34-608. Bid security for design-build and job-order-contracting construction services

A. As a guarantee that the contractor will enter into a contract, bid security is required for all design-build construction services and all job-order-contracting construction services awarded by an agent by competitive sealed proposals pursuant to section 34-603, subsection F or 34-604, subsection F if the agent estimates that the budget for construction, excluding the cost of any finance services, maintenance services, operations services, design services, preconstruction services or other related services, will be more than the amount prescribed in section 41-2535, subsection D. Each proposal for design-build construction services or job-order-contracting construction services shall be accompanied by a certified check, cashier's check or surety bond. The bid security amount for design-build construction services shall be an amount equal to ten per cent of the agent's budget for construction, excluding any finance services, maintenance services, operations services, design services, preconstruction services or other related services, for the project as stated in the request for proposals. The bid security amount for job-order-contracting construction services shall be the amount determined by the agent and stated in the request for proposals and shall not be more than ten per cent of the agent's reasonably estimated budget for construction that the agent believes is likely to actually be done during the first year of the job-order-contracting contract, excluding any finance services, maintenance services, operations services, design services, preconstruction services or other related services that are included in the contract.

B. The agent shall return the certified check, cashier's check or surety bond to the contractors whose proposals are not accepted and to the successful contractor on the execution of satisfactory payment and performance bonds, insurance and the contract as provided in this chapter.

C. Notwithstanding any other statute, the surety bond shall be executed solely by a surety company or companies holding a certificate of authority to transact surety business in this state issued by the director of the department of insurance pursuant to title 20, chapter 2, article 1. The bond shall not be executed by an individual surety or sureties, even if the requirements of section 7-101 are satisfied.

D. The conditions and provisions of the surety bond regarding the surety's obligations shall follow the following form:

Now, therefore, if the obligee accepts the proposal of the principal and the principal enters into a contract with the obligee in accordance with the terms of the proposal and gives the bonds and certificates of insurance as specified in the standard specifications with good and sufficient surety for the faithful performance of the contract and for the prompt payment of labor and materials furnished in the prosecution of the contract, or in the event of the failure of the principal to enter into the contract and give the bonds and certificates of insurance, if the principal pays to the obligee the difference not to exceed the penalty of the bond between the amount specified in the proposal and any larger amount for which the obligee may contract in good faith with another party to perform the work covered by the proposal, this obligation is void. Otherwise it remains in full force and effect. Provided, however, that this bond is executed pursuant to section 34-608, Arizona Revised Statutes, and all liabilities on this bond shall be determined in accordance with the provisions of the section to the extent as if it were copied at length in this agreement.

E. If the request for proposals requires security, noncompliance requires that the agent reject the proposal for noncompliance with the security requirement, unless the agent determines that the bid fails to comply in a nonsubstantial manner with the security requirements.

F. After the agent opens the proposals, the proposals are irrevocable for the period specified in the request for proposals, except as provided in section 34-603, subsection F or section 34-604, subsection F. If a proposer is permitted to withdraw its proposal before award, no action may be had against the proposer or the bid security.

G. All bonds given by a contractor and surety pursuant to this section, regardless of their actual form, are deemed by law to be the form required and set forth in this section.