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This year will see a number of new surety regulations taking effect across the country. These will require contractors to obtain construction bonds or contractor license bonds in different amounts and adjust to new compliance standards implemented by sureties. Moreover, questions about the state of the economy and what contractors can expect in terms of government spending are also on the table and require attention.

What Can Contractors Expect of the Market in 2019?

Overall, the construction market seems to be at a point of "rounding the peak." According to a report issued by Dodge Data & Analytics, total construction starts this year will only increase marginally to around $808.3 billion from $806.8 billion in 2018.

While not much may change in 2019, the plateauing off of the market also signals a slow deceleration that is expected to occur within the next few years. For now, the market remains stable and robust, even if growth is limited.

The ongoing labor shortage remains the main concern for contractors, stopping them from achieving full capacity and making use of the available spending.  

Finally, contractors may also expect to face stricter compliance standards by sureties. With a series of major domestic and international defaults by contractors, surety underwriters have begun developing stricter procedures to ensure greater compliance and reduce defaults. As a result, contractors will be required to manage their operations more efficiently and stay within the limits of what they can do rather than try to bite off a bigger piece.

Bond Threshold Increases in 2019

On the regulatory front, contractors may expect a variety of new regulations this year. When it comes to bonding requirements specifically, several states have introduced legislation which, if adopted, would increase either contract bond amounts or the amounts of the licensing bonds for contractors. Here is an overview of some of the currently pending or already adopted new surety regulations.

North Dakota House Bill 1356

HB 1356, introduced in the beginning of January, would increase the public improvement construction threshold from $150,000 to $250,000. This includes both the threshold for bidding procedures for public improvement projects as well as for procuring plans, drawings and specifications for the execution of such a project. The bill is yet to pass various state committees before it is possibly enacted.

Virginia House Bill 2290

HB 2290 mirrors already existing law concerning Virginia higher education institutions. The bill was introduced in early January and has already passed several committees. Under the bill, James Madison University would have permission to require payment and performance bonds for construction projects that exceed $1 million. Among other things, the bill would require performance and payment bonds upward of that sum to be equal to the contract price. Given the progress the bill has made so far, it may soon be adopted though an effective date is yet not specified.

Wyoming House Bill 108

HB 108 specifies that the University of Wyoming, Wyoming community colleges and public corporations are all included in the state's Little Miller Act. In other words, any contracts with these entities that exceed $7,500 would require contractors to obtain the relevant contract surety bonds.

This has raised concerns that this will allow all tiers of subcontractors to file claims against prime contractors. Yet, this is already the case as the Wyoming Little Miller Act has already been interpreted in such a way. This bill will become effective on July 1, 2019.

West Virginia House Bill 2420

HB 2420, which was filed for introduction in mid-January creates a Mountaineer Trail Network Recreation Authority. The bill requires that for any goods and services contracts above $25,000 a performance bond is posted by vendors that is equal to at least 50 percent of the contract amount. While the bill is not exclusively targeted at contractors, it would also include construction activities. The bill was introduced in the senate in early February and is now expected to move through the Economic Development Authority and the judiciary.

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