Subcontractors to benefit from new Texas surety bond laws

subcontractors

On June 17, Texas Gov. Rick Perry signed multiple pieces of legislation, two of which will provide greater protection to the state’s subcontractors through the use of surety bonds. The Houston Chapter of the American Subcontractor Association has expressed support for these two laws, which will go into effect September 1.

Texas House Bill 628

HB 628 “relating to contracts by governmental entities and related professional services and to public works performance and payment bonds” now forbids the use of reverse auctions on public work contracts that require surety bonds.

Reverse auctions are used when a buyer of construction services requests bids using software or an online marketplace. Sellers must then decide if they want to partake in multiple rounds of bids. The practice depends on subcontractors’ willingness to disclose, and then alter, their bids. Construction professionals believe this practice devalues the integrity of the industry’s traditional competitive bid system.

The passing of HB 628 protects the interests of construction professionals by ensuring that they do not have to partake in reverse auctions when supplying surety bonds on public projects.

Texas Senate Bill 1048

The second piece of legislation, SB 1048, requires payment and performance bonds mandated by the state’s Little Miller Act to also be used for projects funded by public-private partnerships. The Texas Little Miller Act requires a performance bond if the contract is more than $100,000 and a payment bond if the contract is more than $25,000.

The passing of SB 1048 necessitates the use of these same bonds on all public-private partnership projects, which will make it easier for subcontractors to collect reparation when head contractors leave a contracted work midproject.

 

About the Author

Chris Birk
Chris Birk is a former newspaper and magazine writer who now works for a pair of Inc. 500 companies. He’s also a principal and the chief content creator for Surety Bonds.com, and a part-time college professor at a private Midwestern university.