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[Ý ƒ"à©$ÝÔUSUS.,ÔÔ€ôXòXXÔÚÚ19Ú ÚÝÝÔ_Ôòòóóòòóó€To€locate€a€state€insurance€department€contact€the€National€Association€of€Insurance€Commissioners€atÐ ° ÐÔ4‚æÝ °ÔÝ‚TÍOÝÔÿÔòòÝÝÔ5 ÔÝ‚.ÿÿÿÝóóòòÔÿÿÔÝÝwww.naic.orgÝ‚.ÿÿÿFƒ*ÝóóÔÿÿÔÝÝÔ6úÔÝ‚Tƒ"ÝÔÿÔÝÝÔ7Ý R<Ô.€€See€also€the€U.S.€Treasury€List€at€Ô4‚èÝ ªÔÝ‚TÍOÝÔÿÔòòÝÝÔ5 ÔÝ‚.ÿÿÿÝóóòòÔÿÿÔÝÝwww.fms.treas.gov/c570/index.htmlÝ‚.ÿÿÿƒ*ÝóóÔÿÿÔÝÝÔ63ÔÝ‚TGƒ"ÝÔÿÔÝÝÔ7Ý uÔ ÙÝ ƒ"à©$ÝÔUSUS.,ÔÔ€ôXòXXÔÚÚ11Ú ÚÝÝÔ_Ô€„€šRules€relating€to€expiration€of€wage€determinations€are€discussed€in€detail€at€FAR€ðð22.404-5.šhttp://www.naic.org èÝ ƒ"à©$ÝÔUSUS.,ÔÔ€ôXòXXÔÚÚ12Ú ÚÝÝÔ_Ô€„€šIf€award€of€the€contract€is€not€made€within€90€days€after€bid€opening,€the€modification€becomes€effective€unlessÐ ° Ðthe€Wage€and€Hour€Division€Administrator€extends€the€90€day€period.€€If€an€extension€is€not€granted,€theÐ tÄ Ðmodification€is€treated€the€same€as€a€new€wage€determination€and€the€same€procedures€as€discussed€above€apply.šhttp://www.fms.treas.gov/c570/index.html ¨Ý ƒ"à©$ÝÔUSUS.,ÔÔ€ôXòXXÔÚÚ20Ú ÚÝÝÔ_Ôòòóóòòóó€The€Treasury€List€may€be€downloaded€on€the€Internet€at€€Ô4‚ëÝ pÔÝ‚TÍOÝÔÿÔòòÝÝÔ5 ÔÝ‚.ÿÿÿÝóóòòÔÿÿÔÝÝwww.fms.treas.gov/c570/index.htmlÝ‚.ÿÿÿƒ*ÝóóÔÿÿÔÝÝÔ6¸ÔÝ‚TÌƒ"ÝÔÿÔÝÝÔ7Ý ØúÔ.€€The€Treasury€ListÐ ° Ðidentifies€the€various€states€where€the€listed€bonding€companies€are€licensed€and€the€state€insurance€departments€withÐ tÄ Ðtheir€phone€numbers.http://www.fms.treas.gov/c570/index.html ãÝ ƒ"à©$ÝÔUSUS.,ÔÔ€ôXòXXÔÚÚ21Ú ÚÝÝÔ_Ôòòóóòòóó€For€more€information€about€the€SAAððs€Model€Contractor€Development€Program,€contact€the€Surety€AssociationÐ ° Ðof€America€at€202„463„0600€or€their€Web€site:€Ô4‚XÝ úÔÝ‚TÍOÝÔÿÔòòÝÝÔ5 Ôwww.surety.orgÔ6/ÔÝ‚TÍOCƒ"ÝóóÔÿÔÝÝÔ7Ý qÔ. ¬Ý ƒ"à©$ÝÔUSUS.,ÔÔ€ôXòXXÔÚÚ22Ú ÚÝÝÔ_Ôòòóóòòóó€For€this€and€other€materials,€contact€the€Surety€Information€Office€at€202„686„7463€or€their€Web€site:Ð ° ÐÔ4‚UÝ °ÔÝ‚TÍOÝÔÿÔòòÝÝÔ5 Ôwww.sio.orgÔ6ûÔÝ‚TÍOƒ"ÝóóÔÿÔÝÝÔ7Ý =Ô. 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ÞÝ ƒ"à©$ÝÔUSUS.,ÔÔ€ôXòXXÔÚÚ40Ú ÚÝÝÔ_ÔÔ_ÔšSee€the€discussion€of€how€this€publication€may€be€obtained€in€Note€3.€under€Section€8.1.1. õÝ ƒ"à©$ÝÔUSUS.,ÔÔ€ôXòXXÔÚÚ41Ú ÚÝÝÔ_ÔÔ_ÔWheeler€Bros.,€Ô_ÔASBCAÔ_Ô€20465,€79„1€Ô_ÔBCAÔ_Ô€ðð€13,642.š NÝ ƒ"à©$ÝÔUSUS.,ÔÔ€ôXòXXÔÚÚ42Ú ÚÝÝÔ_ÔÔ_ÔJohn€Ô_ÔCibinicÔ_Ô,€Jr.€and€Ralph€Nash,€Jr.òò€€Administration€of€Government€Contracts.€óó€Third€Ed.€€Washington,€D.C.:Ð ° ÐGeorge€Washington€University,€1995.šÝ ƒfüœ!ÝÔUSUS.,ÔÝÝÔ_ÔÔ‡PX»(XXXÔÑÏ°ÑÓÓòòÑÑÖ€£ÿÿÖChapter€8óóÐ 3 ÐòòÌÓÓòòóó8€„€òòContract€ClausesóóóóÐ Ø ÐòòÌóóàà8.1€òòFederal€Requirementsóó€€€(1/98)òòÐ ã ° Ðààà` àÌààà0` àóó8.1.1€òòSources€of€Model€Federal€Clauses€and€Applicabilityóó€€€(1/98)òòÐ»ˆ` (#` (# Ðààà` àóó8.1.2€òòDavis€Bacon€Actóó€€€(1/98)òòÐ § t Ðààà0` àóó8.1.3€òòCargo€Preferencesóó€€€(1/98)òòÐ“`` (#` (# Ðààà0` àóó8.1.4€òòBuy€Americaóó€€€(6/03)òòÐL ` (#` (# Ðààà0` àóó8.1.5€òòFly€Americaóó€€€(1/98)òòÐk8 ` (#` (# ÐààÌà0àóó8.2€òòSurety€Bondsóó€€€(4/05)òòÐC(#(# Ðààà` àÌààà` àóó8.2.1€òòPerformance€Bondsóó€€€Ô_Ô(4/05)òòÔ_ÔÐ è Ðààà0` àóó8.2.2€òòOptionsóó€€€(1/98)òòÐÔ ` (#` (# Ðààà0` àóó8.2.3€òòLiquidated€Damagesóó€€€(1/98)òòÐóÀ` (#` (# ÐÌà0àà0` (#(#àà0¸` (#` (#àóó8.2.3.1€òòRelationship€with€Default€Terminationóó€€€(1/98)òòÐË˜¸(#¸(# ÐÌààà0` àóó8.2.4€òòIntellectual€Property€Rightsóó€€€(1/98)òòÐ£p` (#` (# Ðààà` àà¸àÌààà` àà0¸àóó8.2.4.1€òòDisclosure€of€Trade€Secretsóó€€€(1/98)òòÐ{H¸(#¸(# Ðààà` àà0¸àóó8.2.4.2€òòContract€Work€Products,€Patents€and€Copyrightsóó€€€(1/98)òòÐg4¸(#¸(# Ðààà` àà¸àÌààà0` àóó8.2.5€òòTerminationóó€€€(1/98)òòÐ?` (#` (# ÐóóÌà0àà0` (#(#àà0¸` (#` (#à8.2.5.1€òòTermination€for€Convenienceóó€€€(1/98)òòÐ ä¸(#¸(# Ðà0àà0` (#(#àà0¸` (#` (#àóó8.2.5.2€òòPartial€Terminationsóó€€€(1/98)òòÐ!Ð¸(#¸(# Ðà0àà0` (#(#àà0¸` (#` (#àóó8.2.5.3€òòTermination€for€Defaultóó€€€(1/98)Ðï!¼¸(#¸(# Ðà0àà0` (#(#àà¸ààààhàÐ ` (#` (# ÐòòÓÓ8.1€€FEDERAL€REQUIREMENTSÔÿÿÔóóàÀààààpààÈàà ààxàÐ Ç#” ÐÌòòÔÿÿÔÔÔ8.1.1€€òòSources€of€Model€Federal€Clauses€and€ApplicabilityÔb ÔÔÿÿÔóóÐ Ÿ%l! ÐóóÔÿÿÔÌÔ*…ƒddd Xdd Xdd X°(#°(#…ÔÔ,xttÔÔ+ ÔÐ1€w'D #w'D €€‚‚ƒƒ1ÐÓdÓÌÓÿÿð°œXÓÓdÓòòREQUIREMENTÐ@€-ë'¸ % €€‚‚ƒƒ@Ðóóðð16€of€FTA€Circular€4220.1E€requires€that€grantees€evaluate€Federal€statutory€and€regulatoryÐ ÷(Ä!& Ðrequirements€for€relevance€and€applicability€to€a€particular€procurement.€òò€óóÐ ã)°"' ÐÌAppendix€A.1€of€this€Manual€contains€a€discussion€of€each€of€the€most€generally€applicableÐ ¿+Œ$) Ðrequirements,€including€the€types€of€contracts€to€which€each€applies,€any€specific€wording€thatÐ «,x%* Ðmust€be€incorporated€in€your€contracts,€suggested€wording€where€specific€wording€is€notÐ —-d&+ Ðmandatory,€and€the€applicability€to€subcontracts.òòÐ.$"ƒ.P', .ÐòŒòÐ /L(, ÐDISCUSSIONóŒóóóÐ 3 ÐÌòòFTA€grantees€recognize€that€the€most€significant€of€the€strings€attached€to€the€receipt€ofÐ Ø Ðfederal€funds€is€the€requirement€to€comply€with€federal€statutes€and€regulations€applicableÐ ÷ Ä Ðto€their€project€or€particular€contract.€€Ð ã ° ÐÌYou€will€want€to€be€able€to€determine€exactly€which€clauses€are€required€for€a€specificÐ »ˆ Ðprocurement€because€the€incorporation€of€unnecessary€or€loosely€drafted€clauses€can:€Ð § t ÐÌÓ€ H_)*+-9<EF(¼p3@ÓÝ"‚_´J"ÝÝÝÓ$°,4P ŠXÿÿð$ÓààÝ‚_´J¢ÝÔ2¼ÔððÔ3 Ôà04àÝÝòŒòdiscourage€competitors,€Ýƒ_´J¢ÿÝŒÐL 4(#4(# ÐŒÝ ÝóŒóÝ"‚_´J"ÝÝÝà0àÝ‚_´J¦ÝÔ2¼ÔððÔ3 Ôà04(#(#àÝÝcause€confusion€for€anyone€involved€with€the€contract,€and€óóÝƒ_´J¦ßÝŒÐk8 4(#4(# ÐŒÝ ÝÝ"‚_´J"ÝÝÝààÝ‚_´J®ÝÔ2¼ÔððÔ3 Ôà04àÝÝÓK.ÿÿðÌøP ¨X°`¸hÀ!°,4P ŠXKÓòòultimately€result€in€additional€€costs€for€your€agency.€€óóÝƒ_´J®çÝŒÐW$ 4(#4(# ÐŒÝ Ýà0Ìàà0øÌ(#Ì(#àÐ ø(#ø(# ÐÓE+ÿÿ ðøP ¨X°`¸hÀ!ÿÿðÌø‹XEÓòòAppendix€A.1€of€this€manual€discusses€each€of€the€most€generally€applicable€clauses.€€€Ð 3 ÐKnowing€that€a€particular€law€must€be€complied€with€and€that€appropriate€language€mustÐ ì Ðbe€included€in€a€third€party€contract,€still€leaves€the€Grantee€trying€to€draft€or€incorporateÐ Ø Ða€clause€that€meets€those€requirements.€€The€clause-by-clause€discussions€in€Appendix€A.1Ð ÷Ä Ðhave€been€developed€by€FTA€to€assist€you.óóÐ ã° ÐàøàÌòòBest€PracticesÐ »ˆ ÐóóÌAppendix€A.1€of€this€Manual€contains€thirty€model€contract€clauses€that€are€either€federallyÐ “` Ðrequired€or€are€suggested€model€clauses€that€you€may€include€in€contracts.€The€clauses€containedÐ L Ðin€this€Appendix€include€the€following€common€elements€which€will€be€helpful€to€grantees€inÐ k8 Ðdeciding€if€a€specific€clause€is€required€in€a€particular€procurement:Ð W$ ÐÌòòApplicability€to€Contractsóó€-€discusses€the€types€of€contracts€for€which€the€clause€is€applicable.Ð /ü ÐòòÌFlow€Downóó€-€discusses€to€which€prime€contractors€and€which€level€of€subcontractors€the€clausesÐ !Ô Ðapply.Ð ó!À ÐÌòòMandatory€Clause/Languageóó€-€includes€the€model€clause,€identified€by€FTA€as€either€a€requiredÐ Ë#˜ Ð(specified)€clause€or€a€suggested-language€clause.