Senate File 2376 - Introduced SENATE FILE 2376 BY COMMITTEE ON LOCAL GOVERNMENT (SUCCESSOR TO SF 576) (SUCCESSOR TO SSB 1151) A BILL FOR An Act relating to bonds and letters of credit for general 1 contractors and subcontractors. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 2245SZ (2) 91 ss/ns

S.F. 2376 Section 1. NEW SECTION . 572A.1 Contractor performance bond 1 —— registration requirement. 2 1. A general contractor or subcontractor that engages in 3 the business of construction in this state shall obtain and 4 maintain an annual performance bond or irrevocable letter of 5 credit in the amount of fifty thousand dollars. The bond 6 or letter of credit shall be payable to the state of Iowa 7 and executed by a surety company or financial institution 8 authorized to do business in this state. 9 2. A bond or letter of credit required pursuant to 10 this section shall be filed with the state. The state or a 11 political subdivision of the state may enforce the requirements 12 of this section in connection with private construction work 13 within its jurisdiction and may bring an action on the bond or 14 letter of credit in the name of the state of Iowa for the use 15 and benefit of a private person or political subdivision harmed 16 by the contractor’s or subcontractor’s failure to perform 17 contractual obligations or for violation of this section or 18 other applicable law. 19 3. The aggregate liability of a surety company or financial 20 institution under a bond or letter of credit issued pursuant to 21 this section shall not exceed the penal sum of the bond or the 22 face amount of the letter of credit, regardless of the number 23 of claims made or actions brought. 24 4. A general contractor or subcontractor shall not 25 register, renew a registration, or conduct business as a 26 general contractor or subcontractor in this state unless the 27 general contractor or subcontractor has a bond or letter of 28 credit as required by this section. 29 5. A political subdivision of the state shall not, in 30 connection with private construction work, require a general 31 contractor or subcontractor to obtain or file a bond, letter of 32 credit, or other financial security, or require the issuance 33 of a license or impose a license fee or charge, except as 34 expressly required by this section or by other state or federal 35 -1- LSB 2245SZ (2) 91 ss/ns 1/ 3

S.F. 2376 law. 1 6. This section does not apply to a general contractor or 2 subcontractor performing work for the state or a political 3 subdivision of the state, including work subject to the 4 requirements of chapter 8A, subchapter III. 5 7. For purposes of this section: 6 a. “Construction” means the improvement of real property, 7 including the performance of labor or furnishing of materials 8 for the alteration, repair, or erection of a building or 9 structure. 10 b. “General contractor” means the same as defined in section 11 572.1. 12 c. “Subcontractor” means the same as defined in section 13 572.l. 14 EXPLANATION 15 The inclusion of this explanation does not constitute agreement with 16 the explanation’s substance by the members of the general assembly. 17 This bill relates to performance bonds and letters of 18 credit for general contractors and subcontractors. The bill 19 requires a general contractor or subcontractor, as defined in 20 Code chapter 572 (mechanic’s lien), engaged in the business of 21 construction, defined in the bill as the improvement of real 22 property, including the performance of labor or furnishing of 23 materials for the alteration, repair, or erection of a building 24 or structure, in this state to obtain and maintain an annual 25 performance bond or irrevocable letter of credit in the amount 26 of $50,000. The bond or letter of credit shall be payable to 27 the state of Iowa and executed by a surety company or financial 28 institution authorized to do business in this state. 29 The bill requires a bond or letter of credit required by the 30 bill to be filed with the state. The bill allows the state or a 31 political subdivision of the state to enforce the requirements 32 of the bill in connection with private construction work within 33 its jurisdiction and to bring an action on the bond or letter 34 of credit in the name of the state of Iowa for the use and 35 -2- LSB 2245SZ (2) 91 ss/ns 2/ 3

S.F. 2376 benefit of a private person or political subdivision harmed 1 by the contractor’s or subcontractor’s failure to perform 2 contractual obligations or for violation of the bill or other 3 applicable law. 4 The bill limits the aggregate liability of a surety company 5 or financial institution under a bond or letter of credit 6 issued pursuant to the bill to the penal sum of the bond or 7 the face amount of the letter of credit. The bill prohibits a 8 general contractor or subcontractor from registering, renewing 9 a registration, or conducting business as a general contractor 10 or subcontractor unless the general contractor or subcontractor 11 has a bond or letter of credit as required by the bill. 12 The bill prohibits a political subdivision of the state from 13 requiring, in connection with private construction work, a 14 general contractor or subcontractor to obtain or file a bond, 15 letter of credit, or other financial security, or the issuance 16 of a license, or imposing a license fee or charge, except 17 as otherwise required by law. The bill does not apply to a 18 general contractor or subcontractor performing work for the 19 state or a political subdivision of the state. 20 -3- LSB 2245SZ (2) 91 ss/ns 3/ 3