NIGP Career Seminar Series II Workshop I Bonds (Bid, Performance, and Payment) Bond Excerpts from ARS Title 34

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1 NIGP Career Seminar Series II Workshop I Bonds (Bid, Performance, and Payment) Bond Excerpts from ARS Title Notice of intention to receive bids and enter contract; procedure; doing work without advertising for bids; county compliance A. Except as provided in subsections B through G and L of this section, every agent, on acceptance and approval of the working drawings and specifications, shall publish a notice to contractors of intention to receive bids and contract for the proposed work. This notice shall be published by advertising in a newspaper of general circulation in the county in which the agent is located for two consecutive publications if it is a weekly newspaper or for two publications that are at least six but no more than ten days apart if it is a daily newspaper. The notice shall state: 1. The nature of the work required, the type, purpose and location of the proposed building and where the plans, specifications and full information as to the proposed work may be obtained. 2. That contractors desiring to submit proposals may obtain copies of full or partial sets of plans and specifications for estimate on request or by appointment. The return of such plans and specifications shall be guaranteed by a deposit of a designated amount which shall be refunded on return of the plans and specifications in good order. 3. That every proposal shall be accompanied by a certified check, cashier's check or surety bond for ten per cent of the amount of the bid included in the proposal as a guarantee that the contractor will enter into a contract to perform the proposal in accordance with the plans and specifications. Notwithstanding any other statute, the surety bond shall be executed solely by a surety company or companies holding a certificate of authority to transact surety business in this state issued by the director of the department of insurance pursuant to title 20, chapter 2, article 1. The surety bond shall not be executed by an individual surety or sureties, even if the requirements of section are satisfied. The certified check, cashier's check or surety bond shall be returned to the contractors whose proposals are not accepted, and to the successful contractor on the execution of a satisfactory bond and contract as provided in this article. The conditions and provisions of the surety bid bond regarding the surety's obligations shall follow the following form: Now, therefore, if the obligee accepts the proposal of the principal and the principal enters into a contract with the obligee in accordance with the terms of the proposal and gives the bonds and certificates of insurance as specified in the standard specifications with good and sufficient surety for the faithful performance of the contract and for the prompt payment of labor and materials furnished in the prosecution of the contract, Surety bond required; suit on bond; limitations A. Except where specifically exempted by statute, before any contract is executed with any person for the construction, alteration, or repair of any public building, a public work or improvement of any county, city or town, or officer, board or commission thereof, and irrigation, power, electrical, drainage, flood protection and flood control districts, tax

2 levying public improvement districts, and county or city improvement districts, the person shall furnish to the agent entering into such contract the following bonds which shall become binding upon the award of the contract to such person, who, for purposes of this article, means "contractor": 1. A performance bond in an amount equal to the full contract amount conditioned upon the faithful performance of the contract in accordance with plans, specifications and conditions thereof. Such bond shall be solely for the protection of the public body awarding the contract. 2. A payment bond in an amount equal to the full contract amount solely for the protection of claimants supplying labor or materials to the contractor or his subcontractors in the prosecution of the work provided for in such contract. B. Each such bond shall include a provision allowing the prevailing party in a suit on such bond to recover as a part of the judgment such reasonable attorneys' fees as may be fixed by a judge of the court Bid security for design-build and job-order-contracting construction services A. As a guarantee that the contractor will enter into a contract, bid security is required for all design-build construction services and all job-order-contracting construction services awarded by an agent by competitive sealed proposals pursuant to section , subsection F or , subsection F if the agent estimates that the budget for construction, excluding the cost of any finance services, maintenance services, operations services, design services, preconstruction services or other related services, will be more than the amount prescribed in section , subsection D. Each proposal for design-build construction services or job-order-contracting construction services shall be accompanied by a certified check, cashier's check or surety bond. The bid security amount for design-build construction services shall be an amount equal to ten per cent of the agent's budget for construction, excluding any finance services, maintenance services, operations services, design services, preconstruction services or other related services, for the project as stated in the request for proposals. The bid security amount for job-order-contracting construction services shall be the amount determined by the agent and stated in the request for proposals and shall not be more than ten per cent of the agent's reasonably estimated budget for construction that the agent believes is likely to actually be done during the first year of the job-ordercontracting contract, excluding any finance services, maintenance services, operations services, design services, preconstruction services or other related services that are included in the contract. B. The agent shall return the certified check, cashier's check or surety bond to the contractors whose proposals are not accepted and to the successful contractor on the execution of satisfactory payment and performance bonds, insurance and the contract as provided in this chapter..

