An Act To
Maine Legislature, Session 123, LD 2092
Committee Amendment CA_A_H696 (House)
Amends: 14 MRSA §871

COMMITTEE AMENDMENT" A " to H.P. 1478, L.D. 2092, Bill, "An Act To 
Amend the Public Works Contractors' Surety Bond Law of 1971" 
Amend the bill by striking out everything after the enacting clause and before the 
summary and inserting the following: 
'Sec. 1. 14 MRSA §871, sub-§3, as amended by PL 1993, c. 436, § 1, is further 
amended to read: 
3. Surety bonds. Except as provided in Title 5, section 1745, before any contract 
exceeding $100,000 $125,000 in amount for the construction, alteration or repair of any 
public building or other public improvement or public work, including highways, is 
awarded to any person by the State or by any political subdivision or quasi-municipal 
corporation, or by any public authority, that person must furnish to the State or to the 
other contracting body, as the case may be, the following surety bonds: 
A. 
A performance bond in an amount equal to the full contract amount, conditioned 
upon the faithful performance of the contract in accordance with the plans, 
specifications and conditions thereof. Such ~ bond is solely for the protection of the 
State or the contracting body awarding the contract, as the case may be~ 
performance bond issued pursuant to this paragraph must include on its face the name 
of and contact information for the surety company that issued the bond; and 
B. 
A payment bond in an amount equal to the full amount of the contract solely for 
the protection of claimants supplying labor or materials to the contractor or the 
contractor's subcontractor in the prosecution of the work provided for in the contract. 
The term "materials" includes rental of equipment. A payment bond issued pursuant 
to this paragraph must include on its face the name of and contact information for the 
surety company that issued the bond. 
When required by the contracting authority, the contractor shall furnish bid security in an 
amount wffieh the contracting authority considers sufficient to guarantee that if the work 
is awarded the contractor will contract with the contracting agency. 
COMMITTEE AMENDMENT 
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COMMITTEE AMENDMENT" A 
"to H.P. 1478, L.D. 2092 
The bid security may be in the form of United States postal money order, official bank 
checks, cashiers' checks, certificates of deposit, certified checks, money in escrow, bonds 
from parties other than bonding companies subject to an adequate financial standing 
documented by a financial statement of the party giving the surety, bond or bonds from a 
surety company or companies duly authorized to do business in the State. 
The bid security may be required at the discretion of the contracting authority to assttre 
ensure that the contractor is bondable. 
The bid securities other than bid bonds must be returned to the respective unsuccessful 
bidders. The bid security of the successful bidder must be returned to the contractor upon 
the execution and delivery to the contracting agency of the contract and performance and 
payment bonds, in terms satisfactory to the contracting agency for the due execution of 
the work. 
In the case of contracts on behalf of the State, the bonds must be payable to the State and 
deposited with the contracting authority. In the case of all other contracts subject to this 
section, the bonds must be payable to and deposited with the contracting body awarding 
the contract. 
Sec.2. 14 MRSA §871, sub-§3-A is enacted to read: 
3-A. Letter of credit. Notwithstanding the surety bond requirements of subsection 
3, at the discretion of the State or other contracting authority, a person may provide an 
irrevocable letter of credit in lieu of the performance bond required by subsection 3, 
paragraph A or the payment bond required by subsection 3, paragraph B, or both, to the 
State or the contracting authority, as the case may be. For purposes of this subsection, 
"letter of credit" has the same meaning as in Title 11, section 5-1102, subsection (1), 
paragraph (j). 
A. The letter of credit must be: 
(1) Issued in favor of the State or other contracting authority by a federally 
insured financial institution; 
(2) In a form satisfactory to the State or other contracting authority; and 
(3) In an amount equal to the full amount ofthe contract. 
B. 
In order to issue an irrevocable letter of credit as an alternative to a surety bond 
under this subsection, a financial institution or its parent company must: 
(1) 
Maintain a long-term unsecured debt rating of at least "A3" issued by 
Moody's Investors Service, Inc. or "A-" issued by Standard and Poor's 
Corporation; 
(2) 
Maintain a short-term commercial paper rating within the 3 highest 
categories established by Moody's Investors Service, Inc. or Standard and Poor's 
Corporation; or 
(3) Be certified in writing by the Superintendent of Financial Institutions that the 
financial institution's capital ratios, as calculated in the most recent quarterly 
consolidated report of condition and income, meet or exceed the requirements for 
well-capitalized financial institutions. 
COMMITTEE AMENDMENT 
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COMMITTEE AMENDMENT" A .. to H.P. 1478, L.D. 2092 
C. 
If the letter of credit has an expiration date that is earlier than the date of 
acceptance of performance of the contract in accordance with the plans, specifications 
and conditions of the contract, a replacement letter of credit that meets the 
specifications of paragraph A must be delivered to the State or other contracting 
authority not later than 30 days prior to that expiration date. 