Ð ·$„ ÐÌThe€narratives€provided€with€the€individual€clauses€in€the€Appendix€indicate€the€source€of€theÐ &\" Ðclause,€if€required.€€Many€of€the€required€clauses€come€directly€from€requirements€in€variousÐ {'H # Ðsections€of€the€Code€of€Federal€Regulations€(Ô_ÔCFRÔ_Ô)€which€is€published€by€various€executiveÐ g(4!$ Ðdepartments€of€the€federal€government.€€The€most€common€requirements€for€FTA€grantees€comeÐ S) "% Ðfrom€various€parts€of€Title€49€of€the€Ô_ÔCFRÔ_Ô,€published€by€the€Department€of€Transportation.€Ð ?*#& ÐRequirements€of€the€Department€of€Labor€(such€as€Davis-Bacon€Act€clauses)€originate€asÐ ++ø#' Ðspecific€language€in€Title€29€of€the€Ô_ÔCFRÔ_Ô.€Where€clauses€are€not€mandated€by€an€executiveÐ ,ä$( Ðdepartment,€they€are€frequently€€modeled€after€clauses€in€the€Federal€Acquisition€RegulationsÐ -Ð%) Ð(FAR)€which€are€applicable€to€those€executive€departments.€€Ð ï-¼&* Ðâ âÓB+ÿÿ ðøP ¨X°`¸hÀ!ÿÿðø‹XBÓÐ Û.¨'+ ÐÓB+ÿÿ ðøP ¨X°`¸hÀ!ÿÿðø‹XBÓEven€though€the€FAR€does€not€apply€to€grantee€Ô_ÔprocurementsÔ_Ô,€one€advantage€of€using€FARÐ 3 Ðâ âclauses€in€the€absence€of€a€specific€requirement€imposed€upon€your€Agency€is€that€a€body€ofÐ ì Ðfederal€law€has€been€developed€which€interprets€those€clauses.òòÝ‚ÿÿÿÝÔ€PX»(XXPX»(ÔÔ€XSXXPX»(ÔÔÔòòÝÝÔ€PX»(XhXSÔ×ƒ§×Ý ƒ ¢˜Ýò…òòŽòÚÚ1Ú ÚóŽóó…óÝÝ× ×Ý‚ÿÿÿB!ny€oÝÔ€PX»(XhPX»(ÔÔ€PX»(XhPX»(ÔÔÔóóÝÝóóÐ Ø ÐÌYour€State,€local€jurisdiction,€or€transit€Agency€may€have€enacted€a€procurement€code€or€€bodyÐ ã ° Ðof€regulations€that€actually€establishes€specific€clauses€which€you€must€use.€€In€that€case,€you€willÐ Ïœ Ðbe€obligated€to€use€what€has€been€established€for€you.€€Many€of€the€recent€enactments€of€thoseÐ »ˆ Ðcodes€or€regulations€are€adaptations€of€the€American€Bar€Association's€òòModel€Procurement€CodeÐ § t Ðfor€State€and€Local€Governmentsóó.€òòÝ‚ÿÿÿÝÔ€PX»(XXPX»(ÔÔ€XSXXPX»(ÔÔÔòòÝÝÔ€PX»(XhXSÔ×ƒª ×Ý ƒ ¢˜Ýò…òòŽòÚÚ2Ú ÚóŽóó…óÝÝ× ×óóÝ‚ÿÿÿ¯$ny€oÝÔ€PX»(XhPX»(ÔÔ€PX»(XhPX»(ÔÔÔóóÝÝ€€Ð “` ÐÌYou€may€have€the€ability€€to€incorporate€clauses€by€reference€(such€as,€title,€date€and€where€it€canÐ k8 Ðbe€found)€€in€your€contracts.€€To€the€extent€clauses€you€want€to€incorporate€are€published€in€aÐ W$ ÐFederal,€State,€or€local€statute,€code,€or€ordinance,€or€in€an€official€regulation€such€as€the€Ô_ÔCFRÔ_Ô,Ð C Ðyou€should€be€able€to€incorporate€those€provisions€directly€into€your€contractual€document€byÐ /ü Ðreference€only.€€You€can€check€with€your€supporting€legal€counsel€on€what€clauses€you€can€andÐ è Ðcannot€incorporate€by€reference€and€the€manner€in€which€they€may€be€incorporated.€€It€is€doubtfulÐ Ô Ðyou€would€ever€be€able€to€incorporate€by€reference€a€clause€that€was€only€published€in€an€FTAÐ óÀ ÐCircular,€because€of€the€way€FTA€Circulars€are€published€(i.e.€they€are€not€officially€published€inÐ ß¬ Ðthe€òòFederal€Registeróó).Ð Ë˜ ÐÌòò8.1.2€€òòDavis€Bacon€ActóóóóÔÿÿÔÐ £p ÐÔÿÿÔÌÔ*_ƒ&'ddxttx°(#°(#_ÔÔ,xjjÔÔ+ ÔÐ1€{H{H €€‚‚ƒƒ1ÐÓdÓòòÌÓd*+ÓREQUIREMENTóóÐ@€-ï¼ €€‚‚ƒƒ@ÐÌðð€24€of€the€Master€Agreement€delineates€the€Grantee's€obligations€to€comply€with€theÐ ç´ Ðemployee€protection€requirements€of€the€Davis-Bacon€Act.€€For€construction€activitiesÐ Ó Ðexceeding€$2,000€performed€in€connection€with€an€FTA-funded€Project,€the€Recipient€of€thoseÐ ¿Œ Ðfunds€agrees€to€comply€with,€and€assure€compliance€with,€the€requirements€of€49€U.S.C.Ð « x Ððð5333(a),€the€Davis-Bacon€Act€Ý‚ÿÿÿÝÔ€PX»(XXPX»(ÔÔ€XSXXPX»(ÔÔÔòòÝÝÔ€PX»(XhXSÔòò×ƒÉ´×Ý ƒ ¢˜Ýò…òòŽòÚÚ3Ú ÚóŽóó…óÝÝ× ×óóÝ‚ÿÿÿv-€reqÝÔ€PX»(XhPX»(ÔÔ€PX»(XhPX»(ÔÔÔóóÝÝ,€and€the€implementing€regulations€of€the€Department€ofÐ —!d ÐLabor€at€29€Ô_ÔCFRÔ_Ô€Part€5.€€In€addition€to€the€requirements€of€the€statute€and€regulations,€theÐ ƒ"P ÐRecipient€also€agrees€to€report€to€the€FTA€every€suspected€or€reported€violation€of€theÐ o#< ÐDavis-Bacon€Act€or€its€Federal€implementing€Regulations.Ð [$(! ÐÐ.$"G%" .ÐÐ C&" ÐòòDISCUSSIONóóÐ 3 ÐòòÌThe€Davis-Bacon€Act€(the€Act)€provides€that€contracts€in€excess€of€$2,000€to€which€theÐ Ø ÐUnited€States€is€a€party€(i.e.,€federal€funds€are€involved)€for€construction,€alteration,€orÐ ÷ Ä Ðrepair€(including€painting€and€decorating)€of€public€buildings€or€public€works€within€theÐ ã ° ÐUnited€States€shall€contain€a€clause€that€no€laborer€or€mechanic€employed€directly€uponÐ Ïœ Ðthe€site€of€the€work€shall€receive€less€than€the€prevailing€wage€rates€as€determined€by€theÐ »ˆ ÐSecretary€of€Labor.€òòÝ‚ÿÿÿÝÔ€PX»(XXPX»(ÔÔ€XSXXPX»(ÔÔÔòòÝÝÔ€PX»(XhXSÔóó×ƒÌ×Ý ƒ ¢˜Ýò…òòŽòÚÚ4Ú ÚóŽóó…óÝÝ× ×óóÝ‚ÿÿÿ3EÓÝÔ€PX»(XhPX»(ÔÔ€PX»(XhPX»(ÔÔÔóóÝÝòò€€The€clause€mandated€by€the€Act€and€its€implementing€federalÐ § t Ðregulations€is€found€in€Appendix€A.1€of€the€Manual.€€The€purpose€of€this€section€in€theÐ “` ÐManual€is€to€discuss€the€practical€issues€surrounding€the€requirements€of€the€Act€and€theÐ L Ðregulations€implementing€it.óóÐ k8 ÐòòÌBest€PracticesÐ C ÐóóÌòòFederal€Wage€Determinationsóó€-€€€When€a€construction€project€is€being€performed€with€federalÐ è Ðfunds,€laborers€and€mechanics€employed€directly€upon€the€site€of€the€work€shall€be€paid€aÐ Ô Ðminimum€wage€which€is€determined€by€the€Secretary€of€Labor.€€That€rate€of€pay€is€referred€to€asÐ óÀ Ðthe€"Davis-Bacon€wage€rate"€and€is€specifically€identified€in€the€contract€between€the€RecipientÐ ß¬ Ðand€the€Contractor.€Ð Ë˜ ÐÌòòTypes€of€Wage€Determinationsóó€„€Federal€wage€determinations€are€of€two€types:€(a)€GeneralÐ £p ÐWage€Determinations€and€(b)€Project€Wage€Determinations.€€òòGeneral€wage€determinationsóóÐ \ Ðcontain€prevailing€wage€rates€for€the€types€of€construction€designated€in€the€determination,€andÐ {H Ðthey€are€used€in€contracts€performed€within€a€specified€geographical€area.€€They€contain€noÐ g4 Ðexpiration€date€and€remain€valid€until€modified,€superseded,€or€canceled€by€a€notice€in€theÐ S ÐFederal€Register€by€the€Department€of€Labor.€€These€determinations€should€be€used€wheneverÐ ? Ðpossible.€Ð +ø ÐÌòòProject€wage€determinationsóó€are€issued€at€the€specific€request€of€the€grantee.€€They€are€used€onlyÐ !Ð Ðwhen€no€general€wage€determination€applies€and€they€are€effective€for€180€days€from€the€date€ofÐ ï!¼ Ðthe€determination.Ð Û"¨ ÐÌIt€is€the€obligation€of€the€contracting€officer€to€ensure€that€a€copy€of€the€most€current€wageÐ ³$€ Ðdetermination€of€the€Department€of€Labor€(DOL)€is€actually€included€in€the€solicitation€andÐ Ÿ%l! Ðensuing€contract.€€The€Wage€and€Hour€Division€of€the€DOL€is€responsible€for€the€publication€ofÐ ‹&X" Ðwage€determinations.€€Such€determinations€are€numbered,€dated,€and€issued€as€different€rateÐ w'D # Ðschedules,€depending€upon€the€type€of€construction€involved€(building,€residential,€highway,€orÐ c(0!$ Ðheavy€construction).€òòÝ‚ÿÿÿÝÔ€PX»(XXPX»(ÔÔ€XSXXPX»(ÔÔÔòòÝÝÔ€PX»(XhXSÔ×ƒÏT×Ý ƒ ¢˜Ýò…òòŽòÚÚ5Ú ÚóŽóó…óÝÝ× ×óóÝ‚ÿÿÿ(>actuÝÔ€PX»(XhPX»(ÔÔ€PX»(XhPX»(ÔÔÔóóÝÝ€€Ð O)"% Ðâ âòòÐ ;*#& ÐState€Wage€Determinations€on€Federally€Funded€Projectsóó€„€Your€state€may€also€prescribeÐ 3 Ðâ âminimum€wages€and€benefits€for€public€works€projects.