2023 Illinois Compiled Statutes › Chapter 30 - FINANCE › 30 ILCS 550/ - Public Construction Bond Act.

(30 ILCS 550/0.01) (from Ch. 29, par. 14.9)
Sec. 0.01. 
		Short title. 
		This Act may be cited as the
Public Construction Bond Act.
(Source: P.A. 86-1324.)
(30 ILCS 550/1) (from Ch. 29, par. 15)
Sec. 1. Except as otherwise provided by this Act, until January 1, 2029, all officials, boards, commissions, or agents of this State, or of any political subdivision thereof, in making contracts for public work of any kind costing over $150,000 to be performed for the State, or of any political subdivision thereof, shall require every contractor for the work to furnish, supply and deliver a bond to the State, or to the political subdivision thereof entering into the contract, as the case may be, with good and sufficient sureties. The surety on the bond shall be a company that is licensed by the Department of Insurance authorizing it to execute surety bonds and the company shall have a financial strength rating of at least A- as rated by A.M. Best Company, Inc., Moody's Investors Service, Standard & Poor's Corporation, or a similar rating agency. The amount of the bond shall be fixed by the officials, boards, commissions, commissioners or agents, and the bond, among other conditions, shall be conditioned for the completion of the contract, for the payment of material, apparatus, fixtures, and machinery used in the work and for all labor performed in the work, whether by subcontractor or otherwise.
Until January 1, 2029, when making contracts for public works to be constructed, the Department of Transportation and the Illinois State Toll Highway Authority shall require every contractor for those works to furnish, supply, and deliver a bond to the Department or the Authority, as the case may be, with good and sufficient sureties only if the public works contract will cost more than $500,000. The Department of Transportation and the Illinois State Toll Highway Authority shall publicly display the following information by website or annual report and shall provide that information to interested parties upon request:
(1) a list of each of its defaulted public works     contracts, including the value of the award, the adjusted contract value, and the amount remaining unpaid by the Department or Authority, as applicable;
(2) the number and the aggregate amount of payment     claims made under the Mechanics Lien Act along with the number of contracts in which payment claims are made under the Mechanics Lien Act;
(3) for each of its public improvement contracts,     regardless of the contract value, the aggregate annual revenue of the contractor derived from contracts with the State;
(4) for each of its public works contracts,     regardless of contract value, the identity of the surety providing the contract bond, payment and performance bond, or both; and
(5) for each of its public works contracts,     regardless of the bond threshold, a list of bidders for each public works contract, and the amount bid by each bidder.
Until January 1, 2029, local governmental units may require a bond, by ordinance or resolution, for public works contracts valued at $150,000 or less.
On and after January 1, 2029, all officials, boards, commissions, or agents of this State, or of any political subdivision thereof, in making contracts for public work of any kind costing over $50,000 to be performed for the State, or of any political subdivision thereof, shall require every contractor for the work to furnish, supply and deliver a bond to the State, or to the political subdivision thereof entering into the contract, as the case may be, with good and sufficient sureties. The surety on the bond shall be a company that is licensed by the Department of Insurance authorizing it to execute surety bonds and the company shall have a financial strength rating of at least A- as rated by A.M. Best Company, Inc., Moody's Investors Service, Standard & Poor's Corporation, or a similar rating agency. The amount of the bond shall be fixed by the officials, boards, commissions, commissioners or agents, and the bond, among other conditions, shall be conditioned for the completion of the contract, for the payment of material, apparatus, fixtures, and machinery used in the work and for all labor performed in the work, whether by subcontractor or otherwise.
If the contract is for emergency repairs as provided in the Illinois Procurement Code, proof of payment for all labor, materials, apparatus, fixtures, and machinery may be furnished in lieu of the bond required by this Section.
