Washington, DC — Currently, 29 states in the United States prohibit the practice known as suretyship or owner-controlled surety. Most recently, several other states were added to the list including North Dakota and Nebraska. According to the National Association of Surety Bond Producers (NASBP) new legislation will prohibit public entities from directing contractors on public works projects to obtain surety bonds from specific surety bond producers or surety companies.

NASBP launched this initiative last year because of growing concerns about directed surety proposals that were presented to public owners for public construction projects.

Under directed surety programs, contractors are required to obtain bonds from designated sureties. According to NASBP, this requires contractors to provide detailed personal information and business financial information to surety producers or companies other than their own for the sake of a single project.

“Limiting a contractor’s ability to use its regular surety producer and company interferes with competitive bidding and runs contrary to the existence of a free and open marketplace. Passing laws, state-by-state, was the only answer,” said NASBP’s past president, James C. Pateidl.

For more information, go to www.nasbp.org (website).

Publication date: 07/16/2001