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1 Michael C. Loulakis, et al., Legal Issues Involving Surety for Public Transportation Projects 1 (2012)

handle is hein.scsl/lissueptp0001 and id is 1 raw text is: July 2012 TRANSIT COOPERATIVE RESEARCH PROGRAM Sponsored by the Federal Transit Administration Responsible Senior Program Officer: Gwen Chisholm Smith Legal Research Digest 40 LEGAL ISSUES INVOLVING SURETY FOR PUBLIC TRANSPORTATION PROJECTS This report was prepared under TCRP Project J-5, Legal Aspects of Transit and Intermodal Transportation Programs, for which the Transportation Research Board is the agency coordinating the research. The report was prepared by Michael C. Loulakis, Esq., Capital Project Strategies, LLC; Shannon J. Briglia, Esq., BrigliaMcLaughlin, PLLC; and Lauren R McLaughlin, Esq., BrigliaMcLaughlin, PLLC. James B. McDaniel, TRB Counsel for Legal Research Projects, was the principal investigator and content editor. The Problem and Its Solution The nation's 6,000 plus transit agencies need to have access to a program that can provide authoritatively researched, specific, limited-scope studies of legal is- sues and problems having national significance and application to their business. Some transit programs involve legal problems and issues that are not shared with other modes; as, for example, compliance with transit-equipment and operations guidelines, FTA fi- nancing initiatives, private-sector programs, and labor or environmental standards relating to transit opera- tions. Also, much of the information that is needed by transit attorneys to address legal concerns is scattered and fragmented. Consequently, it would be helpful to the transit lawyer to have well-resourced and well- documented reports on specific legal topics available to the transit legal community. The Legal Research Digests (LRDs) are developed to assist transit attorneys in dealing with the myriad of initiatives and problems associated with transit start- up and operations, as well as with day-to-day legal work. The LRDs address such issues as eminent do- main, civil rights, constitutional rights, contracting, environmental concerns, labor, procurement, risk management, security, tort liability, and zoning. The transit legal research, when conducted through the TRB's legal studies process, either collects primary data that generally are not available elsewhere or per- forms analysis of existing literature. Applications Basically, a surety bond is where one has agreed to be liable for another's debt, default, or other obligation. Various types of surety bonds are used on transit proj- ects, each of which fulfills a specified purpose. They typically fall under one of four common categories: bid bonds, performance bonds, payment bonds, or warranty or maintenance bonds. Transit owners, like other owners of capital projects, use these bonds as a means of mitigating the risk of contractor default. Most often owners of large capital projects encounter unique problems when seeking surety bonds. Federal, state, and local laws require bonding at varying levels for construction and other types of cap- ital projects. In situations where bonding is not re- quired, a transit agency must decide whether, on its own authority, to require bonding or other surety in some form. More recently, problems have arisen re- garding the costs of obtaining surety, whether value is being received for the surety required, difficulties ob- taining surety for large or unusual projects, and mak- ing claims against sureties should problems arise with performance. This digest includes a review of applicable federal law, examples of state and local laws, and industry practices. The digest also examines surety issues and industry practices in various types of construction and other public transportation projects. The types of surety available, including performance, payment, and war- ranty bonds; letters of credit; and other instruments, are discussed. TRANSPORTATION RESEARCH BOARD OF THE NATIONAL ACADEMIES

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