òò€If€your€state€has€established€€prevailingÐ ì Ðwages€that€are€higher€than€Davis€Bacon€Act€rates,€you€should€get€advice€of€counsel€to€determineÐ Ø Ðwhether€or€not€the€state€law€or€Davis€Bacon€Act€rate€prevails,€however€in€no€event€can€rates€beÐ ÷ Ä Ðlower€than€Davis€Bacon€Act€rates.€òòóóÐ ã ° ÐÌWhere€to€Obtain€Wage€Determinationsóó€-€€General€wage€determinations€may€be€found€in€theÐ »ˆ ÐGovernment€Printing€Office€document€entitled€òòGeneral€Wage€Determinations€Issued€Under€TheÐ § t ÐDavis-Bacon€and€Related€Acts.€€óóÐ “` ÐÌSubscriptions€to€this€information€are€available€electronically€òòÝ‚ÿÿÿÝÔ€PX»(XXPX»(ÔÔ€XSXXPX»(ÔÔÔòòÝÝÔ€PX»(XhXSÔ×ƒÒ×Ý ƒ ¢˜Ýò…òòŽòÚÚ6Ú ÚóŽóó…óÝÝ× ×óóÝ‚ÿÿÿ*Ce€moÝÔ€PX»(XhPX»(ÔÔ€PX»(XhPX»(ÔÔÔóóÝÝ€and€by€hard-copy.€×ƒÕ ×Ý ƒ ¢˜ÝòòòòÚÚ7Ú ÚóóóóÝÝ× ×€€The€decisionsÐ k8 Ðare€included€in€six€different€volumes,€arranged€by€state.€€If€ordering€a€hard-copy€subscription,Ð W$ Ðonly€get€the€volume€that€includes€your€state.€€An€annual€edition€is€published€in€January€orÐ C ÐFebruary€of€each€year€and€then€updated€weekly€throughout€the€year€as€part€of€the€loose-leafÐ /ü Ðservice.Ð è ÐÌThis€publication€is€available€at€each€of€the€50€Regional€Government€Depository€Libraries€andÐ óÀ Ðmany€of€the€Government€Depository€Libraries€across€the€country.€€In€large€metropolitan€areas,Ð ß¬ Ðthis€document€may€also€be€available€in€a€central€public€library€as€well€as€through€local€offices€ofÐ Ë˜ Ðyour€state's€department€of€transportation.€€In€addition,€The€Davis€Bacon€Act€wage€rates€can€beÐ ·„ Ðaccessed€on€the€Internet€at€http://159.185.2:80/wagerate.€€This€site€is€maintained€by€the€GeneralÐ £p ÐServices€Administration€(GSA).Ð \ ÐÌIf€you€are€involved€in€a€project€that€will€involve€the€issuance€of€multiple€construction-relatedÐ g4 Ðsolicitations€over€an€extended€period€of€time,€you€may€want€your€own€copy€of€this€document.€Ð S ÐThis€is€not€only€for€convenience€but€also€ensures€that€your€solicitations€and€contracts€contain€theÐ ? Ðmost€up-to-date€determinations.€òòÝ‚ÿÿÿÝÔ€PX»(XXPX»(ÔÔ€XSXXPX»(ÔÔÔòòÝÝÔ€PX»(XhXSÔ×ƒØð×Ý ƒ ¢˜Ýò…òòŽòÚÚ8Ú ÚóŽóó…óÝÝ× ×óóÝ‚ÿÿÿJe€moÝÔ€PX»(XhPX»(ÔÔ€PX»(XhPX»(ÔÔÔóóÝÝ€€Ð +ø ÐÌòòRequesting€a€Wage€Determinationóó€-€As€you€start€a€project€involving€construction,€one€of€the€bestÐ !Ð Ðpersonal€contacts€you€can€make€is€with€the€local€DOL€representative€who€will€be€monitoringÐ ï!¼ Ðyour€contract€for€compliance€with€the€Davis-Bacon€minimum€wage€requirements.€€If€a€generalÐ Û"¨ Ðwage€determination€is€available€for€your€area,€you€may€use€it€without€notifying€the€DepartmentÐ Ç#” Ðof€Labor.€€If€a€general€determination€is€not€available€for€your€area,€you€can€work€with€your€local€Ð ³$€ ÐDOL€representative€in€requesting€either€a€general€wage€determination€or€a€project€determination.òòÝ‚ÿÿÿÝÔ€PX»(XXPX»(ÔÔ€XSXXPX»(ÔÔÔòòÝÝÔ€PX»(XhXSÔ×ƒÛ×Ý ƒ ¢˜Ýò…òòŽòÚÚ9Ú ÚóŽóó…óÝÝ× ×óóÝ‚ÿÿÿ›Ne€moÝÔ€PX»(XhPX»(ÔÔ€PX»(XhPX»(ÔÔÔóóÝÝ€Ð 3 ÐDo€not€hesitate€to€utilize€the€services€of€a€project's€design€services€professional€to€assist€inÐ ì Ðobtaining€information€about€the€latest€wage€determinations.€€In€all€likelihood,€that€firm€will€knowÐ Ø Ðprecisely€what€the€requirements€are€and€who€to€contact€at€the€DOL.€€Ð ÷ Ä ÐÌBecause€the€process€to€make€a€determination€takes€at€least€45€days,€it€is€important€to€know€earlyÐ Ïœ Ðin€the€project€whether€or€not€a€determination€is€available€for€your€area.€The€request€to€have€aÐ »ˆ Ðdetermination€made€needs€to€be€submitted€to€the€DOL€45€to€60€days€before€the€solicitation€is€toÐ § t Ðbe€issued.Ð “` ÐòòÌWage€Determinations€and€Your€Solicitation/Contractóó€-€The€clause€and€regulations€require€thatÐ k8 Ðthe€wage€determination€be€physically€attached€to€the€solicitation.€€The€wage€determination€cannotÐ W$ Ðbe€incorporated€by€reference.€€If€the€solicitation€is€issued€without€a€wage€determination€included,Ð C Ðbids€may€not€be€opened€until€a€reasonable€time€after€the€wage€determination€has€been€furnishedÐ /ü Ðto€all€bidders€and€incorporated€into€the€solicitation€by€amendment.€€Ð è ÐÌòòWhat€if€the€wage€determination€expires€before€award?€€óóIt€should€be€noted€that€òògeneral€wageÐ óÀ Ðdeterminationsóó€never€expire€and€remain€valid€until€modified,€superseded€or€canceled€by€DOL.€Ð ã° ÐButòò€project€wage€determinationsóó€do€expire.€€In€the€event€that€your€project€wage€determinationÐ Ïœ Ðexpires€or€your€general€wage€determination€is€superseded€by€a€new€determination€òò€before€bidsóóÐ »ˆ Ðòòare€receivedóó,€you€must€request€a€new€project€determination€(if€using€a€project€wageÐ §t Ðdetermination)€and€incorporate€the€new€rates€in€a€solicitation€amendment€in€sufficient€time€forÐ “` Ðbidders€to€amend€their€bids.€€If€the€new€determination€does€not€change€the€wage€rates€and€wouldÐ L Ðnot€cause€bidders€to€change€their€bid€prices,€you€should€amend€the€solicitation€to€include€theÐ k8 Ðnumber€and€date€of€the€new€determination.Ð W$ ÐÌòòIf€the€wage€determination€expires€after€bid€receipt€but€prior€to€awardóó,€you€should€request€anÐ /ü Ðextension€of€the€determination€from€DOL's€Wage€and€Hour€Division.€€If€necessary,€award€of€theÐ è Ðcontract€should€be€delayed€until€the€request€for€extension€has€been€granted€or€a€new€wageÐ !Ô Ðdetermination€has€been€issued.€€If€the€request€for€extension€is€denied€and€a€new€wageÐ ó!À Ðdetermination€issued€that€changes€the€wage€rates€for€classifications€to€be€used€in€the€contract,€theÐ ß"¬ Ðcontracting€officer€may€either€cancel€the€solicitation€and€re-advertise€with€the€appropriateÐ Ë#˜ Ðdetermination€or€award€the€contract€and€incorporate€the€new€determination€effective€on€the€dateÐ ·$„ Ðof€contract€award.€òòÝ‚ÿÿÿÝÔ€PX»(XXPX»(ÔÔ€XSXXPX»(ÔÔÔòòÝÝÔ€PX»(XhXSÔ×ƒß×Ý ƒ ¢˜Ýò…òòŽòÚÚ10Ú ÚóŽóó…óÝÝ× ×óóÝ‚ÿÿÿ\€€ThÝÔ€PX»(XhPX»(ÔÔ€PX»(XhPX»(ÔÔÔóóÝÝ€€If€the€new€wage€determination€did€not€change€any€wage€rate,€the€Ð £%p! Ðcontracting€officer€should€award€the€contract€and€modify€it€to€include€the€number€and€date€of€theÐ 3 Ðnew€determination.€òòÝ‚ÿÿÿÝÔ€PX»(XXPX»(ÔÔ€XSXXPX»(ÔÔÔòòÝÝÔ€PX»(XhXSÔ×ƒä×Ý ƒ ¢˜Ýò…òòŽòÚÚ11Ú ÚóŽóó…óÝÝ× ×óóÝ‚ÿÿÿ\^modiÝÔ€PX»(XhPX»(ÔÔ€PX»(XhPX»(ÔÔÔóóÝÝÐ ì ÐÌòòWhat€if€the€wage€determination€is€modified€before€award?óó€€òòIf€the€wage€determination€isÐ ÷ Ä Ðmodified€(as€opposed€to€expires)€before€bids€are€receivedóó,€whether€or€not€it€must€be€included€inÐ ç ´ Ðthe€solicitation€is€determined€by€the€time€of€receipt€of€the€modification€by€the€contracting€agencyÐ Ó Ðor€the€time€of€its€publication€in€theòò€Federal€Registeróó.€€The€modification€is€effective€and€must€beÐ ¿Œ Ðincluded€in€the€solicitation€if€€(a)€€it€is€received€by€the€contracting€agency,€or€notice€of€theÐ « x Ðmodification€is€published€in€the€òòFederal€Registeróó,€10€or€more€calendar€days€before€the€date€of€Ð —d Ðbid€opening€or€(b)it€is€received€by€the€contracting€agency€or€notice€of€the€modification€isÐ ƒP Ðpublished€in€the€òòFederal€Registeróó,€less€than€10€days€before€bids€are€due€to€be€opened€unless€theÐ o< Ðcontracting€officer€finds€that€there€is€not€reasonable€time€to€notify€bidders€of€the€modification.