Prepare For the Coming Surge in Florida Public Projects:

Understand How to Find Projects and Anticipate Potential Bonding Requirements

In times of economic recession, the government has historically increased spending to stimulate the economy. The American Recovery and Reinvestment Act is no exception with $787 billion in spending spread over two years. A significant portion of the funds are earmarked for spending on infrastructure. Although prime contracts on substantial public projects will fall outside the capacity of smaller contractors and subcontractors, stimulus funding will provide many opportunities on public projects for all contractors, no matter the size.

Economists predict that stimulus funding will result in federal, state and local projects. Opportunities exist for smaller contractors to obtain: (1) subcontracts on substantial state and local government projects; and (2) primary contracts on smaller projects. However, smaller contactors must be prepared by understanding how to find public projects at the state and local level and anticipating the potential bonding requirements on those projects.



Finding Public Projects

In Florida, state and local governments begin the construction contract process by soliciting competitive bids, requesting proposals or requesting qualifications. With the exception of emergencies, solicitation of bids or requests must be publicly advertised.

The method by which the State of Florida must advertise solicitation of competitive bids or proposals on state construction projects is based upon the projected cost of the project. Projects that are projected to cost more than $200,000 must be advertised once in the Florida Administrative Weekly (www.flrules.org) at least 21 days prior to the established bid opening.

Projects that are projected to cost more than $500,000 must be advertised in the Florida Administrative Weekly at least 30 days prior to the established bid opening, and at least once in a public newspaper of general circulation in the county where the project is located, at least 30 days prior to the established bid opening and at least five days prior to any scheduled prebid conference.

Similarly, county and local governments must advertise solicitation of competitive bids or proposals based upon the projected cost of the project. Local projects that are projected to cost more than $200,000 must be advertised at least once in a public newspaper of general circulation in the county where the project is located, at least 21 days prior to the established bid opening, and at least five days prior to any scheduled prebid conference. Local projects that are projected to cost more than $500,000 must be advertised in the same manner, but at least 30 days prior to the established bid opening.

Florida Public Notice provides an online database for members (www.floridapublicnotices.com) of public notices published in newspapers throughout Florida. Membership is free. Both Florida Law Weekly and Florida Public Notices provide an email notification service that allows members to indicate what types of notices are important, and automatically emails the member updates of those specific notices.

In addition, the Florida Office of Economic Recovery, with a website located at www.flarecovery.com, is charged with tracking the stimulus funding, ensuring the funds are spent quickly and with maximum efficiency, ensuring that communication within the state and to the public is open and clear, evaluating the progress of the funding and ensuring the funds are used for the intended purpose. The FOER website further provides general descriptions of major state and local projects.


Bonding Requirements on Public Projects

After contractors locate potential projects in the publicly advertised notices, one of the most important determinations is the extent to which a bond is required on the project. The solicitations for competitive bids, requests for proposals and requests for qualifications will identify the bonding requirements for the project.

In general, no payment or performance bond is required for a contract with the state of Florida in the amount of $100,000 or less. A contract with the state greater than $100,000 but not greater than $200,000 may be exempt from the payment and performance bond requirements by the proper state official.

A contract with a county, city, political subdivision or public authority in the amount of $200,000 or less may be exempted from the payment and performance bond requirements at the discretion of the official or board that awarded the contract. Alternatively, a contractor may provide security for the project in the form of an irrevocable letter of credit or other specific forms of security designated by the legislature.

The payment and performance bond must be obtained from a surety insurer licensed to do business in Florida. Before commencing work on the project, the primary contractor must provide the public entity with the executed bond and must record the bond in the public records of the county in which the project is located.

Recording the bond is a crucial step because it provides notice of the bond, and the information contained in the bond, to other contractors and suppliers on the project. If a contractor fails to record the bond in the public records or to include the required information, the contractor cannot later claim that suppliers and other contractors who failed to comply with the notice requirements are prevented from making claims against the bond.

The bond must also contain specific information related to the contractor, public entity, surety, project, description of the improvements and statutory notice and time requirements. The amount of the bond must be for the amount of the contract unless the contract is greater than $250 million. In that case, the bond should be for the greatest amount reasonably available but not less than $250 million.

In addition, the bond cannot restrict the types of potential claimants who are protected by the bond, such as laborers, suppliers or subcontractors. The bond will usually include a provision that awards the public entity attorney’s fees and costs if the contractor defaults.


Cautionary Measures for Public Bonds

Regardless of what the public entity requires or allows, contractors must take responsibility to follow the bond requirements outlined in the statute and ensure it has fulfilled its obligations. Failure to do so may result in problems for the contractor because almost all public contracts require that the contractor stand in the shoes of the government entity by providing a defense and paying any judgment in the event of a dispute.

As a cautionary measure, contractors should not rely upon employees of state and local governments for information regarding bond requirements. If a government employee makes a mistake with the bond or provides misinformation, the contractor, not the government entity, will pay for the mistake.

A recent example illustrates the point. A contractor provided a payment bond as part of its bid package to a county in Florida. The contractor’s bond was approved by the required department and the county attorney. The contractor won the bid and entered into the contract with the county. However, the bond was not issued by a surety licensed to do business in Florida, did not meet the requirements to qualify as an alternative method of security, and failed to contain all of the required information. Also, the county did not require that the contractor record the bond. After the job began, a dispute arose between a subcontractor and its material supplier. The material supplier sued the subcontractor, contractor, surety and the county. Not only did the contractor have to defend the county in the lawsuit because the bond was defective, but the contractor had to explain to the county why his bond did not protect the county and it was now a defendant in a lawsuit. Needless to say, this severely damaged the county’s relationship and trust with the contractor. Prudent contractors will ensure that their bonds meet the statutory requirements and protect their valued customer – the government entity.

The Boy Scout motto holds true for finding public projects arising out of the influx of stimulus funding from the American Recovery and Reinvestment Act: Be Prepared. Opportunities exist for smaller contractors and subcontractors who understand how to find public projects and anticipate the potential bonding requirements on those projects.

Bruce Loren & Associates is an AV-rated construction and business litigation law firm. Bruce Loren is Florida Bar Board Certified in Construction law and is a U.S. Green Building Council LEED Accredited Professional. If you have any questions about this article or any construction related issue, please contact Bruce Loren or Michael St. Jacques at bloren@lorenlawfirm.com or mstjacques@lorenlawfirm.com or call (561) 615-5701.