HOUSE BILL 542

50th legislature - STATE OF NEW MEXICO - first session, 2011

INTRODUCED BY

Nate Gentry

AN ACT

RELATING TO PUBLIC WORKS; PROVIDING THAT THE AMOUNT OF A REQUIRED PERFORMANCE BOND MAY BE REDUCED UNDER CERTAIN CIRCUMSTANCES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     SECTION 1. Section 13-4-18 NMSA 1978 (being Laws 1987, Chapter 109, Section 1) is amended to read:

     "13-4-18. CONSTRUCTION CONTRACT PERFORMANCE AND PAYMENT BONDS.--

          A. When a construction contract is awarded in excess of twenty-five thousand dollars ($25,000), the following bonds or security shall be delivered to the state agency or local public body and shall become binding on the parties upon the execution of the contract. If a contractor fails to deliver the required performance and payment bonds, the contractor's bid shall be rejected, and its bid security shall be enforced to the extent of actual damages. Award of the contract shall be made pursuant to the Procurement Code in the following manner:

                (1) a performance bond satisfactory to the state agency or local public body, executed by a surety company authorized to do business in this state and said surety to be approved in federal circular 570 as published by the United States treasury department or the state board of finance or the local governing authority, in an amount equal to one hundred percent of the price specified in the contract; and

                (2) a payment bond satisfactory to the state agency or local public body, executed by a surety company authorized to do business in this state and said surety to be approved in federal circular 570 as published by the United States treasury department or the state board of finance or the local governing authority, in an amount equal to one hundred percent of the price specified in the contract, for the protection of all persons supplying labor and material to the contractor or its subcontractors for the performance of the work provided for in the contract.

         B. The state purchasing agent or the central purchasing office may reduce the amount of the performance bond required prior to solicitation to not less than fifty percent of the contract price if it is determined to be less costly or more advantageous to the state agency or local public body to self-insure a part of the performance of the contractor.

         C. The state purchasing agent or the central purchasing office may reduce the amount of the payment bond required prior to solicitation [of] to not less than fifty percent of the contract price if it is determined that it is in the best interest of the state agency or local public body to do so. Factors to be considered in order to make such a determination include, but are not limited to:

             (1) the value and number of subcontracts to be awarded by the contractor; and

             (2) the value of the contract.

         D. Prior to solicitation, the state purchasing agent or the central purchasing office may reduce the amount of the required performance bond to exclude the gross receipts taxes on payments received under the construction contract awarded to the contractor for which the bond was issued if the state purchasing agent or central purchasing office agrees to indemnify the issuer of the performance bond for any payment that the issuer of that bond is required to make to the taxation and revenue department for gross receipts taxes due on payments received by the contractor under the construction contract.

         [D.] E. Nothing in this section shall be construed to limit the authority of the state agency or local public body to require a performance bond or other security in addition to those bonds, or in circumstances other than specified in Subsection A of this section.

         [E.] F. For contracts under twenty-five thousand dollars ($25,000), the state agency or local public body may impose in its sole and complete discretion the requirements of Subsections A, B and C of this section."

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