Bills › 91st General Assembly
Relating to bonds for general contractors
Sponsored by the Senate Local Government Committee
Where it is now
- Done: IntroducedFebruary 18, 2025
- Done: SubcommitteeFebruary 18, 2025
- Done: Senate committeeMarch 6, 2025
- Skipped: Passes the SenateContinued as SF 2376
- Next: House committee
- Next: Passes the House
- Next: To the Governor
- Next: Signed into law
Became SF 2376 → Its progress continues under the new number. Go to SF 2376 What’s a funnel?
What’s in it
AI summary General contractors working in Iowa must get a $50,000 performance bond before they start any work. This rule applies to private projects but does not affect contractors working for the state or local governments. Local governments are also not allowed to require extra bonds for private work beyond what this law says.1
Read the official explanation
This bill requires a general contractor, defined as a person who does work or furnishes materials by contract, express or implied, with an owner, to obtain a performance bond payable to the person for whom the general contractor is performing work in the amount of $50,000 prior to performing any work in this state. The bill does not apply to a general contractor performing work for the state or a political subdivision of the state, including a general contractor subject to state agency competitive bidding requirements. The bill prohibits a county, city, township, or school district from requiring that a general contractor file a bond for private work other than as required by the bill.
Why it matters. General contractors performing work in Iowa would be required to obtain a $50,000 performance bond before starting any projects. Local governments, such as cities, counties, townships, and school districts, would be prohibited from requiring additional bonds for private work beyond this requirement.2
Changed since by amendment S-5044; see Amendments.
Senate subcommittee
Named January 15, 2026. On January 22, 2026 it recommended passage.
Three legislators hear a bill first and recommend what the committee should do; it’s the best time to weigh in. How to take part
Fiscal note
AI summary This bill requires in-state general contractors and subcontractors to obtain an annual performance bond or letter of credit of $50,000 filed with the state. It is estimated to increase costs to the Licensing and Regulation Fund by approximately $734,000 in fiscal year 2027 due to new staff positions and a one-time $10,000 programming cost. For fiscal year 2028 and beyond, the estimated annual cost to the fund is approximately $724,000.4
Read the fiscal note
Description
Senate File 2376 relates to bonds and letters of credit for general contractors and subcontractors and does the following:
- Requires general contractors and subcontractors that engage in the business of construction in the State to obtain and maintain an annual performance bond or irrevocable letter of credit in the amount of $50,000 filed with and payable to the State.
- Authorizes the State or a political subdivision to enforce the requirements of the Bill in connection with private construction work within its jurisdiction and to bring an action on the bond or letter of credit in the name of the State for the use and benefit of a private person or political subdivision harmed by the failure to perform contractual obligations or for other violations.
- Authorizes political subdivisions to require a contractor or subcontractor to obtain or file a bond, letter of credit, or other financial security only for private construction work that is performed in a public-right-of-way.
This Bill does not apply to a general contractor or subcontractor performing work for the State or a political subdivision, including work subject to the requirements of Iowa Code chapter 8A, subchapter III.
Background
Under current law, in-state general contractors and subcontractors that engage in the business of construction in the State are not required to obtain and maintain an annual performance bond or irrevocable letter of credit with the State. Out-of-state contractors are required to hold a surety bond in the amount of $25,000.
According to the Department of Inspections, Appeals, and Licensing (DIAL), there are approximately 19,900 in-state contractors and 816 out-of-state contractors, for a total of approximately 20,716 contractors.
Assumptions
- The DIAL will not need to make any changes to its current licensing system.
- According to the DIAL, the Administrative Licensing and Inspection Governance Network (ALIGN) system, which is currently being built, will require additional functionality that is not currently planned for. The DIAL estimates that these changes will cost approximately $10,000.
- According to the DIAL, entering the annual performance bonds and irrevocable letters of credit into the ALIGN system will require 2.5 Administrative Support Assistant 3 full-time equivalent (FTE) positions at an annual cost of $55,000 each. The 2.5 Administrative Support Assistant 3 FTE positions will cost approximately $138,000 annually.
- According to the DIAL, it is estimated that 10.0% of in-state contractors will go through an investigation, hearing, or revocation process.
- According to the DIAL, it is estimated that the investigation, hearing, and revocation process work will require 8.0 Investigator 2 FTE positions.
- Each Investigator 2 FTE position will cost approximately $73,000 annually. The 8.0 Investigator 2 FTE positions will cost $586,000 annually.
- No additional revenue will be generated as a result of this Bill.
- The funding source will be the Licensing and Regulation Fund (LRF).
Fiscal Impact
Senate File 2376 is estimated to increase costs in FY 2027 to the Licensing and Regulation Fund by approximately $734,000 for 10.5 additional FTE positions and a one-time programming cost of $10,000 to the ALIGN system. The costs for FY 2028 and thereafter will be approximately $724,000 annually.
Source
- Department of Inspections, Appeals, and Licensing
- Contractor Bond Requirements · March 18, 2026 · $724,000
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91st General Assembly