€Ð [( ÐÌòòIf€the€modification€is€received€(or€notification€of€the€modification€published€in€the€FederalÐ 3 ÐRegister)€after€bid€opening,óó€it€is€not€effective€and€shall€not€be€included€in€the€solicitation.òòÝ‚ÿÿÿÝÔ€PX»(XXPX»(ÔÔ€XSXXPX»(ÔÔÔòòÝÝÔ€PX»(XhXSÔ×ƒçT×Ý ƒ ¢˜Ýò…òòŽòÚÚ12Ú ÚóŽóó…óÝÝ× ×óóÝ‚ÿÿÿÞdmodiÝÔ€PX»(XhPX»(ÔÔ€PX»(XhPX»(ÔÔÔóóÝÝ€€Ð ì ÐYou€may€have€a€situation€where€an€"effective€modification"€(i.e.,€received€by€the€contractingÐ Ø Ðagency€or€published€in€the€òòFederal€Registeróó€10€days€prior€to€the€bid€opening€date)€is€received€byÐ ÷Ä Ðthe€contracting€officer€at€some€time€later€than€it€was€received€by€the€contracting€agency.€€In€thisÐ ã° Ðcase,€if€the€"effective€modification"€is€€received€by€the€contracting€officer€prior€to€bid€opening,Ð Ïœ Ðthe€bid€opening€date€shall€be€postponed€to€allow€a€reasonable€time€to€amend€the€solicitation€toÐ »ˆ Ðincorporate€the€modification€and€permit€bidders€to€consider€the€impact€of€the€modification€onÐ §t Ðtheir€bids.€€If€the€modification€is€received€after€bid€opening,€but€prior€to€award,€the€sameÐ “` Ðprocedures€apply€as€in€our€earlier€discussion€about€new€wage€determinations€received€after€bidÐ L Ðopening,€but€prior€to€award.€€If€the€effective€modification€is€not€received€by€the€contractingÐ k8 Ðofficer€until€after€award,€the€contracting€officer€must€modify€the€contract€to€incorporate€the€wageÐ W$ Ðmodification€retroactively€to€the€date€of€contract€award€and€equitably€adjust€the€contract€for€anyÐ C Ðincreased€or€decreased€cost€of€performance€resulting€from€any€changed€wage€modifications.òòÝ‚ÿÿÿÝÔ€PX»(XXPX»(ÔÔ€XSXXPX»(ÔÔÔòòÝÝÔ€PX»(XhXSÔ×ƒïh×Ý ƒ ¢˜Ýò…òòŽòÚÚ13Ú ÚóŽóó…óÝÝ× ×óóÝ‚ÿÿÿ·k€theÝÔ€PX»(XhPX»(ÔÔ€PX»(XhPX»(ÔÔÔóóÝÝÐ /ü ÐÌòòWhat€if€the€Wage€Determination€is€modified€after€award?€€€óóIt€is€recommended€that€granteesÐ !Ô Ðincorporate€language€such€that€contractors€are€obligated€to€pay€prevailing€wages€throughout€theÐ ÷!Ä Ðlife€of€the€project€and€are€not€entitled€to€change€orders€for€increased€costs€associated€with€anyÐ ã"° Ðchange€in€the€prevailing€wage€made€after€award.Ð Ï#œ ÐÌÐ §%t! ÐAs€you€can€see€from€this€discussion,€you€should€not€wait€until€you€are€ready€to€issue€theÐ 3 Ðsolicitation€to€start€checking€on€the€Davis-Bacon€wage€rates€for€your€area€and€it€should€beÐ ì Ðequally€obvious€that€a€good€working€relationship€with€your€local€Department€of€Labor€officials€isÐ Ø Ðvery€important.€€They€generally€are€very€cooperative€and€helpful€in€answering€any€questions€youÐ ÷ Ä Ðmay€have€and€notifying€you€of€impending€changes€or€revisions€to€existing€wage€determinationsÐ ã ° Ðthat€would€impact€your€contract€because€it€is€in€their€best€interests€that€your€project€run€smoothlyÐ Ïœ Ðfrom€a€minimum€wage€standpoint.Ð »ˆ ÐòòÔ€PôN”òXPX»(ÔÌÔ€PX»(XòPôN”ÔContract€Administration€and€the€Davis-Bacon€Actóó€-€€Once€the€contract€is€awarded,€it€is€initiallyÐ k8 Ðthe€responsibility€of€the€contracting€officer€to€ensure€that€the€contractor€comply€with€theÐ W$ Ðprovisions€of€the€contract€clause.€€This€means€ensuring€that€the€appropriate€signs€are€availableÐ C Ðand€posted,€as€well€as€ensuring€that€the€appropriate€payrolls€and€certificates€are€submitted€notÐ /ü Ðless€frequently€than€weekly.€€If€€you€have€a€construction€management€contractor,€you€may€wantÐ è Ðto€assign€that€firm€the€task€of€checking€payrolls€on€a€regular€basis€and€spot„€check€the€pay€ofÐ Ô Ðindividuals€against€the€actual€work€that€they€are€performing.€€The€failure€of€the€contractingÐ óÀ Ðofficer€to€properly€monitor€the€contractors€compliance€with€Davis€Bacon€may€result€in€aÐ ß¬ Ðdetermination€by€DOL€that€your€agency€is€responsible€for€payment€of€the€back€wages.Ð Ë˜ ÐÔ€PôN”òXPX»(ÔÌÔ€PX»(XòPôN”ÔIf€€you€do€not€have€such€a€contractual€relationship€and€your€construction€management€is€doneÐ {H Ð"in-house,"€the€contracting€officer€will€have€responsibility€for€compliance€checks.€€Once€youÐ g4 Ðhave€reviewed€the€payrolls,€they€should€be€retained€unless€requested€by€an€appropriate€FTAÐ S Ðofficial.€€In€your€initial€meeting€with€the€FTA€regional€officials€for€your€project€(or€this€particularÐ ? Ðcontract)€make€sure€it€is€clear€to€whom€the€payrolls€should€be€transmitted.€FTA€may€request€thatÐ +ø Ðyou€hold€them€on-site€or€at€the€agency€for€them€to€review€and€not€actually€transmit€them.€FTAÐ ä Ðmay€also€delegate€the€review€fuÔ_ÔnctionÔ_Ô€to€its€Project€Management€Oversight€contractor.€Ð Ð ÐòòÔ€PôN”òXPX»(ÔÌÔ€PX»(XòPôN”ÔComplaint€Processóó€-€If€DOL€comes€to€the€site€to€investigate€a€complaint€(often€the€way€minimumÐ ³€ Ðwage€discrepancies€are€uncovered),€you€(and€the€contractor)€will€want€to€cooperate€in€thatÐ Ÿl Ðinvestigation.€€If€a€determination€is€made€that€the€contractor€is€not€in€compliance€with€theÐ ‹ X ÐDavis-Bacon€Act€contractual€provisions,€it€is€the€contracting€officer's€responsibility€to€ensure€thatÐ w!D ÐDOL€and€the€FTA€are€informed€of€the€discrepancy.€€If€it€is€determined€that€back€wages€are€owed,Ð c"0 Ðyou€will€receive€written€communication€to€that€effect€from€the€DOL€and€the€FTA€and€you€shouldÐ O# Ðcomply€very€strictly€with€that€direction€--€at€this€point€in€time,€it€is€an€issue€between€theÐ ;$ Ðcontractor€and€the€DOL,€and€the€DOL€regulations€govern€the€reviews€and€appeals€fromÐ '%ô! Ðdeterminations€of€that€type.Ð &à" ÐòòÌòòóó8.1.3€€òòCargo€PreferenceóóÔÿÿÔóóÐ ë'¸ $ ÐÔÿÿÔÓN7ÿÿëøP ¨X°`¸hÀ!$p&È( +ÿÿðø‹XNÓà0ëàÐ ë(#ë(# ÐÔ*_ƒ78ddxjjx&'°(#°(#_ÔÔ,xttÔÔ+ ÔÐ1€Ã)"&Ã)" €€‚‚ƒƒ1ÐÓK4ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿëøXKÓòòREQUIREMENTóóÐ@€-Ó) "' €€‚‚ƒƒ@ÐÓH4ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿÐXHÓÔ€Pd.cXPX»(ÔÌÔ€PX»(XcPd.Ôðð€14.b€of€the€Master€Agreement€sets€forth€the€Grantee's€obligations€to€comply€with€theÐ +Ô#) Ðrequirements€of€the€United€States€Maritime€Administration€regulations€entitled€"CargoÐ ó+À$* ÐPreference€--€U.S.€-Flag€Vessel,"€found€at€46€Ô_ÔCFRÔ_Ô€Part€381.€€Specifically,€the€grantee€isÐ ß,¬%+ Ðobligated€to€incorporate€the€clause€found€at€46€Ô_ÔCFRÔ_Ô€Section€381.7(b)€into€contracts€in€whichÐ Ë-˜&, Ðequipment,€materials,€or€commodities€may€be€transported€by€an€ocean€vessel.€Ð ·.„'- ÐÔ€Pd.cXPX»(ÔÌâ âÐ.$"Ë/˜(/ .ÐÓH4ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿÐXHÓòòÔ€PX»(XcPd.ÔBest€PracticesóóÐ 3 Ðâ âÓH4ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿÐXHÓÌÓH4ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿÐXHÓThe€fourth€model€clause€in€Appendix€A.1€to€this€Manual€contains€a€suggested€clause€thatÐ Ø Ðcomplies€with€the€requirements€of€the€United€States€Maritime€Administration€at€46€Ô_ÔCFRÔ_Ô€SectionÐ ÷ Ä Ð381.7(b),€which€provides€a€suggested€clause€for€use€as€well.€€Ð ã ° ÐÓH4ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿÐXHÓÌÓH4ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿÐXHÓIf€your€contract€contemplates€the€shipment€of€any€equipment,€materials,€or€commodities€by€oceanÐ »ˆ Ðvessel,€a€clause€that€meets€the€requirements€of€46€Ô_ÔCFRÔ_Ô€Part€381€must€be€included€in€the€contract.