SB 109 would raise threshold for performance and payment bonds
Frankfort, KY: Governor Ernie Fletcher today praised the Senate for passing Senate Bill 109, legislation designed to enable more small contractors, including minority- and female-owned companies, to compete for contracts.
“Senate Bill 109 will change a requirement that many people now feel is an impediment to small contractors,” stated Governor Ernie Fletcher. “I applaud the Kentucky Senate for passing legislation that will allow for a more level playing field for all contractors.”
Kentucky law now requires contractors to post payment and performance bonds on construction projects costing as little as $25,000. The Finance and Administration Cabinet proposed exempting projects costing less than the “small purchase” threshold for state agencies.
That threshold is $40,000 for several agencies, including Finance and Administration, the Kentucky Fair Board, Kentucky Educational Television, the Kentucky Transportation Cabinet and the Department of Parks.
All contractors include the cost of bonding in their bids. It averages about 5 percent of the bid price, but the percentage fluctuates according to a contractor’s financial history. For small or inexperienced companies, bonds are more expensive and sometimes unattainable.
“This bill is significant in that the increased limit allows more small businesses, particularly minority- and woman-owned, to participate in capital construction projects with the state without having to go through the expensive and cumbersome processes of trying to gain bonding,” said Tierra K. Turner, executive director of the Governor’s Office for Minority Empowerment. “This initiative will essentially act as an incubator for the small businesses as they gain the opportunity to do work with the state,” Turner stated
The Senate vote was 37-0 on the bill, which was sponsored by Senator Alice Forgy Kerr, R-Lexington. The bill now goes to the House.