Each such bond is deemed to contain the following provisions whether such provisions are inserted in such bond or not:
"The principal and sureties on this bond agree that all the undertakings, covenants, terms, conditions and agreements of the contract or contracts entered into between the principal and the State or any political subdivision thereof will be performed and fulfilled and to pay all persons, firms and corporations having contracts with the principal or with subcontractors, all just claims due them under the provisions of such contracts for labor performed or materials furnished in the performance of the contract on account of which this bond is given, when such claims are not satisfied out of the contract price of the contract on account of which this bond is given, after final settlement between the officer, board, commission or agent of the State or of any political subdivision thereof and the principal has been made.".
Each bond securing contracts between the Capital Development Board or any board of a public institution of higher education and a contractor shall contain the following provisions, whether the provisions are inserted in the bond or not:
"Upon the default of the principal with respect to undertakings, covenants, terms, conditions, and agreements, the termination of the contractor's right to proceed with the work, and written notice of that default and termination by the State or any political subdivision to the surety ("Notice"), the surety shall promptly remedy the default by taking one of the following actions:
(1) The surety shall complete the work pursuant to a     written takeover agreement, using a completing contractor jointly selected by the surety and the State or any political subdivision; or
(2) The surety shall pay a sum of money to the     obligee, up to the penal sum of the bond, that represents the reasonable cost to complete the work that exceeds the unpaid balance of the contract sum.
The surety shall respond to the Notice within 15 working days of receipt indicating the course of action that it intends to take or advising that it requires more time to investigate the default and select a course of action. If the surety requires more than 15 working days to investigate the default and select a course of action or if the surety elects to complete the work with a completing contractor that is not prepared to commence performance within 15 working days after receipt of Notice, and if the State or any political subdivision determines it is in the best interest of the State to maintain the progress of the work, the State or any political subdivision may continue to work until the completing contractor is prepared to commence performance. Unless otherwise agreed to by the procuring agency, in no case may the surety take longer than 30 working days to advise the State or political subdivision on the course of action it intends to take. The surety shall be liable for reasonable costs incurred by the State or any political subdivision to maintain the progress to the extent the costs exceed the unpaid balance of the contract sum, subject to the penal sum of the bond.".
The surety bond required by this Section may be acquired from the company, agent or broker of the contractor's choice. The bond and sureties shall be subject to the right of reasonable approval or disapproval, including suspension, by the State or political subdivision thereof concerned. Except as otherwise provided in this Section, in the case of State construction contracts, a contractor shall not be required to post a cash bond or letter of credit in addition to or as a substitute for the surety bond required by this Section.
Prior to the completion of 50% of the contract for public works, a local governmental unit may not withhold retainage from any payment to a contractor who furnishes the bond or bond substitute required by this Act in an amount in excess of 10% of any payment made prior to the date of completion of 50% of the contract for public works. When a contract for public works is 50% complete, the local governmental unit shall reduce the retainage so that no more than 5% is held. After the contract is 50% complete, no more than 5% of the amount of any subsequent payments made under the contract for public works may be withheld as retainage.
Prior to the completion of 50% of the contract for public works, the contractor and their respective subcontractors shall not withhold from their subcontractors retainage in excess of 10% of any payment made prior to the date of completion of 50% of the contract for public works. When the contract for public works is 50% complete, the contractor and its subcontractors shall reduce the retainage so that no more than 5% is withheld from their respective subcontractors. After the contract is 50% complete, the contractor and its subcontractors shall not withhold more than 5% of the amount of any subsequent payments made under the contract to their respective subcontractors.
When other than motor fuel tax funds, federal-aid funds, or other funds received from the State are used, a political subdivision may allow the contractor to provide a non-diminishing irrevocable bank letter of credit, in lieu of the bond required by this Section, on contracts under $100,000 to comply with the requirements of this Section. Any such bank letter of credit shall contain all provisions required for bonds by this Section.
In order to reduce barriers to entry for diverse and small businesses, the Department of Transportation may implement a 5-year pilot program to allow a contractor to provide a non-diminishing irrevocable bank letter of credit in lieu of the bond required by this Section on contracts under $500,000. Projects selected by the Department of Transportation for this pilot program must be classified by the Department as low-risk scope of work contracts. The Department shall adopt rules to define the criteria for pilot project selection and implementation of the pilot program.