Ð § t ÐAdditionally,€if€a€subcontractor€at€any€tier€would€be€responsible€for€the€ocean€vessel€shipment,Ð “` Ðthe€clause€would€flow€down€to€that€subcontractor.€€The€clause€in€Appendix€A.1€or€as€found€atÐ L ÐSection€381.7(b)€meets€that€requirement€and€it€is€recommended€that€either€of€these€clauses€beÐ k8 Ðutilized.€€Ð W$ ÐÓH4ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿÐXHÓÌÓH4ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿÐXHÓIf€it€appears€you€have€a€contract€in€which€ocean€vessel€transport€would€be€required,€it€isÐ /ü Ðrecommended€you€check€with€your€legal€counsel€and€ascertain€if€there€are€any€changes€to€the€lawÐ è Ðor€the€clause.€€Questions€about€this€clause€frequently€come€up€in€the€context€of€rail€carÐ Ô ÐÔ_ÔprocurementsÔ_Ô€which,€until€recently,€invariably€required€the€shipment€of€rail€cars€from€overseasÐ óÀ Ðlocations.€€It€is€recommended€that€you€either€be€prepared€to€address€this€requirement,€or€beÐ ß¬ Ðprepared€to€respond€to€any€questions€Ô_ÔofferorsÔ_Ô€may€have€at€any€pre-bid€or€pre-proposalÐ Ë˜ Ðconferences€held€in€conjunction€with€those€Ô_ÔprocurementsÔ_Ô.€€Ð ·„ ÐÓH4ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿÐXHÓà8(àà8€(°"(°"àÓK7ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿÐXKÓà0Ø €X €X àÐ Ø X Ø X ÐòòÓQ4ÿÿøP ¨X°`¸hÀ!$p&È( +ÿÿÐ(€XQÓ8.1.4€€òòBuy€AmericaóóÔÿÿÔóóÐ \ ÐÓH4ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿøXHÓà8(àà8€(°"(°"àÓK7ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿÐXKÓà8Ø €X €X àà00Ø Ø àÔÿÿÔÐ 00 ÐÓQ4ÿÿøP ¨X°`¸hÀ!$p&È( +ÿÿÐ(€XQÓÔ*_ƒ:;ddxttx78°(#°(#_ÔÔ,xttÔÔ+ ÔÐ1€g4g4 €€‚‚ƒƒ1ÐÓH4ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿøXHÓÓ ázÓòòREQUIREMENTóóÐ@€-wD €€‚‚ƒƒ@ÐÓH4ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿÐXHÓÓ ázÓÔ€P–“C–XPX»(ÔÌÔ€PX»(X–P–“CÔðð€14.a€of€the€Master€Agreement€requires€compliance€with€49€U.S.C.€ðð€5323(j)€and€FTA's€BuyÐ ¿Œ ÐAmerica€regulations€found€at€49€Ô_ÔCFRÔ_Ô€Part€661,€as€well€as€implementing€guidance€issued€byÐ «x Ðthe€FTA.€€Ð —d ÐÔ€P–“C–XPX»(ÔÐ3)'ƒ P 3ÐòòÔ€PX»(X–P–“CÔÌDISCUSSIONÐ »!ˆ ÐÌÓH4ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿÐXHÓPlease€see,€òòSection€4.3.3.2.2óó€of€this€Manual€for€a€thorough€discussion€of€the€Buy€AmericaÐ “#` Ðrequirements.€€Please€see€the€Appendix€for€the€required€clauses.óóÐ $L! Ðà(àÌòò8.1.5€€òòFly€AmericaÐ W&$# ÐÌÓH4ÿÿøP ¨X°`¸hÀ!$p&È( +ÿÿÐXHÓóóóóÔ*_ƒCDddxttx:;°(#°(#_ÔÔ,xttÔÔ+ ÔÐ1€/(ü %/(ü €€‚‚ƒƒ1ÐÓH4ÿÿÐ(€Ø 0ˆà8è@˜ðH! #ø%ÿÿøXHÓòòREQUIREMENTóóÐ@€-?(!& €€‚‚ƒƒ@ÐÔ€P–“C–XPX»(ÔÌÔ€PX»(X–P–“CÔðð€14.c€of€the€Master€Agreement€states€that€if€the€contract€or€subcontracts€may€involve€theÐ ‡)T"( Ðinternational€transportation€of€goods,€equipment,€or€personnel€by€air,€the€contract€must€requireÐ s*@#) Ðcontractors€and€subcontractors€at€every€tier€to€use€U.S.-flag€air€carriers,€to€the€extent€serviceÐ _+,$* Ðby€these€carriers€is€available.€€49€U.S.C.€40118€and€4€Ô_ÔCFRÔ_Ô€Part€52.€Ð K,%+ ÐÔ€P–“C–XPX»(ÔÐ.$"7-&, .ÐòòÔ€PX»(X–P–“CÔÌÐ o.<'- ÐDISCUSSIONóóÐ 3 ÐÌòòA€contract€for€goods€or€equipment€must€contain€a€Fly€America€provision€as€discussed€inÐ Ø ÐAppendix€A.1,€just€as€it€contains€a€Cargo€Preference€provision,€if€there€is€reason€to€expectÐ ÷ Ä Ðthat€international€air€travel€would€be€involved.€€Although€there€is€no€Federally€prescribedÐ ã ° Ðlanguage€for€this€provision,€model€language€is€contained€in€Appendix€A.1.€€If€there€is€noÐ Ïœ Ðpossibility€of€international€shipments€or€travel€under€the€contract,€these€provisions€are€notÐ »ˆ Ðrequired.Ð § t ÐÌÓH4ÿÿøP ¨X°`¸hÀ!$p&È( +ÿÿÐXHÓ8.2€SURETY€BONDSóóÐ L ÐÌòòÔ#†XSXXPX»(=#ÔÔ‡BX»(XXXSÔòòHistoryÐ W$ ÐóóÌóóThe€idea€behind€surety€bonding€is€straightforward.€€One€person€guarantees€to€another€that€a€thirdÐ /ü Ðperson€will€perform.€Ð è ÐÌThe€first€corporate€surety€bonding€company€in€the€United€States,€the€Fidelity€InsuranceÐ óÀ ÐCompany,€was€formed€in€1865.€€In€1894,€Congress€passed€the€Heard€Act,€which€required€suretyÐ ß¬ Ðbonds€on€all€federally€funded€projects€as€a€result€of€the€large€number€of€contractors€working€onÐ Ë˜ Ðpublic€projects€who€had€defaulted€and€in€response€to€complains€from€unpaid€suppliers€andÐ ·„ Ðsubcontractors.€The€Miller€Act€(40€U.S.C.€ðð270a€et€seq.)€was€passed€in€1935€to€replace€the€HeardÐ £p ÐAct.€€The€Miller€Act€requires€performance€and€payment€bonds€for€all€public€work€contracts€inÐ \ Ðexcess€of€$100,000€and€payment€protection,€with€payment€bonds€the€preferred€method€forÐ {H Ðcontracts€in€excess€of€$25,000.€Ý‚ÿÿÿÝòòÝÝòòÑÈÑÝ‚ÿÿÿlŸƒyÝóóÝÝ×ƒ÷×Ý ƒ ¢˜ÝòòòŽòÚÚ14Ú ÚóŽóóóÝÝ× ×òòÝ‚ÿÿÿÝò…òÝÝÝ‚ÿÿÿ ƒyÝó…óÝÝóóóó€€Almost€all€states€and€most€local€jurisdictions€have€enactedÐ g4 Ðsimilar€legislation€requiring€surety€bonds€on€public€works.€€These€generally€are€referred€to€asÐ S Ðð ðLittle€Miller€Acts.Ð ? ÐÌToday,€surety€bonds€protect€virtually€every€public€construction€project€in€the€U.S.€€In€1977,Ð ä Ðnearly€$160€billion€in€public€works€projects€were€so€protected€with€surety€bonds.€€From€1990„Ð !Ð Ð1997,€more€than€80,000€contractors€failed,€with€losses€of€$21.8€billion,€according€to€Dun€andÐ ï!¼ ÐBradstreetððs€òòBusiness€Failure€Recordóó.€€From€2001„2003,€surety€companies€incurred€more€thanÐ Û"¨ Ð$1.8€billion€in€losses€from€surety€bonds,€according€to€The€Surety€Association€of€America.Ð Ç#” ÐòòÌÔ&tÔòòTypes€of€Surety€BondsÐ Ÿ%l! ÐóóÌòòóóSurety€Bondóó€„€A€written€agreement€whereby€one€party,€called€the€òòsuretyóó,€obligates€itself€to€aÐ w'D # Ðsecond€party,€called€the€òòÔ_ÔobligeeÔ_Ô€óó(the€owner,€grantee),€to€answer€for€the€default€of€a€third€party,Ð c(0!$ Ðcalled€the€òòprincipalóó€or€òòÔ_ÔobligorÔ_Ôóó.€€Surety€bonds€used€in€construction€are€called€òòcontract€suretyÐ O)"% Ðbondsóó.€€There€are€three€primary€types€of€contract€surety€bonds:€òòbid€bondsóó,€òòperformance€bonds,óóÐ ;*#& Ðand€òòpayment€bondsóó.€Ô't·(›£ÔÐ '+ô#' ÐòòÐ ,à$( ÐòòóóBid€Bond€(or€Bid€Guarantee)òòóó€ð!ð€óóA€promise€from€a€surety€(or€a€certified€or€cashierððs€check€givenÐ 3 Ðby€a€bidder)€for€a€supply€or€construction€contract€to€guarantee€that€the€bidder,€if€awarded€theÐ ì Ðcontract€within€the€time€stipulated,€will€enter€into€the€contract€at€the€price€bid€and€furnish€theÐ Ø Ðprescribedòò€óóperformance€and/or€payment€bond.€€Default€ordinarily€will€result€in€liability€to€theÐ ÷ Ä ÐÔ_ÔobligeeÔ_Ô€for€the€difference€between€the€amount€of€the€principalððs€bid€and€the€bid€of€the€next€lowÐ ã ° Ðbidder€who€can€qualify€for€the€contract.€€The€liability€of€the€surety€is€limited€to€the€bid€bondÐ Ïœ Ðpenalty.€€Contractors€that€have€a€relationship€with€a€surety€can€normally€obtain€bid€bonds€at€noÐ »ˆ Ðcost.€€Bid€bonds€are€not€usually€appropriate€for€negotiated€Ô_ÔprocurementsÔ_Ô€due€to€the€nature€of€theÐ § t Ðprocess.