HR0234LRB097 11386 PJG 53682 r

1
HOUSE RESOLUTION

 
2    WHEREAS, Small business growth is at the heart of any
3economic recovery as most new jobs are created by small
4businesses; and
 
5    WHEREAS, Minority-owned and women-owned small businesses
6(M/WBEs) are particularly important drivers of job growth for
7African-Americans and Latinos who experience
8disproportionately high unemployment rates; and
 
9    WHEREAS, It has long been a strategic objective of the
10State of Illinois to support the development of minority-owned
11and women-owned businesses through the M/WBE programs for State
12procurement, particularly in construction; and
 
13    WHEREAS, During the recent credit crunch, one of the single
14largest barriers to growth for women-owned and minority-owned
15construction businesses has been bonding requirements and the
16very stringent financial terms imposed upon M/WBE businesses by
17the bonding companies; and
 
18    WHEREAS, It is not uncommon for a bonding company to
19require a construction company to deposit half the amount of
20the total value of a construction contract in an escrow account
21in order for the bonding company to sell to the construction

 

 

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1company a performance bond for the project; and
 
2    WHEREAS, As M/WBE construction firms tend not to be heavily
3capitalized, the rates charged to the M/WBE firms by the
4bonding companies tend to be far higher than the rates charged
5to large legacy firms; and
 
6    WHEREAS, The purpose of a bond requirement is to
7financially reimburse the State in the event of default by the
8construction company, not to suppress competition or enrich
9bond companies; and
 
10    WHEREAS, There may be more efficient alternative methods to
11protect the State from any financial loss in the event of lack
12of performance by M/WBE firms on a construction project; and
 
13    WHEREAS, The members of the Federation of Women Contractors
14believe that the current state of the bond market and the bond
15requirements are among very significant impediments to growth;
16therefore, be it
 
17    RESOLVED, BY THE HOUSE OF REPRESENTATIVES OF THE
18NINETY-SEVENTH GENERAL ASSEMBLY OF THE STATE OF ILLINOIS, that
19the Department of Commerce and Economic Opportunity consider
20whether a surety program successfully administered years ago be
21resurrected in order to provide a financial guarantee to

 

 

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1bonding companies for projects conducted by M/WBE firms in
2order to lower the costs to M/WBE firms and increase their
3access to capital; and be it further
 
4    RESOLVED, That the Department of Insurance, which
5regulates bond issuing companies, consider how it can help
6identify and encourage bond companies to participate in a
7program for M/WBE construction firms; and be it further
 
8    RESOLVED, That the Department of Transportation and the
9Capital Development Board review their bonding requirements
10for M/WBE participants in light of the actual number of
11defaults by M/WBE companies over the last 5 years to determine
12whether the bonding requirements are more stringent than
13necessary to protect against risk; and be it further
 
14    RESOLVED, That the Department of Commerce and Economic
15Opportunity, the Department of Insurance, the Department of
16Transportation, and the Capital Development Board report to the
17General Assembly with recommendations to reform bonding
18requirements for M/WBE firms in public construction projects by
19January 15, 2012.