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Bipartisan legislators reintroduce bill strengthening financial security for infrastructure projects

U.S. Sens. Chris Van Hollen (D-MD) and Mike Rounds (R-SD), along with U.S. Sens. Stephen F. Lynch (D-MA) and Troy Balderson (R-OH), reintroduced legislation Monday that would increase the financial security of federal infrastructure projects.

The bill, Promoting Infrastructure by Protecting Our Subcontractors and Taxpayers Act of 2021, would direct the U.S. Department of Transportation (DOT) to ensure public-private partnership (P3) projects using Transportation Infrastructure Finance Innovation Act (TIFIA) financing by requiring a surety bond.

U.S. Sen. Van Hollen (D-MD) is the lead sponsor of the Senate bill, S. 638, and U.S. Rep. Stephen Lynch (D-MA) introduced the House version of the bill, H.R. 1641, on March 9.

The legislation would ensure contractor defaults do not leave subcontractors, workers, and taxpayers in the lurch.

“Contractor defaults on infrastructure projects can cause costly delays, wasting taxpayer dollars and leaving residents, local stakeholders, and project workers in the lurch. As we work to make historic investments in our nation’s transportation network, we must ensure that projects are financed securely. I’m proud to introduce this bipartisan legislation and will be pushing to pass this important improvement to our nation’s infrastructure financing,” Van Hollen said.
Currently, some state laws require bonding for P3s, but not all do. Without the surety bond, should a contractor default, the project is halted and can be terminated, leaving subcontractors not paid and taxpayers on the hook for additional costs.

The lawmakers cited one example in Indiana where a private developer defaulted on a P3 project leaving subcontractors without pay. The default cost taxpayers over $300 million in additional costs and delays delivery of the project significantly.

Surety bonds provide monetary compensation if a contractor fails to adhere to the contract. The bonds ensure contractors in financial distress avoid bankruptcy and ensure subcontractors and workers continue to be paid. In 2017 and 2018, sureties paid over $1.58 billion in connection with contractor defaults and “at-risk” federal, municipal, and state projects.

“Our commonsense legislation closes a loophole in federal law to protect American taxpayers,” Rounds said. “This legislation would assure the taxpayer’s interests are protected when a contractor does not fulfill their contract as agreed to.”

The legislation is supported by the American Subcontractors Association (ASA), The Association of Union Constructors (TAUC), National Association of Minority Contractors (NAMC), Women Construction Owners and Executives (WCOE), Construction Employers of America (CEA), National Electrical Contractors Association (NECA), Mechanical Contractors Association of America (MCAA), Business Coalition for Fair Competition (BCFC), Finishing Contractors Association (FCA), International, Sheet Metal and Air Conditioning Contractors’ National Association (SMACNA), American Property & Casualty Association of American (APCIA), National Association of Mutual Insurance Companies (NAMIC), National Association of Surety Bond Producers (NASBP), Council of Insurance Agents and Brokers (CIAB).

“The COVID-19 economic fallout disproportionately impacted minority-owned businesses that often serve as subcontractors on multi-million-dollar public construction projects,” said Wendell Stemley, Emeritus Director of the National Association of Minority Contractors. “Sen. Van Hollen’s Promoting Infrastructure by Protecting Our Subcontractors and Taxpayers Act provides critical protections for minority workers, suppliers, and contractors. This commonsense solution will ensure payment and performance protections are in place to safeguard our nation’s construction community.”

The Surety & Fidelity Association of America (SFAA) also applauded the legislation.

“Bonding TIFIA-financed P3 projects will protect taxpayers’ dollars, ensure project completion, protect local small business contractors and workers, and promote economic growth,” SFAA President and CEO Lee Covington said. “TIFIA should be modernized to include the same payment and performance requirements that protect all other federally funded infrastructure projects.”

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