Ð “` ÐÌòòPerformance€Bondóó€-€A€promise€from€a€bonding€company€("the€surety")€to€perform€(or€cause€to€beÐ k8 Ðperformed)€those€obligations€of€the€contractor€€("the€principal"),€when€the€contractor€fails€toÐ W$ Ðperform€its€obligations,€in€an€amount€up€to€but€not€exceeding€the€amount€of€the€bond€("penalÐ C Ðsum").€€Performance€bonds€can€incorporate€payment€bond€(labor€and€materials)€and€maintenanceÐ /ü Ðbond€liability€(see€below).€A€performance€bond€protects€the€owner€(grantee)€from€financial€lossÐ è Ðshould€the€contractor€fail€to€perform€the€contract€in€accordance€with€its€terms€and€conditions.Ð Ô ÐOnce€a€surety€bond€is€issued,€it€cannot€be€withdrawn€or€cancelled.€€€General€contractors€may€alsoÐ óÀ Ðact€as€the€Ô_ÔobligeeÔ_Ô€when€bonding€subcontractors.€€General€contractors€may€require€subcontractorÐ ß¬ Ðbonds€if€the€subcontractor€is€a€significant€part€of€the€job€or€a€specialized€contractor€that€isÐ Ë˜ Ðdifficult€to€replace.Ð ·„ ÐÌòòPayment€Bondóó€-€A€promise€from€a€surety€that€guarantees€payment€to€certain€subcontractors,Ð \ Ðlaborers€and€suppliers€for€the€labor€and€materials€used€in€the€work€performed€under€the€contract.€Ð {H ÐPayment€bonds€are€also€called€òòlabor€and€material€bondsóó.€€These€bonds€protect€laborers€andÐ g4 Ðsuppliers€in€the€event€the€contractor€fails€to€pay€them.€The€suretyððs€obligation€is€limited€by€theÐ S Ðamount€of€the€bond.Ð ? ÐÌòòMaintenance€Bondóó€„€A€maintenance€bond€normally€guarantees€against€defective€workmanship€orÐ ä Ðmaterials.€€However,€maintenance€bonds€occasionally€may€incorporate€an€obligationÐ !Ð Ðguaranteeing€ð ðefficient€or€successful€operationðð€or€other€obligations€of€like€intent€and€purpose.€Ð ï!¼ ÐÌIt€is€important€to€note€that€surety€bonds€are€not€intended€to€protect€the€contractors€that€post€them.€Ð Ç#” ÐThese€bonds€are€for€the€protection€of€the€owner€of€the€construction€project€and€for€the€protectionÐ ³$€ Ðof€laborers,€material€suppliers€and€subcontractors.€€Since€mechanicððs€liens€cannot€be€placedÐ Ÿ%l! Ðagainst€public€property,€the€payment€bond€may€be€the€only€protection€these€claimants€have€ifÐ ‹&X" Ðthey€are€not€paid€for€the€goods€and€services€they€provide€to€the€project.€€Under€normalÐ w'D # Ðcircumstances,€sureties€do€not€charge€a€separate€premium€for€Payment€Bonds.Ð c(0!$ ÐòòÌÔ&œÔòòGeneral€Indemnity€AgreementÐ ;*#& ÐóóóóÌWhen€a€surety€guarantees€the€performance€of€a€firm€(the€principal),€the€principal€remains€liableÐ ,à$( Ðfor€this€obligation€to€the€surety€in€the€event€of€a€contract€default€by€the€principal.€€The€principal€isÐ ÿ,Ì%) Ðobligated€to€reimburse€the€surety€for€whatever€sums€the€surety€is€required€to€pay€out€to€complete€Ô'œ;*õ´ÔÐ ë-¸&* Ðthe€principalððs€contract.€€Many€contracting€firms€do€not€have€the€capital€to€assure€this€repayment,Ð 3 Ðand€so€most€surety€companies€require€a€general€agreement€of€indemnity€(GAI)€to€be€signed€notÐ ì Ðonly€by€the€firm,€but€by€individuals€willing€to€support€the€firm.€€This€might€be€the€owner€of€theÐ Ø Ðfirm,€the€spouse€of€the€owner,€a€parent€corporation€or€other€individuals€willing€to€risk€their€assetsÐ ÷ Ä Ðfor€the€firm.Ð ã ° ÐÌÔ&°ÔòòòòPublic€Vs.€Private€SectorsÐ »ˆ ÐóóóóÌPerformance€bonding€is€not€typical€in€large€private€sector€contracts€but€is€required€in€the€publicÐ “` Ðsector.€€Public€construction€contract€performance€bonding€is€more€common€because:Ô'°»¶¸ÔÐ L ÐÌÓ€ A_)*+-9<EF(ÜypH_)*+-9<EFÓÝ"‚_´J"ÝÝÝÓXÓÝ‚_´JpºÝÔ2ÜÔððÔ3 Ôà0øàÝÝThe€public€interest€is€served€by€the€surety€industryððs€protection€of€taxpayer€dollarsÐ W$ Ðexpended€for€public€sector€projects;Ýƒ_´Jpº«ºÝŒÐCø(#ø(# ÐŒÝ ÝÌÝ"‚_´J"ÝÝÝÝ‚_´JÆ»ÝÔ2ÜÔððÔ3 Ôà0øàÝÝthe€public€sector€undertakes€large,€fixed€price€public€works€projects;Ýƒ_´JÆ»ó»ÝŒÐèø(#ø(# ÐŒÝ ÝÌÝ"‚_´J"ÝÝÝÝ‚_´JÃ¼ÝÔ2ÜÔððÔ3 Ôà0øàÝÝunforeseen€costs€could€easily€bankrupt€a€construction€contractor€that€is€a€pure€serviceÐ óÀ Ðorganization€with€few€assets;Ýƒ_´JÃ¼ð¼ÝŒÐß¬ø(#ø(# ÐŒÝ Ý€ÌÝ"‚_´J"ÝÝÝÝ‚_´J¾ÝÔ2ÜÔððÔ3 Ôà0øàÝÝpublic€agencies€accept€the€lowest€responsive€bid€from€a€responsible€bidder€without€anÐ ·„ Ðopportunity€to€fully€consider€and€adjust€the€contracting€strategy€and€terms€to€theÐ £p Ðapparent€low€bidder;€andÝƒ_´J¾1¾ÝŒÐ\ø(#ø(# ÐŒÝ Ý€ÌÝ"‚_´J"ÝÝÝÝ‚_´J¥¿ÝÔ2ÜÔððÔ3 Ôà0øàÝÝif€a€contractor€is€unable€to€perform,€(e.g.€because€it€is€having€difficulty€obtaining€fundsÐ g4 Ðto€pay€suppliers€and€employees)€and€if€the€work€is€slowed€down€and€ultimately€turnedÐ S Ðover€to€other€forces€to€complete,€the€cost€to€the€public€agency€of€mobilizing€theÐ ? Ðsubstitute€forces€and€picking€up€each€of€the€work€tasks€where€the€failed€contractor€leftÐ +ø Ðthem€is€higher€than€in€a€typical€supply€contract€where€there€are€usually€a€number€ofÐ ä Ðsuppliers€offering€the€product€at€competitively€established€market€prices.Ýƒ_´J¥¿Ò¿ÝŒÐ!Ðø(#ø(# ÐŒÝ Ýà0øàÐ ø(#ø(# ÐÓXÓÓK7°hÀ°pÈ xÐÀpÈ xÐ (#ÿÿøXKÓPayment€Bonds€have€a€related€but€secondary€purpose.€€Usually€in€the€public€sector,€a€contractor'sÐ Û"¨ Ðsuppliers€cannot€place€liens€on€the€material€and€work€supplied€when€payment€to€theÐ Ç#” Ðsubcontractor€is€overdue.€€States€often€protect€public€property€and€services€by€exempting€publicÐ ³$€ Ðworks€from€Ô_ÔmaterialmenÔ_Ô's€liens.€€Therefore,€although€performance€bonds€alone€would€oftenÐ Ÿ%l! Ðguarantee€payment€to€subcontractors,€additional€payment€bonds€are€often€required€in€constructionÐ ‹&X" Ðcontracts€to€assure€there€are€no€disputes€over€potential€performance€bond€liability€to€satisfyÐ w'D # Ðsecond€and€third€tier€subcontractor€claims.Ð c(0!$ ÐÌÓT.°°` ¸hÀpÈ xÐ (#°hÀ°…XÀ†X(#TÓòòòòÔ_ÔPrequalificationÔ_Ô€of€ContractorsÐ ;*#& ÐóóóóÌMost€surety€companies€are€subsidiaries€or€divisions€of€insurance€companies,€and€both€suretyÐ ,à$( Ðbonds€and€traditional€insurance€policies€are€risk€transfer€mechanisms€regulated€by€state€insuranceÐ ÿ,Ì%) Ðdepartments.€€However,€traditional€insurance€is€designed€to€compensate€the€insured€againstÐ ë-¸&* Ðunforeseen€adverse€events.€€The€policy€premium€is€actuarially€determined€based€on€aggregateÐ ×.¤'+ Ðpremiums€earned€versus€expected€losses.€€Surety€companies€operate€on€a€different€business€Ð Ã/(, ÐÑÈÑmodel.€€òòThe€surety€Ô_ÔprequalifiesÔ_Ô€the€contractor€based€on€financial€strength€and€constructionÐ 3 Ðexpertiseóó.€€Since€the€bond€is€underwritten€with€little€expectation€of€loss,€the€premium€is€primarilyÐ ì Ða€fee€for€Ô_ÔprequalificationÔ_Ô€services€and€the€allocation€of€the€suretyððs€capital€to€protect€the€Ô_ÔobligeeÔ_ÔÐ Ø Ðagainst€the€possibility€of€loss.€Ð ÷ Ä ÐÌAlthough€the€bonding€companies€perform€this€Ô_ÔprequalificationÔ_Ô€for€their€own€purposes€and€theirÐ Ïœ Ðinterests€are€similar€to€those€of€the€transit€agency,€the€transit€agency€is€still€required€to€reviewÐ »ˆ Ðpotential€contractorsðð€responsibility€before€award.€€While€surety€bonds€are€a€necessary€conditionÐ § t Ðin€the€determination€of€responsibility,€they€alone€are€not€sufficient.€€Ô_ÔPrequalificationÔ_Ô€ofÐ “` Ðcontractors€is€the€primary€focus€of€surety€underwriters.€€Surety€bond€underwriters€must€analyzeÐ L Ðapplicants€closely€since€they€are€committing€the€assets€of€their€companies€to€guarantee€theÐ k8 Ðcontractorððs€performance€and€payment€of€its€suppliers.