Performance Bond Changes Proposed by TN Department of General Sevices

The Tennessee Department of General Services has proposed to rewrite the current regulations for professional and consulting service contracts. The proposed rules would expand the details in the existing regulations concerning the requirement of bonds. Current regulations simply provide that proposal bonds and performance bonds may be required if deemed appropriate.The proposed rules are much more specific:

• The rules would provide that the Chief Procurement Officer would have the sole discretion to require proposal bonds and performance bonds.
• Further, surety bonds used as proposal bonds or performance bonds would have to be issued by a surety company licensed to do business in the State, and the rules would specify that the proposal bond would have to be in amount not to exceed 5% of the estimated value of the contract. The bond would be returned upon the award of the contract.
• The performance bond would have to be stated as a set amount or as a percentage of the contract value. The performance bond amount could be reduced proportionately based on the successful performance of the contract during the contract term.
• Performance bonds would have to be filed with the State of Tennessee within 14 calendar days after receipt of request by the Chief Procurement Officer or a Delegated State Agency.
• Personal checks would not be accepted. The Chief Procurement Officer would have to approve the terms of the proposal bond and the performance bond.
• Finally, the rules would eliminate the use of bid protest bonds, which are outlined in the current regulations, but not included in the revised rules.