SENATE JOINT MEMORIAL 71

49th legislature - STATE OF NEW MEXICO - first session, 2009

INTRODUCED BY

Vernon D. Asbill

A JOINT MEMORIAL

REQUESTING THE SUPERINTENDENT OF INSURANCE TO CONVENE A WORK GROUP TO STUDY THE COSTS AND BENEFITS OF THE STATUTORY REQUIREMENT FOR THE BONDING OF SUBCONTRACTORS ON PUBLIC WORKS BUILDING PROJECTS.

     WHEREAS, in 2005, legislation was enacted to require a subcontractor to provide a performance and payment bond on a public works building project if the contract for the work to be performed on the project is fifty thousand dollars ($50,000) or more; and

     WHEREAS, the statutory language was amended in 2007 to increase the limit on a project to one hundred twenty-five thousand dollars ($125,000); and

     WHEREAS, the bonding of contractors and subcontractors is intended to protect payment of all workers, subcontractors and material suppliers by providing a remedy for recovery of funds due for wages, performing work or providing materials on a state or local construction project; and

     WHEREAS, it has been argued that, by adding the requirement of bonding of subcontractors, the owner will benefit through proportional reductions in the general contractor bond costs passed on to the owner through lower risk of subcontractor default; and

     WHEREAS, public school facilities authority data indicate that general contractor bond costs remain at essentially the same rate as they were before subcontractor bonding was enacted; and

     WHEREAS, others have argued that the addition of the subcontractor bonding requirement appears to have contributed to disproportionate increases in construction costs, especially in rural areas, and has limited the number of subcontractors able to perform work on projects; and

     WHEREAS, increased costs to projects may vary depending on the amount of work to be provided by subcontractors and the capabilities and capacity of the general contractor; and

     WHEREAS, because these issues continue to be argued, legislation is introduced each year to modify or repeal the subcontractor bonding requirement; and

     WHEREAS, a number of entities have an interest in and concerns about the subcontractor bonding requirement;

     NOW, THEREFORE, BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO that the superintendent of insurance be requested to convene a work group to study the costs and benefits of the statutory requirement that all subcontractors on public works projects of more than one hundred twenty-five thousand dollars ($125,000) be bonded; and

     BE IT FURTHER RESOLVED that membership on the work group include the following:

          A. the secretary of general services or the secretary's designee;

          B. the secretary of higher education or the secretary's designee;

          C. the secretary of transportation or the secretary's designee;

          D. the director of the public school facilities authority or the director's designee;

          E. the director of the construction industries division of the regulation and licensing department or the director's designee;

          F. one representative appointed by the associated general contractors;

          G. one representative appointed by the New Mexico federation of labor;

          H. one representative appointed by the New Mexico association of counties;

          I. one representative appointed by the New Mexico municipal league; and

          J. three members appointed by the public school capital outlay council from school districts, one from each congressional district; and

     BE IT FURTHER RESOLVED that the work group report its findings and recommendations to the governor, the public school capital outlay oversight task force, the legislative finance committee and the legislative education study committee; and

     BE IT FURTHER RESOLVED that copies of this memorial be transmitted to the superintendent of insurance, the secretary of general services, the secretary of higher education, the secretary of transportation, the director of the public school facilities authority, the director of the construction industries division of the regulation and licensing department, the associated general contractors, the New Mexico federation of labor, the New Mexico association of counties, the New Mexico municipal league and the chair of the public school capital outlay council.

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