(a) When required and amounts.--For construction contracts awarded for amounts between $25,000 and $100,000, the purchasing agency shall require contract performance security, in an amount equal to at least 50% of the contract price, as the purchasing agency in its discretion determines necessary to protect the interests of the Commonwealth. When a construction contract is awarded in excess of $100,000, the following bonds shall be delivered to the purchasing agency and shall be binding on the parties upon the execution of the contract:

(1) A performance bond, executed by a surety company authorized to do business in this Commonwealth and made payable to the Commonwealth, in an amount equal to 100% of the price specified in the contract and conditioned upon the faithful performance of the contract in accordance with the plans, specifications and conditions of the contract.

(2) A payment bond, executed by a surety company authorized to do business in this Commonwealth and made payable to the Commonwealth, in an amount equal to 100% of the price specified in the contract and conditioned upon the prompt payment for all materials furnished or labor supplied or performed in the prosecution of the work. Labor or materials include public utility services and reasonable rentals of equipment for the periods when the equipment is actually used at the site.

(b) Protection.--A performance bond shall be solely for the protection of the purchasing agency which awarded the contract. A payment bond shall be solely for the protection of claimants supplying labor or materials to the prime contractor to whom the contract was awarded or to any of its subcontractors in the prosecution of the work provided for in the contract, whether or not the labor or materials constitute a component part of the construction.

(c) Authority to require additional bonds.--Nothing in this section shall be construed to limit the authority of the Commonwealth agency to require a performance bond, payment bond or other security in addition to those bonds or in circumstances other than specified in subsection (a).

(d) Actions on payment bonds.--

(1) Subject to paragraph (2), any claimant who has performed labor or furnished material in the prosecution of the work provided for in any contract for which a payment bond has been given under subsection (a) and who has not been paid in full before the expiration of 90 days after the day on which the claimant performed the last of the labor or furnished the last of the materials for which it claims payments may bring an action on the payment bond in its own name, in assumpsit, to recover any amount due it for the labor or material and may prosecute the action to final judgment and have execution on the judgment.

(2) Any claimant who has a direct contractual relationship with any subcontractor of the prime contractor who gave the payment bond but has no contractual relationship, express or implied, with the prime contractor may bring an action on the payment bond only if it has given written notice to the contractor within 90 days from the date on which the claimant performed the last of the labor or furnished the last of the materials for which it claims payment, stating with substantial accuracy the amount and the name of the person for whom the work was performed or to whom the material was furnished.

(3) Notice shall be served by registered mail in an envelope addressed to the contractor at any place where its office is regularly maintained for the transaction of business or served in any manner in which legal process may be served in the manner provided by law for the service of a summons except that the service need not be made by a public officer.

(e) Adjustment of threshold amount.--The dollar thresholds set forth in subsection (a) shall be adjusted annually by the department to reflect the annual percentage change in the Composite Construction Cost Index of the United States Department of Commerce occurring in the one-year period ending on December 31 of each year.

(Dec. 3, 2002, P.L.1147, No.142, eff. imd.)

2002 Amendment. Act 142 amended subsec. (e).

Cross References. Section 903 is referred to in section 533 of this title.