PFA Eases Bond Requirement for Smaller Construction Projects

In a special meeting on Monday, the board of the Public Finance Authority voted to raise the threshold for requiring bonds on construction projects, easing the burden on smaller contractors to meet the PFA's requirement for certain projects.

Previously, all projects above $250,000 have required contractors to be bonded — a type of financial assurance that provides a guarantee to the project owner that the contractor will perform the work in accordance with the terms, conditions, and timelines of the contract.

However, according to staff counsel Lorelei Farrington, the PFA has moved from mostly procuring professional services to the addition of procurement construction projects, due to the addition of the Office of Disaster Recovery as a division of the PFA.

The changing nature of the PFA’s work has necessitated the upward adjustment in the bond threshold. Using the example of the EnVIsion Tomorrow program, where hurricane-damaged homes are reconstructed and rehabilitated, Ms. Farrington said that the small contractors attracted to projects such as these, which generally cost below $350,000, often have difficulty securing bonding. Ms. Farrington explained that most bonding companies consider working capital above all else, and they “tend to believe that contractors, especially the smaller ones, have issues with cash and liquidity. Therefore, a small contractor with a negative working capital will have a very difficult time obtaining bonds from the performance bond companies.”