€€Underwriters€must€be€certain€that€onlyÐ W$ Ðthose€contractors€who€can€complete€a€project€receive€a€bond,€and€they€must€be€fully€satisfied€thatÐ C Ðthe€contractorððs€business€is€well„managed€and€profitable.€€Ô_ÔPrequalificationÔ_Ô€is€one€of€the€mostÐ /ü Ðvaluable€services€of€the€surety€bond€process.€The€process€involves€underwriters€satisfyingÐ è Ðthemselves€that€the€contractor€has:€Ð Ô ÐÌÝ"‚_´J"ÝÝÝÓ-°°‚,¸‰X(#°°ŒX(#-ÓÓXÓÝ‚_´J]ÐÝÔ2ÜÔððÔ3 Ôà04àÝÝGood€references€and€reputation;Ýƒ_´J]ÐÅÐÝŒÐß¬4(#4(# ÐŒÝ ÝÝ"‚_´J"ÝÝÝÝ‚_´JmÑÝÔ2ÜÔððÔ3 Ôà04àÝÝA€track€record€of€successful€operations€in€the€past€and€the€ability€to€meet€current€andÐ Ë˜ Ðfuture€obligations;Ýƒ_´JmÑšÑÝŒÐ·„4(#4(# ÐŒÝ ÝÝ"‚_´J"ÝÝÝÝ‚_´J¢ÒÝÔ2ÜÔððÔ3 Ôà04àÝÝExperience€matching€the€contract€requirements;Ýƒ_´J¢ÒÏÒÝŒÐ£p4(#4(# ÐŒÝ ÝÝ"‚_´J"ÝÝÝÝ‚_´J†ÓÝÔ2ÜÔððÔ3 Ôà04àÝÝThe€necessary€equipment€to€do€the€work€or€the€ability€to€obtain€it;Ýƒ_´J†Ó³ÓÝŒÐ\4(#4(# ÐŒÝ ÝÝ"‚_´J "ÝÝÝÝ‚_´JÔÝÔ2ÜÔððÔ3 Ôà04àÝÝThe€financial€strength€to€support€the€desired€work€program;Ýƒ_´JÔ¬ÔÝŒÐ{H4(#4(# ÐŒÝ ÝÝ"‚_´J "ÝÝÝÝ‚_´JpÕÝÔ2ÜÔððÔ3 Ôà04àÝÝAn€excellent€credit€history,€and€an€established€bank€relationship€and€line€of€credit.€€Ýƒ_´JpÕÕÝŒÐg44(#4(# ÐŒÝ ÝÓX·ÐÓÓ1 °°ŒX(#°°‚,¸‰X(#ŠÐ1ÓÌSurety€bonds€are€obtained€through€insurance€agents€and€brokers,€called€òòproducers.€€óóTheseÐ ? Ðproducers€help€their€contractor€clients€during€the€Ô_ÔprequalificationÔ_Ô€process€and€assist€them€inÐ +ø Ðdeveloping€a€business€relationship€with€the€surety€bond€company.€Ý‚ÿÿÿÝòòÝÝòòÝ‚ÿÿÿØnd€tÝóóÝÝ×ƒý×Ý ƒ ¢˜ÝòòòŽòÚÚ15Ú ÚóŽóóóÝÝ× ×òòÝ‚ÿÿÿÝò…òÝÝÝ‚ÿÿÿ¬Ønd€tÝó…óÝÝóóóó€Ð ä ÐÌÔ&L ÔòòòòSurety€Bonds€Versus€Bank€Letters€of€CreditÐ ï!¼ ÐÌÓE.°°` ¸hÀpÈ xÐ (#°°ŒX(#EÓóóóóBank€letters€of€credit€are€discussed€below€for€consideration€under€ð ðBest€Practicesðð€in€the€contextÐ Ç#” Ðof€non„construction€contracts.€€At€first€glance€it€may€appear€that€letters€of€credit€and€surety€bondsÐ ³$€ Ðoffer€the€same€degree€of€financial€protection.€€However,€a€more€thorough€review€reveals€thatÐ Ÿ%l! Ðsurety€bonds€provide€greater€benefits€to€both€the€grantee€(Ô_ÔobligeeÔ_Ô)€and€the€contractor€Ð ‹&X" Ð(principal).€Ý‚ÿÿÿÝòòÝÝòòÝ‚ÿÿÿ«Ûnd€tÝóóÝÝ×ƒT×Ý ƒ ¢˜ÝòòòŽòÚÚ16Ú ÚóŽóóóÝÝ× ×òòÝ‚ÿÿÿÝò…òÝÝÝ‚ÿÿÿOÜnd€tÝó…óÝÝóóóó€Ô'L C$ ÙÔÐ w'D # ÐÐ c(0!$ ÐÔ*lƒKkddxttxCD°(#°(#lÔÔ,<dd ÔÔ,<dd ÔÔ+ ÔÐ$33 €€……$ÐòòA€ComparisonóóÐ—d ÐòòÔ#†XSXXBX»(T›#ÔÔ‡QXSXXXSÔBank€Letters€of€CreditÐ ä ÐóóòòòòÔ€Q,úÉ,XQXSÔÌÔ€QXSX,Q,úÉÔÔ_ÔPrequalificationÔ_Ô€Servicesóó:Ð y F ÐòˆòóˆóóóÌThe€underwriting€bank€focuses€primarily€onÐ Q Ðthe€quality€and€liquidity€of€the€underlyingÐ = Ðcollateral;€i.e.,€on€the€ability€of€the€contractorÐ )ö Ðto€repay€any€draws€on€the€LOCÔ#†XSXXQXSüÝ#ÔÔ‡BX»(XXXSÔ.Ð â ÐòòSurety€BondsÐ ä ÐÌóóÌThe€essence€of€surety€underwriting€isÐ Û¨ ÐÔ_ÔprequalificationÔ_Ô.€€The€surety€examines€theÐ Ç” Ðcontractorððs€entire€business€operation,Ð ³ € Ðchecking€for€adequate€finances,€necessaryÐ Ÿl Ðexperience,€organization,€existing€work„€loadÐ ‹X Ðand€its€profitability,€and€management€skills€toÐ wD Ðsuccessfully€complete€the€project€for€whichÐ c0 Ðthe€bond€is€required.€Ð O ÐòòòòClaims€„€Access€to€Fundsóó:óóÐ Ïœ ÐÌThe€beneficiary€must€make€a€demand€prior€toÐ §t Ðexpiration€date.€€No€funds€are€available€afterÐ “` Ðexpiration€date,€even€for€liabilities€incurredÐ L Ðprior€to€expiration.€€The€bank€has€€€noÐ k8 Ðobligation€to€complete€the€project.Ð W$ ÐÌÌÌÌÌÌÌÌThere€is€no€completion€clause€in€a€LOC.€€TheÐ £!p$ Ðtask€of€administering€completion€of€theÐ "\% Ðcontract€is€left€to€the€owner.€€The€owner€mustÐ {#H& Ðevaluate€work€done,€develop€detailedÐ g$4' Ðspecifications€for€completion€of€the€work€andÐ S% ( Ðsolicit€bids€or€negotiate€(depending€on€stateÐ ?&) Ðlaw)€for€a€new€contractor€to€complete€theÐ +'ø* Ðwork.€€Under€a€performance€bond,€these€tasksÐ (ä + Ðare€the€responsibility€of€the€surety.€€Ð )Ð!, ÐÌÌThe€owner€must€determine€the€validity€ofÐ Ç+”$/ Ðclaims€by€subcontractors,€laborers,€andÐ ³,€%0 Ðmaterial€suppliers.€€If€there€is€not€enoughÐ Ÿ-l&1 Ðmoney€from€the€letter€of€credit€to€pay€all€ofÐ ‹.X'2 Ðthe€claims,€then€the€owner€has€to€decide€à$àÐ w/D(3 ÐÓ'Pc¨‹XÈ2°°ŒX(#'ÓÌÌIn€most€cases,€a€bond€covers€liabilities€thatÐ §t6 Ðwere€incurred€during€the€bond€term.€€A€claimÐ “`7 Ðmay€be€made€on€the€bond€after€theÐ L8 Ðtermination€of€the€bond€for€liabilities€incurredÐ k89 Ðprior€to€cancellation€or€Ô_ÔnonrenewalÔ_Ô.Ð W$: ÐÌThe€surety€has€obligations€to€both€the€ownerÐ /ü< Ðand€the€contractor.€€If€the€contractor€andÐ è= Ðowner€disagree€on€contract€performanceÐ Ô> Ðissues€and€the€owner€declares€the€contractorÐ óÀ? Ðin€default,€the€surety€must€investigate€theÐ ß¬@ Ðclaim.Ð Ë˜A ÐÌThe€surety€has€several€alternatives€if€the€Ð £!pC ÐContractor€defaults:Ð "\D ÐÓ€ @(#3yA_)*+-9<EFÓFinance€the€original€contractor€or€provideÐ {#HE Ðsupport€necessary€to€allow€the€contractor€toÐ g$4F Ðfinish€the€project;Ð S% G ÐArrange€for€a€new€contractor€to€complete€theÐ ?&H Ðcontract;Ð +'øI ÐAssume€the€role€of€the€contractor€anÐ (ä J Ðsubcontract€the€remaining€work;Ð )Ð!K ÐPay€the€penal€sum€of€the€bond.Ð ï)¼"L ÐÌWith€payment€bonds,€the€surety€pays€theÐ Ç+”$N Ðrightful€claims€of€certain€subcontractors,Ð ³,€%O Ðlaborers€and€suppliers.Ð Ÿ-l&P Ðâ âÐ ‹.X'Q Ð‡â âÔ*ƒlmdd<dd <<dd <Kk°(#°(#ÔÔ,<dd ÔÔ,<dd ÔÔ+ ÔÐ33 Ðwhich€claims€will€be€paid€and€which€will€beÐ —d Ðrejected.àÄ àÐ ƒP ÐÐ —d ÐòòòòBorrowing€Capacityóó:Ð Ð ÐòˆòóˆóóóÌSpecific€assets€are€pledged€to€secure€bankÐ Û¨ Ðletters€of€credit.€€Ô_ÔLOCsÔ_Ô€diminish€an€existingÐ Ç” Ðline€of€credit,€and€are€reflected€on€theÐ ³ € Ðcontractorððs€financial€statement€as€aÐ Ÿl Ðcontingent€liability.€€The€tying€up€of€assets,€orÐ ‹X Ðthe€reduction€of€an€available€line€of€credit,€isÐ wD Ðcounter„productive€to€both€the€owner€and€theÐ c0 Ðcontractor.€€This€can€adversely€affect€theÐ O Ðcontractorððs€cash€flow€during€contractÐ ; Ðperformance.€€Ð 'ô ÐÌSubcontractors€and€material€suppliers€may€beÐ ÿÌ Ðreluctant€to€provide€labor€and€supplies€to€theÐ ë¸ Ðcontractor€since€they€have€no€access€or€rightsÐ ×¤ Ðto€funds€available€from€the€LOC.Ð Ã ÐÌÌWith€few€exceptions,€performance€andÐ Û¨ Ðpayment€bonds€are€issued€on€an€unsecuredÐ Ç” Ðbasis.€€They€are€usually€provided€on€theÐ ³ € Ðstrength€of€the€corporate€and€personalÐ Ÿl Ðsignatures€of€the€company€owners.€€TheÐ ‹X Ðissuance€of€bonds€has€no€effect€on€theÐ wD Ðcontractorððs€bank€line€of€credit.Ð c0 ÐÌÌÌÌSubcontractors€and€material€suppliers€may€beÐ ÿÌ" Ðmore€willing€to€provide€labor€and€materials€toÐ ë¸# Ðthe€contractor€when€they€are€protected€by€aÐ ×¤$ Ðpayment€bond.Ð Ã% ÐòòòòCostóó:Ð C& ÐÌóóCost€is€generally€1%€of€the€contract€amountÐ è( Ðcovered€by€the€LOC„€e.g.,€if€the€LOC€coversÐ Ô) Ð10%€of€contract,€Cost€=€1%€x€(10%€xÐ óÀ* ÐContract€Amount).Ð ß¬+ ÐÌÌGenerally€ðð€„€2%€of€contract€price.€€TheÐ è. Ðpremium€includes€100%€performance€bond,€aÐ Ô/ Ð100%€payment€bond,€and€normally€a€one„yearÐ óÀ0 Ðmaintenance€period.