WASHINGTON – U.S. Senator Kevin Cramer (R-ND), Ranking Member of the Environment and Public Works (EPW) Subcommittee on Transportation and Infrastructure, joined U.S. Senator Mark Kelly (D-AZ) in introducing the Water Infrastructure Subcontractor and Taxpayer Protection Act. This bipartisan legislation would require all primary contractors working on water infrastructure projects financed by federally guaranteed loans to hold a surety bond, guaranteeing the compensation of local sponsors and sub-contractors should the contractor defaults before the completion of the project.
According to a study conducted by Ernst & Young’s Quantitative Economics and Statistics Group, in collaboration with the Surety & Fidelity Association of America, unbonded projects are 10 times as likely to default than bonded projects. Surety bonds are already required for water infrastructure projects funded by the Environmental Protection Agency through the State Revolving Loan Fund, and both North Dakota and Arizona require the use of surety bonds for state-funded projects.
However, public-private partnerships financed by the Water Infrastructure Finance and Innovation Act (WIFIA) are exempt from these surety bond requirements. This legislation will close the loophole and ensure the improvement of project delivery and reduce the risk of federally financed water infrastructure projects.
“North Dakotans know just how important public-private partnerships are to large scale infrastructure projects. They can bolster and protect local communities, but taxpayers should be confident their money will not be lost,” said Senator Cramer. “We must work to close existing loopholes in federal law to protect not just American taxpayers, but local small business contractors and workers who make these projects possible.”
“Local governments should not be left holding the bag when contractors don’t deliver,” said Senator Kelly. “That’s why Sen. Cramer and I introduced legislation to ensure water projects financed by taxpayer dollars have the necessary protections to ensure timely completion, helping to improve water security in Arizona communities.”
"The American Subcontractors Association (ASA) proudly supports this important bipartisan legislation because our contractor members witness firsthand the importance of financial securities such as performance and payment bonds on construction projects. These bonds assure that a contractor is qualified to perform the obligations in the award and serve as protection for the public agencies in case the contractor fails to meet their obligations under the contract,” said Gloria Hale and Courtney Little, ASA Government Relations Committee Chairs.
“As the U.S. tackles critical water infrastructure projects nationwide, bonding for private-public partnerships is essential to ensure that projects utilizing the Water Infrastructure Finance and Innovation Act meet the same standards Congress passed for the TIFIA program: that taxpayers are protected, small business subcontractors and workers are protected, and projects are completed,” said Nat Wienecke, Senior Vice President, Federal Government Relations, American Property Casualty Insurance Association.
“Bonding WIFIA financed P3 projects will protect taxpayers’ dollars, ensure project completion, protect local small business contractors and workers, and promote economic growth,” said Lee Covington, President and CEO of the Surety and Fidelity Association of America. “WIFIA should be modernized to include the same payment and performance requirements that protect all other federally funded infrastructure projects.”
Click here to view bill text.