed.
If upon substantial completion of the public work minor items remain
uncompleted, an amount computed under subsection (f) (e) of this
section shall be withheld until those items are completed.
(d) The escrow agreement must contain the following provisions:
(1) The escrow agent shall invest all escrowed principal in
obligations selected by the escrow agent.
(2) The escrow agent shall hold the escrowed principal and
income until receipt of notice from the board and the contractor,
or the contractor and the subcontractor, specifying the part of the
escrowed principal to be released from the escrow and the person
to whom that portion is to be released. After receipt of the notice,
the escrow agent shall remit the designated part of escrowed
principal and the same proportion of then escrowed income to the
person specified in the notice.
(3) The escrow agent shall be compensated for the agent's
services. The parties may agree on a reasonable fee comparable
with fees being charged for the handling of escrow accounts of
similar size and duration. The fee shall be paid from the escrowed
income.
The escrow agreement may include other terms and conditions
consistent with this subsection, including provisions authorizing the
escrow agent to commingle the escrowed funds with funds held in
other escrow accounts and limiting the liability of the escrow agent.
(e) The contractor shall furnish the board with a performance bond
equal to the contract price. If acceptable to the board, the performance
bond may provide for incremental bonding in the form of multiple or
chronological bonds that, when taken as a whole, equal the contract
price. The surety on the performance bond may not be released until
one (1) year after the date of the board's final settlement with the
contractor. The performance bond must specify that:
(1) a modification, omission, or addition to the terms and
conditions of the public work contract, plans, specifications,
drawings, or profile;
(2) a defect in the public work contract; or
(3) a defect in the proceedings preliminary to the letting and
awarding of the public work contract;
does not discharge the surety.
(f) The contractor shall be paid in full, including all escrowed
principal and escrowed income, by the board and escrow agent, within
sixty-one (61) days after the date of substantial completion, subject to
sections 11 and 12 of this chapter. (e) If within sixty-one (61) days after
the date of substantial completion there remain uncompleted minor
items, an amount equal to two hundred percent (200%) of the value of
each item as determined by the architect-engineer shall be withheld
until the item is completed.
Required warranties begin not later than
the date of substantial completion.
(g) Actions against a surety on a performance bond must be brought
within one (1) year after the date of the board's final settlement with the
contractor.
(h) This subsection applies to public work contracts of less than two
hundred fifty thousand dollars ($250,000). The board may waive the
performance bond requirement of subsection (e) and accept from a
contractor an irrevocable letter of credit for an equivalent amount from
an Indiana financial institution approved by the department of financial
institutions instead of a performance bond. Subsections (e) through (g)
apply to a letter of credit submitted under this subsection.
SOURCE: IC 36-1-12-14.5; (00)IN1198.1.10. -->
SECTION 10.
IC 36-1-12-14.5
IS ADDED TO THE INDIANA
CODE AS A
NEW SECTION TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2000]:
Sec. 14.5. (a) The contractor shall be
paid in full, including all escrowed principal and escrowed income,
by the board and escrow agent within sixty-one (61) days after the
date of substantial completion, subject to sections 11 and 12 of this
chapter.
(b) Required warranties begin not later than the date of
substantial completion.