Kelly, Cramer Introduce Bill to Ensure Federally Funded Water Projects are Completed On-Time and On-Budget

Today, Senators Mark Kelly (D-AZ) and Kevin Cramer (R-ND) introduced bipartisan legislation to improve project delivery and reduce risk of default on federally financed water infrastructure projects. The Water Infrastructure Subcontractor and Taxpayer Protection Act would require any primary contractor working on water infrastructure projects financed by federally guaranteed loans to hold a surety bond, which compensates local sponsors and sub-contractors if the contractor defaults before the project is completed.  

Water projects that are funded by the Environmental Protection Agency (EPA) through the state revolving loan funds already have surety bond requirements, and Arizona and North Dakota already require that surety bonds be used for state funded projects. However, public-private partnerships (P3s) financed by the Water Infrastructure Finance and Innovation Act (WIFIA) are currently exempt from these surety bond requirements. This bipartisan legislation would close that loophole — improving project delivery without increasing costs.  

“Local governments should not be left holding the bag when contractors don’t deliver. That’s why Sen. Cramer and I introduced legislation to ensure water projects financed by taxpayer dollars have the necessary protections to ensure timely completion, helping to improve water security in Arizona communities,” said Sen. Kelly.   

“North Dakotans know just how important public-private partnerships are to large scale infrastructure projects. They can bolster and protect local communities, but taxpayers should be confident their money will not be lost,” said Senator Cramer. “We must work to close existing loopholes in federal law to protect not just American taxpayers, but local small business contractors and workers who make these projects possible.” 

“The American Subcontractors Association (ASA) proudly supports this important bipartisan legislation because our contractor members witness firsthand the importance of financial securities such as performance and payment bonds on construction projects. These bonds assure that a contractor is qualified to perform the obligations in the award and serve as protection for the public agencies in case the contractor fails to meet their obligations under the contract,” said Gloria Hale and Courtney Little, ASA Government Relations Committee Chairs. 

“In the new infrastructure bill, many minority-owned contracting businesses often are looking to serve as subcontractors on multi-million dollar public construction projects. As they take capital risks to deliver much needed infrastructure improvements, they deserve continued protection.” said Wendell Stemley, President of the National Association of Minority Contractors. “The Water Infrastructure Subcontractor and Taxpayer Protection Act ensures critical protections for all workers, including minority workers, suppliers and contractors. This bipartisan solution will ensure common payment and performance protections are in place for developers, general contractors to women and minority owned business enterprises (WMBEs), and disadvantaged business enterprise (DBE) sub-contractors & suppliers to safeguard our nation’s small business construction community.” 

“As the U.S. tackles critical water infrastructure projects nationwide, bonding for private-public partnerships is essential to ensure that projects utilizing the Water Infrastructure Finance and Innovation Act meet the same standards Congress passed for the TIFIA program: that taxpayers are protected, small business subcontractors and workers are protected, and projects are completed,” said Nat Wienecke, Senior Vice President, Federal Government Relations, American Property Casualty Insurance Association. 

“Bonding WIFIA financed P3 projects will protect taxpayers’ dollars, ensure project completion, protect local small business contractors and workers, and promote economic growth,” said Lee Covington, President and CEO of the Surety and Fidelity Association of America. “WIFIA should be modernized to include the same payment and performance requirements that protect all other federally funded infrastructure projects.” 

“Water infrastructure projects are vital to our nation’s economy and should be performed by qualified construction firms without undue risk to taxpayer funds and the businesses performing as subcontractors and suppliers,” remarked Mark McCallum, Chief Executive Office of the National Association of Surety Bond Producers (NASBP). “While the means to fund and/or finance water infrastructure projects, such as the WIFIA Program, has evolved over time, the critical need to protect taxpayer dollars and the downstream businesses supplying labor and materials remains constant. NASBP looks forward to working with Senators Kelly and Cramer to advance this important piece of legislation.” 

Background:  

The EPA’s WIFIA program provides low-interest financing for large water projects. WIFIA projects, often funded by public-private partnerships, do not require the primary contractor to hold a surety bond. Projects without surety bonds are ten times more likely to default, which typically results in significantly higher costs and delays. That’s why primary contractors on any transportation infrastructure project receiving federal funding are required to hold a surety bond. Kelly and Cramer’s bill would close that loophole for federally financed water infrastructure projects. Companion legislation has been introduced in the House of Representatives by Congressmen Stephen F. Lynch (D-MA) and Troy Balderson (R-Ohio). In 2021, Kelly co-sponsored similar legislation to require surety bonds for federally financed transportation projects.