An Act To Amend the Public Works Contractors' Surety Bond Law of 1971
Maine Legislature, Session 123, LD 2092
Committee: Insurance and Financial Services
Sponsors: HASKELL, CROCKETT, BRYANT, BEAUDETTE, CAREY, FAIRCLOTH
Amends: 14 MRSA §871

Legislative Document 
No. 2092 
H.P.1478 
House of Representatives, December 27, 2007 
An Act To Amend the Public Works Contractors' Surety Bond Law 
of 1971 
Approved for introduction by a majority of the Legislative Council pursuant to Joint Rule 
203. 
Reference to the Committee on Insurance and Financial Services suggested and ordered 
printed. 
Presented by Representative HASKELL of Portland. 
/J1~ 
171.1Jl~ 
Mll..UCENT M. MacFARLAND 
Clerk 
Cosponsored by Representative CROCKETT of Augusta, Senator BRYANT of Oxford and 
Representatives: BEAUDETTE of Biddeford, BRYANT of Windham, CAREY of Lewiston, 
FAIRCLOTH of Bangor, HINCK ef Portland. 
Printed on recycled paper 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 14 MRSA §871, sub-§3, as amended by PL 1993, c. 436, § I, is further 
amended to read: 
3. Surety bonds. Except as provided in Title 5, section 1745, before any contract 
exceeding $100,000 $250,000 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: 
lOA. A performance bond in an amount equal to the full contract amount, conditioned 
II 
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; 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. 
When required by the contracting authority, the contractor shall furnish bid security in an 
amount which the contracting authority considers sufficient to guarantee that if the work 
is awarded the contractor will contract with the contracting agency. 
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 assure 
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 
I 
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, 
Page I - 123LR3002(Ol)-1 
I 
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. 
A. The letter of credit must be: 
(I) Issued in favor of the State or other contracting authority by an issuer; 
(2) In a form satisfactory to the State or other contracting authority; and 
(3) In an amount equal to the full amount of the contract. 
B. 
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 
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authority not later than 30 days prior to that expiration date. 
F or purposes of this subsection, "letter of credit" has the same meaning as in Title II, 
section 5-1102, subsection (1), paragraph (j). 
SUMMARY 
This bill amends the Public Works Contractors' Surety Bond Law of 1971 by: 
I. Increasing from $100,000 to $250,000 the threshold limit for a contract for the 
construction, alteration or repair of any public building or other public improvement or 
public work for which a person must provide a performance bond and a payment bond; 
and 
2. Allowing, at the discretion of the State or other contracting authority, the person to 
provide an irrevocable letter of credit instead of either or both the performance bond and 
the payment bond.