In this Section:
"Local governmental unit" has the meaning ascribed to it in Section 2 of the Local Government Prompt Payment Act.
"Material", "labor", "apparatus", "fixtures", and "machinery" include those rented items that are on the construction site and those rented tools that are used or consumed on the construction site in the performance of the contract on account of which the bond is given.
(Source: P.A. 102-968, eff. 1-1-23; 103-570, eff. 1-1-24.)
(30 ILCS 550/1.5)
Sec. 1.5. Public private agreements. This Act applies to any public private agreement entered into under the Public Private Agreements for the Illiana Expressway Act or the Public-Private Agreements for the South Suburban Airport Act.
(Source: P.A. 98-109, eff. 7-25-13.)
(30 ILCS 550/1.7)
Sec. 1.7. Public-private agreements. This Act applies to any public-private agreement entered into under the Public-Private Partnerships for Transportation Act.
(Source: P.A. 97-502, eff. 8-23-11.)
(30 ILCS 550/1.9)
Sec. 1.9. Design-build contracts and Construction Manager/General Contractor contracts. This Act applies to any design-build contract or Construction Manager/General Contractor contract entered into under the Innovations for Transportation Infrastructure Act.
(Source: P.A. 102-1094, eff. 6-15-22.)
(30 ILCS 550/2) (from Ch. 29, par. 16)
Sec. 2. 
Every person furnishing material, apparatus, fixtures, machinery, or performing labor, either
as an individual or as a sub-contractor, hereinafter referred to as Claimant, for any contractor, with the
State, or a political subdivision thereof where bond or letter of
credit shall be executed as provided in this Act, shall have the right to
sue on such bond or letter of credit in the name of the State, or the
political subdivision thereof entering into such contract, as the case may
be, for his use and benefit, and in such suit the plaintiff shall file a
copy of such bond or letter of credit, certified by the party or parties in
whose charge such bond or letter of credit shall be, which copy shall,
unless execution thereof be denied under oath, be prima facie evidence of
the execution and delivery of the original; provided, however, that this
Act shall not be taken to in any way make the State, or the political
subdivision thereof entering into such contract, as the case
may be, liable to such sub-contractor, materialman or laborer to any
greater extent than it was liable under the law as it stood before the
adoption of this Act.
Provided, however, that any Claimant having a claim
for labor, material, apparatus, fixtures, and machinery furnished to the State shall have no such right of action
unless it shall have filed a verified notice of said claim with the
officer, board, bureau or department awarding the contract, within 180
days after the date of the last item of work or the furnishing of the
last item of materials, apparatus, fixtures, and machinery, and shall have furnished a copy of such verified
notice to the contractor within 10 days of the filing of the notice with
the agency awarding the contract.
When any  Claimant has a claim for labor, material, apparatus, fixtures, and machinery furnished to a political subdivision,  the Claimant shall have no right of action unless it shall have filed a verified notice of that claim with the Clerk or Secretary of the political subdivision within 180 days after the date of the last item of work or furnishing of the last item of materials, apparatus, fixtures, and machinery, and shall have filed a copy of that verified notice upon the contractor in a like manner as provided herein within 10 days after the filing of the notice with the Clerk or Secretary.
The Claimant may file said verified notice by using personal service or by depositing the verified notice in the United States Mail, postage prepaid, certified or restricted delivery return receipt requested limited to addressee only. The verified notice shall be deemed filed on the date personal service occurs or the date when the verified notice is mailed in the form and manner provided in this Section.
The claim shall be verified and shall contain
(1) the name and address of the claimant; the business address of the
Claimant within this State and if the Claimant shall be a foreign
corporation having no place of business within the State, the notice
shall state the principal place of business of said corporation and in
the case of a partnership, the notice shall state the names and
residences of each of the partners; (2) the name of the contractor for
the government; (3) the name of the person, firm or corporation by whom
the Claimant was employed or to whom he or it furnished materials, apparatus, fixtures, or machinery; (4)
 a brief description of the public
improvement; (5) a description of the Claimant's contract as it pertains to the public improvement, describing the work done by the Claimant and stating the total amount due and unpaid as of the date of verified notice.
