State of Illinois
2021 and 2022


Introduced 2/9/2021, by Sen. Linda Holmes


30 ILCS 550/1  from Ch. 29, par. 15

    Amends the Public Construction Bond Act. Provides that no retainage may be withheld by a unit of local government from a contractor who furnishes the bond or bond substitute required by the Act, nor may a contractor withhold retainage from its subcontractors.

LRB102 11407 RJF 16740 b






SB0178LRB102 11407 RJF 16740 b

1    AN ACT concerning finance.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 5. The Public Construction Bond Act is amended by
5changing Section 1 as follows:
6    (30 ILCS 550/1)  (from Ch. 29, par. 15)
7    Sec. 1. Except as otherwise provided by this Act, all
8officials, boards, commissions, or agents of this State, or of
9any political subdivision thereof, in making contracts for
10public work of any kind costing over $50,000 to be performed
11for the State, or of any political subdivision thereof, shall
12require every contractor for the work to furnish, supply and
13deliver a bond to the State, or to the political subdivision
14thereof entering into the contract, as the case may be, with
15good and sufficient sureties. The surety on the bond shall be a
16company that is licensed by the Department of Insurance
17authorizing it to execute surety bonds and the company shall
18have a financial strength rating of at least A- as rated by
19A.M. Best Company, Inc., Moody's Investors Service, Standard &
20Poor's Corporation, or a similar rating agency. The amount of
21the bond shall be fixed by the officials, boards, commissions,
22commissioners or agents, and the bond, among other conditions,
23shall be conditioned for the completion of the contract, for



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1the payment of material, apparatus, fixtures, and machinery
2used in the work and for all labor performed in the work,
3whether by subcontractor or otherwise.
4    If the contract is for emergency repairs as provided in
5the Illinois Procurement Code, proof of payment for all labor,
6materials, apparatus, fixtures, and machinery may be furnished
7in lieu of the bond required by this Section.
8    Each such bond is deemed to contain the following
9provisions whether such provisions are inserted in such bond
10or not:
11    "The principal and sureties on this bond agree that all
12the undertakings, covenants, terms, conditions and agreements
13of the contract or contracts entered into between the
14principal and the State or any political subdivision thereof
15will be performed and fulfilled and to pay all persons, firms
16and corporations having contracts with the principal or with
17subcontractors, all just claims due them under the provisions
18of such contracts for labor performed or materials furnished
19in the performance of the contract on account of which this
20bond is given, when such claims are not satisfied out of the
21contract price of the contract on account of which this bond is
22given, after final settlement between the officer, board,
23commission or agent of the State or of any political
24subdivision thereof and the principal has been made.".
25    Each bond securing contracts between the Capital
26Development Board or any board of a public institution of



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1higher education and a contractor shall contain the following
2provisions, whether the provisions are inserted in the bond or
4    "Upon the default of the principal with respect to
5undertakings, covenants, terms, conditions, and agreements,
6the termination of the contractor's right to proceed with the
7work, and written notice of that default and termination by
8the State or any political subdivision to the surety
9("Notice"), the surety shall promptly remedy the default by
10taking one of the following actions:
11        (1) The surety shall complete the work pursuant to a
12    written takeover agreement, using a completing contractor
13    jointly selected by the surety and the State or any
14    political subdivision; or
15        (2) The surety shall pay a sum of money to the obligee,
16    up to the penal sum of the bond, that represents the
17    reasonable cost to complete the work that exceeds the
18    unpaid balance of the contract sum.
19    The surety shall respond to the Notice within 15 working
20days of receipt indicating the course of action that it
21intends to take or advising that it requires more time to
22investigate the default and select a course of action. If the
23surety requires more than 15 working days to investigate the
24default and select a course of action or if the surety elects
25to complete the work with a completing contractor that is not
26prepared to commence performance within 15 working days after



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1receipt of Notice, and if the State or any political
2subdivision determines it is in the best interest of the State
3to maintain the progress of the work, the State or any
4political subdivision may continue to work until the
5completing contractor is prepared to commence performance.
6Unless otherwise agreed to by the procuring agency, in no case
7may the surety take longer than 30 working days to advise the
8State or political subdivision on the course of action it
9intends to take. The surety shall be liable for reasonable
10costs incurred by the State or any political subdivision to
11maintain the progress to the extent the costs exceed the
12unpaid balance of the contract sum, subject to the penal sum of
13the bond.".
14    The surety bond required by this Section may be acquired
15from the company, agent or broker of the contractor's choice.
16The bond and sureties shall be subject to the right of
17reasonable approval or disapproval, including suspension, by
18the State or political subdivision thereof concerned. In the
19case of State construction contracts, a contractor shall not
20be required to post a cash bond or letter of credit in addition
21to or as a substitute for the surety bond required by this
23    No retainage may be withheld by a unit of local
24government, as specified under Section 2 of the Local
25Government Prompt Payment Act, from a contractor who furnishes
26the bond or bond substitute required by this Act, nor may a



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1contractor withhold retainage from its subcontractors.
2    When other than motor fuel tax funds, federal-aid funds,
3or other funds received from the State are used, a political
4subdivision may allow the contractor to provide a
5non-diminishing irrevocable bank letter of credit, in lieu of
6the bond required by this Section, on contracts under $100,000
7to comply with the requirements of this Section. Any such bank
8letter of credit shall contain all provisions required for
9bonds by this Section.
10    For the purposes of this Section, the terms "material",
11"labor", "apparatus", "fixtures", and "machinery" include
12those rented items that are on the construction site and those
13rented tools that are used or consumed on the construction
14site in the performance of the contract on account of which the
15bond is given.
16(Source: P.A. 101-65, eff. 1-1-20.)