SESSION OF 2002

SUPPLEMENTAL NOTE ON HOUSE BILL NO. 2677

As Amended by House Committee on

Ethics and Elections

Brief*

       HB 2677 prohibits either a public official or a contract from requiring a contractor or subcontractor to obtain a surety bond or any other bond from a specific vendor.

Background

       Representative Hermes sponsored the bill.

       Representatives from the Kansas Contractor’s Association, Inc.; Koger Agency, Inc.; Chubb Insurance Company; Thomas McGee, L.C.; Zurich North America Surety; and Associated General Contractors of Kansas, Inc., testified as proponents of the bill. They testified that the bill, as introduced, would prohibit public agencies from using “directed surety” which occurs when an owner designates a specific surety company from which contractors must obtain surety bonds for a specific project. Directed surety reduces competition, invites favoritism and abuse, and interferes with the established, confidential relationship between the prime contractor and its chosen surety and producer. The conferees did not know of an instance in Kansas where an owner required a certain bond company to provide the surety bond, but they noted that it had occurred in Nebraska. The conferees said the federal government prohibits directed surety on federal projects and that 29 states prohibit such practice.

       No opponents testified before the Committee.

       The Committee amended the bill to include other types of bonds besides surety bonds.

       According to the Division of the Budget, the bill as introduced would have no fiscal impact.

*Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.kslegislature.org/cgi-bin/index.cgi