Ð ß¬1 ÐÌòòòòCost€of€BondsóóÐ ç ´2 ÐòòÌóóóóThe€price€or€premium€for€a€bond€will€vary€depending€on€the€type€of€construction,€the€contractÐ ¿"Œ4 Ðamount,€the€duration€of€the€project,€the€surety€company,€and€the€experience€and€financial€strengthÐ «#x5 Ðof€the€contractor.€€Premiums€range,€on€average,€from€ðð€%€to€2€%€(or€perhaps€higher,€and€notÐ —$d6 Ðnecessarily€tied€to€business€strength)€of€the€contract€price€for€contractors€with€establishedÐ ƒ%P7 Ðbonding€credit.€€If€the€contract€amount€changes,€the€bond€premium€will€be€adjusted€for€theÐ o&<8 Ðchange€in€contract€price.€€There€is€usually€no€additional€cost€for€bid€bonds€or€payment€bondsÐ ['( 9 Ðwhen€purchased€with€a€performance€bond.€€Ð G(!: ÐÌBond€premiums€cannot€be€reduced€by€lowering€the€percentage€of€the€bond€from,€say,€100%€toÐ *ì"< Ð50%.€€Thus,€it€usually€makes€sense€to€require€100€percent€performance€and€payment€bonds€so€theÐ +Ø#= Ðâ âowner€receives€maximum€protection.€Ý‚ÿÿÿÝòòÝÝòòÝ‚ÿÿÿTûÝÝóóÝÝ×ƒÝ×Ý ƒ ¢˜ÝòòòŽòÚÚ17Ú ÚóŽóóóÝÝ× ×òòÝ‚ÿÿÿÝò…òÝÝÝ‚ÿÿÿøûÝÝó…óÝÝóóóó€€òòThe€advantage,€however,€in€considering€a€lowerÐ ÷+Ä$> Ðpercentage€is€that€more€contractors€may€be€allowed€to€compete€because€some€may€not€have€theÐ 3 Ðbonding€capacity€to€get€a€100%€bond,€but€may€qualify€for€a€lesser€amount.€Ý‚ÿÿÿÝòòÝÝòòÝ‚ÿÿÿDýÝÝóóÝÝ×ƒà×Ý ƒ ¢˜ÝòòòŽòÚÚ18Ú ÚóŽóóóÝÝ× ×òˆòòòÝ‚ÿÿÿÝò…òÝÝÝ‚ÿÿÿëýÝÝó…óÝÝóóóóÐ ì Ðâ âÓH.°°` ¸hÀpÈ xÐ (#Pc¨‹XÈ2HÓóˆóóóÌòòóóSurety€bonds€issued€through€the€SBA€òòSurety€Bond€Guarantee€Programóó€(see€below)€carry€anÐ ÷ Ä Ðadditional€0.6€percent€fee.Ð ã ° ÐÌòòòòGovernment€Oversight€Ð »ˆ Ðààà` àà¸àààÌóóóóSurety€bond€companies€are€regulated€by€state€insurance€departments.€€€Surety€bonds€on€stateÐ “` Ðpublic€works€must€be€issued€by€a€surety€bond€company€licensed€by€the€insurance€department€inÐ L Ðthat€state.€Ý‚ÿÿÿÝòòÝÝòòÝ‚ÿÿÿŸshedÝóóÝÝ×ƒãT×Ý ƒ ¢˜ÝòòòŽòÚÚ19Ú ÚóŽóóóÝÝ× ×òòÝ‚ÿÿÿÝò…òÝÝÝ‚ÿÿÿCshedÝó…óÝÝóóóóÐ k8 ÐÌOn€the€federal€level,€the€U.S.€Treasury€Department€maintains€a€list€of€surety€bond€companies€thatÐ C Ðit€has€qualified€to€write€surety€bonds€required€for€federal€construction€projects.€€To€be€on€this€list,Ð /ü Ða€surety€bond€company€must€file€financial€and€other€information€with€the€Treasury€DepartmentÐ è Ðand€undergo€the€Departmentððs€financial€analysis.€Ý‚ÿÿÿÝòòÝÝòòÝ‚ÿÿÿ:shedÝóóÝÝ×ƒé¤×Ý ƒ ¢˜ÝòòòŽòÚÚ20Ú ÚóŽóóóÝÝ× ×òòÝ‚ÿÿÿÝò…òÝÝÝ‚ÿÿÿÞshedÝó…óÝÝóóóóÐ Ô ÐÌÔ&ˆÔòòòòBonding€Assistance€ProgramsÐ ß¬ ÐóóóóÌSince€the€early€1970s,€the€Small€Business€Administration€(SBA)€has€operated€its€òòSurety€BondÐ ·„ ÐGuarantee€Programóó,€which€provides€some€repayment€of€losses€to€surety€bond€companies€fromÐ £p Ðbonds€they€would€otherwise€not€provide.€€Small€contractors€have€performed€more€than€$1€billionÐ \ Ðof€contracts€per€year€with€the€help€of€this€SBA€program.€€Ô'ˆ—>ÔÐ {H ÐÌThe€U.S.€Department€of€Transportation€(DOT)€has€established€a€òòBonding€Assistance€ProgramóóÐ S Ðthat€is€administered€by€the€Office€of€Small€and€Disadvantaged€Business€Utilization€(Ô_ÔOSDBUÔ_Ô)Ð ? Ðwithin€the€Office€of€the€Secretary.€€The€Bonding€Assistance€Program€offers€certified€minority,Ð +ø Ðwomen„owned€and€disadvantaged€business€enterprises€(Ô_ÔDBEsÔ_Ô)€an€opportunity€to€obtain€bid,Ð ä Ðpayment€and€performance€bonds€for€transportation„related€projects.€€The€Program€providesÐ !Ð Ðsurety€companies€an€80%€guarantee€against€losses€on€contracts€up€to€$1,000,000.€€Bond€approvalÐ ï!¼ Ðand€issuance€are€performed€by€the€DOT€approved€surety€companies.Ð Û"¨ ÐÌÐ ³$€ ÐA€number€of€states€have€also€established€bond€guarantee€programs€for€contractors,€as€well€asÐ 3 Ðother€special€bonding€assistance€programs.€Ð ì ÐÌThe€Surety€Association€of€America€(SAA)€is€a€nonprofit€trade€association€that€represents€moreÐ ÷ Ä Ðthan€650€U.S.€and€eight€foreign€surety€bond€companies.€€€SAA€has€developed€a€òòModelÐ ã ° ÐContractor€Development€Programóó€(Ô_ÔMCDPÔ_Ô)€to€increase€and€promote€the€availability€of€suretyÐ Ïœ Ðbonds€to€small,€minority€and€women€contractors.€€The€objectives€of€this€program€include:€Ð »ˆ ÐÌÓ€ A_)*+-9<EF(Üy3@ÓÝ"‚_´J"ÝÝÝÓXÓÝ‚_´JšÝÔ2ÜÔððÔ3 Ôà0` àÝÝEducating€emerging€contractors€about€surety€bonds€and€helping€them€becomeÐ “` Ðbondable,Ýƒ_´JšÕÝŒÐL ` (#` (# ÐŒÝ ÝÝ"‚_´J"ÝÝÝÝ‚_´JÅ ÝÔ2ÜÔððÔ3 Ôà0` àÝÝIdentifying€resources€available€to€emerging€contractors€in€obtaining€their€firstÐ k8 Ðbond,€such€as€the€SBA€Surety€Bond€Guarantee€Program€and€similar€state€andÐ W$ Ðlocal€programs,Ýƒ_´JÅ ò ÝŒÐC` (#` (# ÐŒÝ ÝÝ"‚_´J"ÝÝÝÝ‚_´JMÝÔ2ÜÔððÔ3 Ôà0` àÝÝProviding€assistance€and€referrals€to€emerging€contractors€in€obtaining€appropriateÐ /ü Ðaccounting,€project€management€and€financing€expertise,Ýƒ_´JMzÝŒÐè` (#` (# ÐŒÝ ÝÝ"‚_´J"ÝÝÝÝ‚_´J¢ÝÔ2ÜÔððÔ3 Ôà0` àÝÝAssisting€these€contractors€with€increasing€their€bonding€capacity.€Ý‚ÿÿÿÝòòÝÝòòÝ‚ÿÿÿYshedÝóóÝÝ×ƒì×Ý ƒ ¢˜ÝòòòŽòÚÚ21Ú ÚóŽóóóÝÝ× ×òòÝ‚ÿÿÿÝò…òÝÝÝ‚ÿÿÿýshedÝó…óÝÝóóóóÝƒ_´J¢ÏÝŒÐÔ ` (#` (# ÐŒÝ ÝÓE.°°` ¸hÀpÈ xÐ (#°°ŒX(#EÓÐ óÀ ÐÓE.°°` ¸hÀpÈ xÐ (#°°ŒX(#EÓÓXÓSAA€also€offers€an€educational€tool€for€contractors€and€subcontractors,€òòYour€First€Bondóó,€aÐ ß¬ Ðvideotape€and€brochure€of€what€contractors€need€to€do€to€apply€for€bonds,€and€other€educationalÐ Ë˜ Ðmaterials.€Ý‚ÿÿÿÝòòÝÝòòÝ‚ÿÿÿ+shedÝóóÝÝ×ƒî×Ý ƒ ¢˜ÝòòòŽòÚÚ22Ú ÚóŽóóóÝÝ× ×òòÝ‚ÿÿÿÝò…òÝÝÝ‚ÿÿÿÏshedÝó…óÝÝóóóóÐ ·„ ÐÌÓE.°°` ¸hÀpÈ xÐ (#°°ŒX(#EÓòòòòRatings€OrganizationsÐ \ ÐÓE.°°` ¸hÀpÈ xÐ (#°°ŒX(#EÓÌóóóóÓE.°°` ¸hÀpÈ xÐ (#°°ŒX(#EÓA.M.€Best€Company€(Bestððs)€is€a€private€company€that€analyzes€and€rates€insurance€companies.€Ð g4 ÐEach€year€it€publishes€òòBestððs€Insurance€Reports,€Property„Casualty,óó€which€includes€detailedÐ S Ðprofiles€and€financial€information€on€almost€every€insurance€company€operating€in€the€UnitedÐ ? ÐStates.€€Bestððs€gives€each€company€a€rating€(designated€by€an€alphabetic€character)€and€aÐ +ø Ðfinancial€size€category€(designated€by€a€Roman€numeral€scale).€€Best€also€publishes€anÐ ä Ðabbreviated€version€of€its€òòBestððs€Key€Rating€Guide,€Property„Casualtyóó,€which€contains€only€theÐ !Ð Ðalphabetic€ratings€and€financial€size€categories€of€each€insurance€company.€€These€books€areÐ ï!¼ Ðâ âavailable€in€many€public€and€financial€libraries€or€may€be€purchased€from€A.M.€Best.€Ý‚ÿÿÿÝòòÝÝòòÝ‚ÿÿÿ¼shedÝóóÝÝ×ƒðh×Ý ƒ ¢˜ÝòòòŽòÚÚ23Ú ÚóŽóóóÝÝ× ×òòÝ‚ÿÿÿÝò…òÝÝÝ‚ÿÿÿ`shedÝó…óÝÝóóóóÐ Û"¨ ÐOther€ratings€organizations€include€Dun€&€Bradstreet,€Ý‚ÿÿÿÝòòÝÝòòÝ‚ÿÿÿõshedÝóóÝÝ×ƒó×Ý ƒ ¢˜ÝòòòŽòÚÚ24Ú ÚóŽóóóÝÝ× ×òòÝ‚ÿÿÿÝò…òÝÝÝ‚ÿÿÿ™shedÝó…óÝÝóóóó€Ô_ÔFitchÔ_Ô€Ratings,€Ý‚ÿÿÿÝòòÝÝòòÝ‚ÿÿÿshedÝóóÝÝ×ƒöT×Ý ƒ ¢˜ÝòòòŽòÚÚ25Ú ÚóŽóóóÝÝ× ×òòÝ‚ÿÿÿÝò…òÝÝÝ‚ÿÿÿ·shedÝó…óÝÝóóóó€Moodyððs€InvestorsÐ 3 ÐService,€Ý‚ÿÿÿÝòòÝÝòòÝ‚ÿÿÿ4shedÝóóÝÝ×ƒùà×Ý ƒ ¢˜ÝòòòŽòÚÚ26Ú ÚóŽóóóÝÝ× ×òòÝ‚ÿÿÿÝò…òÝÝÝ‚ÿÿÿØshedÝó…óÝÝóóóó€Standard€&€Poorððs€Ý‚ÿÿÿÝòòÝÝòòÝ‚ÿÿÿ8shedÝóóÝÝ×ƒül×Ý ƒ ¢˜ÝòòòŽòÚÚ27Ú ÚóŽóóóÝÝ× ×òòÝ‚ÿÿÿÝò…òÝÝÝ‚ÿÿÿÜshedÝó…óÝÝóóóó€and€Weiss€Ratings€Inc.€Ý‚ÿÿÿÝòòÝÝòòÝ‚ÿÿÿ>shedÝóóÝÝ×ƒÿø×Ý ƒ ¢˜ÝòòòŽòÚÚ28Ú ÚóŽóóóÝÝ× ×òòÝ‚ÿÿÿÝò…òÝ