Sec. 3. 14 MRSA §871, sub-§4, as amended by PL 1973, c. 625, §82, is further 
amended to read: 
4. Actions. Any person who has furnished labor or material to the contractor or to a 
subcontractor of the contractor in the prosecution of the work provided for in sooft ~ 
contract in respect to which a payment bond has been furnished under subsection 3, 
paragraph B, and who has not been paid in full before the expiration of 90 days after the 
day on which the last of the labor was performed by him that person or material was 
furnished or supplied by him that person for which sooft ~ claim is made, shall have the 
right to may bring an action on sooft the payment bond in his that person's own name for 
the amount, or the balance thereof, unpaid at the time of the institution of sooft the action. 
Any such claimant having a direct contractual relationship with a subcontractor of the 
contractor furnishing such ~ payment bond but no contractual relationship, express or 
implied, with sooft that contractor shall does not have the right of action upon sooft that 
payment bond unless he shall have the claimant has given written notice to sooft the 
contractor within 90 days from the date on which sooft the claimant performed the last of 
the labor, or furnished or supplied the last of the material for which sooft the claim is 
made, stating with substantial accuracy the amount claimed and the name of the party to 
whom the material was furnished or supplied or for whom the labor was done or 
performed. Such ~ notice shall must be served by registered or certified mail, postage 
prepaid, in an envelope addressed to the contractor at any place he the contractor 
maintains an office or conducts his business, or at his the contractor's residence. 
Every aetioR OR said paym.eRt bORd shall be broHgRt iR the eOHRty iR whieh the priAeipal 
or SHrety has its priAeipal plaee of bHsiAess. No Any such action may not be commenced 
after the expiration of one year from the date on which the last of the labor was 
performed or material was supplied for the payment of which sooft the action is brought~ 
Provided, except that in the case of a material supplier, where when the amount of the 
claim is not ascertainable due to the unavailability of final quantity estimates, sooft the 
action may be commenced before the expiration of one year from the date on which the 
final quantity estimates are determined. The notice of claim from the material supplier to 
the contractor furnishing the payment bond 5fl.all must be filed before the expiration of 90 
days following the determination by the contracting authority of the final quantity 
estimates. 
The contracting body and the agent in charge of its office shall furnish to anyone making 
written application therefor who states that he the person has supplied labor or materials 
for such work, and payment therefor has not been made, or that he the person is being 
sued on any such bond, or that he the person is the surety thereon, a certified copy of sooft 
the bond and the contract for which it was given, which copy shall be ~ prima facie 
evidence of the contents, execution and delivery of the original. Applicants shall pay for 
SHefl. the certified copies such reasonable fees as the contracting body or the agent in 
charge of its office fixes to cover the actual cost of preparation thereof. 
COMMITTEE AMENDMENT 
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COMMITTEE AMENDMENT" A " to H.P. 1478, L.D. 2092 
Sec.4. 14 MRSA §871, sub-§6 is enacted to read: 
6. Jurisdiction. An action on a performance bond furnished under subsection 3, 
paragraph A or an action on a payment bond furnished under subsection 3, paragraph B in 
accordance with subsection 4 must be brought in the county in this State where the 
construction, alteration or repair of the public building or other public improvement or 
public work is located.' 
SUMMARY 
This amendment is the majority report of the committee and replaces the bill. The 
amendment increases from $100,000 to $125,000 the threshold limit for a public works 
contract for which a contractor must provide a performance bond and a payment bond. 
The bill would have increased the threshold limit to $250,000. The amendment adds 
language requiring that bonds include the name and contact information for the surety 
company that issued the bond. The amendment also requires that any action by any 
person to collect on a performance bond or payment bond be taken in the county where 
the construction, alteration or repair of the public building or other public improvement or 
public work is located. 
As in the bill, the amendment allows, at the discretion of the contracting authority, a 
person to provide an irrevocable letter of credit instead of either or both the performance 
bond and payment bond. The amendment clarifies that the letter of credit must be issued 
by a federally insured financial institution and requires the financial institution or its 
parent company to meet certain financial standards to qualify. 
FISCAL NOTE REQUIRED 
(See attached) 
COMMITTEE AMENDMENT 
Approved: 02114/08 
~aC!. 
LD 2092 
LR 3002(02) 
An Act To Amend the Public Works Contractors' Surety Bond Law of 1971 
Fiscal Note for Bill as Amended by Committee Amendment" A " 
Committee: Insurance and Financial Services 
Fiscal Note Required: Yes 
Fiscal Note 
Minor cost increase - Other Special Revenue Funds 
Fiscal Detail and Notes 
Any additional costs to the Bureau of Financial Institutions in the Department of Professional and Financial 
Regulation can be absorbed by the bureau utilizing existing budget resources. 
LR3002(02) - Fiscal Note - Page 1 of 1