3 Construction-manager-at-risk, design-build and job-order-contracting construction services surety bond required; suit on bond; limitations A. Except if specifically exempted by statute, before an agent executes any contract with any person or firm for construction-manager-at-risk construction services, designbuild construction services or job-order-contracting construction services, the person or firm shall furnish to the agent entering into the contract the following bonds, except that the bonds shall be furnished only on and at the same time as execution of a contract or an amendment to a contract that commits the contractor to provide construction for a fixed price, a guaranteed maximum price or any other fixed amount within a designated time frame: 1. A performance bond in an amount equal to the full contract amount conditioned on the faithful performance of the contract in accordance with plans, specifications and conditions of the contract, except that: (a) For job-order-contracting construction services, the performance bond shall cover the full amount of construction under the job-order-contracting construction services contract, shall not include any design services, preconstruction services, finance services, maintenance services, operations services or other related services included in the contract, may be a single bond for the full term of the contract, a separate bond for each year of a multiyear contract or a separate bond for each job order, as determined by the agent, and, if a single bond for the full term of the contract or a separate bond for each year of a multiyear contract, shall initially be based on the agent's reasonable estimate of the amount of construction that the agent believes is likely to actually be done during the full term of the contract or during the particular year of a multiyear contract, as applicable. (b) For construction-manager-at-risk construction services and design-build construction services, the amount of the performance bond shall be the price of construction and shall not include the cost of any design services, preconstruction services, finance services, maintenance services, operations services or any other related services included in the contract. The performance bond shall be solely for the protection of the public body awarding the contract. 2. A payment bond in an amount equal to the full contract amount solely for the protection of claimants supplying labor or materials to the contractor or the contractor's subcontractors in the prosecution of the construction and not for the protection of persons providing any design services, preconstruction services, finance services, maintenance services, operations services or other related services provided for in the contract, except that:

4 (a) For job-order-contracting construction services, the payment bond shall cover the full amount of construction under the job-order-contracting construction services contract, shall not include any design services, preconstruction services, finance services, maintenance services, operations services or other related services included in the contract, may be a single bond for the full term of the contract, a separate bond for each year of a multiyear contract or a separate bond for each job order, as determined by the agent, and, if a single bond for the full term of the contract or a separate bond for each year of a multiyear contract, shall initially be based on the agent's reasonable estimate of the amount of construction that the agent believes is likely to actually be done during the full term of the contract or during the particular year of a multiyear contract, as applicable. (b) For construction-manager-at-risk construction services and design-build construction services, the amount of the payment bond shall be the price of construction and shall not include the cost of any design services, preconstruction services, finance services, maintenance services, operations services or any other related services included in the contract. B. Each bond shall include a provision allowing the prevailing party in a suit on the bond to recover as a part of the judgment any reasonable attorney fees as may be fixed by the court. C. Notwithstanding any other statute, each bond shall be executed solely by a surety company or companies holding a certificate of authority to transact surety business in this state issued by the director of the department of insurance pursuant to title 20, chapter 2, article 1. The bonds shall not be executed by an individual surety or sureties, even if the requirements of section are satisfied. The bonds shall be payable to the public body concerned. D. The bonds shall be filed in the office of the department, board, commission, institution, agency or other contracting body awarding the contract. E. It is illegal for a request for qualifications or a request for proposals pursuant to section or , or any person acting or purporting to act on behalf of the contracting body, to require that bonds be furnished by a particular surety company, or through a particular agent or broker. F. The conditions and provisions in the payment bond regarding the surety's obligations shall follow the following form: Now, therefore, the condition of this obligation is that if the principal promptly pays all monies due to all persons supplying labor or materials to the principal or the principal's subcontractors in the prosecution of the construction provided for in the contract, this obligation is void. Otherwise it remains in full force and effect. Provided, however, that this bond is executed pursuant to title 34, chapter 6, Arizona Revised Statutes, and all liabilities on this bond shall be determined in accordance with the provisions, conditions

5 and limitations of title 34, chapter 6, Arizona Revised Statutes, to the same extent as if they were copied at length in this agreement. The prevailing party in a suit on this bond shall recover as a part of the judgment reasonable attorney fees that may be fixed by the court. G. The conditions and provisions in the performance bond regarding the surety's obligations shall follow the following form: Now, therefore, the condition of this obligation is that if the principal faithfully performs and fulfills all of the undertakings, covenants, terms, conditions and agreements of the contract during the original term of the contract and any extension of the contract, with or without notice to the surety, and during the life of any guaranty required under the contract, and also performs and fulfills all of the undertakings, covenants, terms, conditions and agreements of all duly authorized modifications of the contract that may hereafter be made, notice of which modifications to the surety being hereby waived, the above obligation is void. Otherwise it remains in full force and effect. Provided, however, that this bond is executed pursuant to title 34, chapter 6, Arizona Revised Statutes, and all liabilities on this bond shall be determined in accordance with title 34, chapter 6, Arizona Revised Statutes, to the extent as if it were copied at length in this agreement. The prevailing party in a suit on this bond shall recover as part of the judgment reasonable attorney fees that may be fixed by the court. The performance under this bond is limited to the construction to be performed under the contract and does not include any design services, preconstruction services, finance services, maintenance services, operations services or any other related services included in the contract. H. If the prime contract or specifications require any persons supplying labor or materials in the prosecution of the work to furnish payment or performance bonds, these bonds shall be executed solely by a surety company or companies holding a certificate of authority to transact surety business in this state issued by the director of the department of insurance pursuant to title 20, chapter 2, article 1. Notwithstanding any other statute, the bonds shall not be executed by an individual surety or sureties, even if the requirements of section are satisfied. I. All bonds given by a contractor and surety pursuant to this section, regardless of their actual form, are deemed by law to be in the form required and set forth in this section.

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