No defect in the notice herein provided for shall deprive the
Claimant of his right of action under this article unless it shall
affirmatively appear that such defect has prejudiced the rights of an
interested party asserting the same.
Provided, further, that no action shall be brought later than one year after the date of the
furnishing of the last item of work, materials, apparatus, fixtures, or machinery by the Claimant. Such action shall be
brought only in the circuit court of this State in the judicial circuit in
which the contract is to be performed.
The remedy provided in this Section is in addition to and independent of
any other rights and remedies provided at law or in equity. A waiver of rights
under the Mechanics Lien Act shall not constitute a waiver of rights under this
Section unless specifically stated in the waiver.
For the purposes of this Section, the terms "material", "labor", "apparatus", "fixtures", and "machinery" include those rented items that are on the construction site and those rented tools that are used or consumed on the construction site in the performance of the contract on account of which the bond is given.
(Source: P.A. 101-65, eff. 1-1-20.)
(30 ILCS 550/3)
Sec. 3. Builder or developer cash bond or other surety.
(a) A county or municipality may not require a cash bond, irrevocable
letter of credit, surety bond, or letter of commitment issued by a bank,
savings and loan association, surety, or insurance company from a builder or
developer to
guarantee completion of a project improvement when the builder or developer
has filed with the county or municipal clerk a
current, irrevocable letter of credit, surety bond, or letter of commitment
issued by a bank, savings and loan association, surety, or insurance company,
deemed good and sufficient by the county or
municipality accepting such security, in an amount equal
to or greater than 110% of the amount of the bid on each project improvement.
A builder or developer has the option to utilize a
cash bond, irrevocable letter of credit,
surety bond, or letter of commitment, issued by a bank, savings and loan
association, surety, or insurance company, deemed good and
sufficient
by the county or municipality, to
satisfy any cash bond requirement established by a county or municipality.
Except for a municipality or county with a population of 1,000,000 or more,
the county or municipality must approve and deem a surety or
insurance company good and sufficient for the purposes set forth in this
Section if the surety or insurance company is authorized by the
Illinois Department of Insurance to sell and issue sureties in the State of
Illinois.
(b) If a county or municipality receives a cash bond, irrevocable letter
of credit, or surety bond from a builder or
developer to
guarantee completion of a project improvement, the county or municipality shall
(i) register
the bond under
the address of the project and the construction permit number and (ii) give the
builder or developer a receipt for the bond.  The county or municipality shall
establish and
maintain a separate account for all cash bonds received from builders and
developers to guarantee completion of a project improvement.
(c) The county or municipality shall refund a cash bond to a builder or
developer, or release the irrevocable letter of credit or surety bond,
within
60 days after the builder or developer notifies the county or municipality in
writing of the
completion of the project improvement for which the bond
was required.
For these purposes, "completion" means that the county or municipality has
determined
that the project improvement for which the bond was required is complete or a
licensed engineer or licensed architect has certified to the builder or
developer and the county or municipality that the project improvement has been
completed to the
applicable codes and ordinances.
The county or municipality shall pay interest to the builder or developer,
beginning 60 days
after the builder or developer notifies the county or municipality in writing
of the completion
of the
project improvement, on any bond not refunded to a builder or developer, at
the rate of 1%
per month.
(d) A home rule county or municipality may not require or maintain cash
bonds, irrevocable
letters of credit, surety bonds, or letters of commitment issued by a bank,
savings and loan association, surety, or insurance company
from builders
or developers in a manner inconsistent with this Section.  This Section supersedes
 and controls over other provisions of the Counties Code or
Illinois Municipal Code as they apply to and guarantee completion of a project
improvement that is required by the county or municipality, regardless of
whether the project improvement is a condition of annexation agreements.
This Section is a
denial and limitation under subsection (i) of Section
6 of Article VII of the Illinois Constitution on the concurrent exercise by a
home rule
county or municipality of powers and functions exercised by the State.
(Source: P.A. 96-1000, eff. 7-2-10.)