Relating to bonds and letters of credit for general contractors and subcontractors

This bill relates to performance bonds and letters of credit for general contractors and subcontractors. The bill requires a general contractor or subcontractor, as defined in Code chapter 572 (mechanic’s lien), engaged in the business of construction, defined in the bill as the improvement of real property, including the performance of labor or furnishing of materials for the alteration, repair, or erection of a building or structure, in this state to obtain and maintain an annual performance bond or irrevocable letter of credit in the amount of $50,000. The bond or letter of credit shall be payable to the state of Iowa and executed by a surety company or financial institution authorized to do business in this state. The bill requires a bond or letter of credit required by the bill to be filed with the state. The bill allows the state or a political subdivision of the state 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 of Iowa for the use and benefit of a private person or political subdivision harmed by the contractor’s or subcontractor’s failure to perform contractual obligations or for violation of the bill or other applicable law. The bill limits the aggregate liability of a surety company or financial institution under a bond or letter of credit issued pursuant to the bill to the penal sum of the bond or the face amount of the letter of credit. The bill prohibits a general contractor or subcontractor from registering, renewing a registration, or conducting business as a general contractor or subcontractor unless the general contractor or subcontractor has a bond or letter of credit as required by the bill. The bill prohibits a political subdivision of the state from requiring, in connection with private construction work, a general contractor or subcontractor to obtain or file a bond, letter of credit, or other financial security, or the issuance of a license, or imposing a license fee or charge, except as otherwise required by law. The bill does not apply to a general contractor or subcontractor performing work for the state or a political subdivision of the state.