Arizona § 41-2574 - Contract performance and payment bonds

§ 41-2574. Contract performance and payment bonds

A. The following bonds or security is required and is binding on the parties to the contract if the value of a construction award exceeds the amount established by section 41-2535:

1. A performance bond that is executed and furnished as required under title 34, chapter 2, article 2 or chapter 6, as applicable, in an amount equal to one hundred percent of the price specified in the contract conditioned on the faithful performance of the contract in accordance with the plans, specifications and conditions of the contract, except that:

(a) For job-order-contracting construction services, the performance bond shall cover the full amount of construction under the job-order-contracting construction services contract, shall not include any design services, preconstruction services, finance services, maintenance services, operations services or other related services included in the contract, may be a single bond for the full term of the contract, a separate bond for each year of a multiyear contract or a separate bond for each job order, as determined by the purchasing agency, and, if a single bond for the full term of the contract or a separate bond for each year of a multiyear contract, shall initially be based on the purchasing agency's reasonable estimate of the amount of construction that the purchasing agency believes is likely to actually be done during the full term of the contract or during the particular year of a multiyear contract, as applicable.

(b) For construction-manager-at-risk construction services and design-build construction services, the amount of the performance bond shall be the price of construction and shall not include the cost of any design services, preconstruction services, finance services, maintenance services, operations services and other related services included in the contract.  This bond is solely for the protection of this state.  The conditions and provisions of the performance bond regarding the surety's obligations shall follow the form required under section 34-222, subsection G or section 34-610, subsection G, as applicable.

2. A payment bond that is executed and furnished as required by title 34, chapter 2, article 2 or chapter 6, as applicable, in an amount equal to one hundred percent of the price specified in the contract for the protection of all persons supplying labor or material to the contractor or its subcontractors for the performance of the construction provided for in the contract, except that:

(a) For job-order-contracting construction services, the payment bond shall cover the full amount of construction under the job-order-contracting construction services contract, shall not include any design services, preconstruction services, finance services, maintenance services, operations services or other related services included in the contract, may be a single bond for the full term of the contract, a separate bond for each year of a multiyear contract or a separate bond for each job order, as determined by the purchasing agency, and, if a single bond for the full term of the contract or a separate bond for each year of a multiyear contract, shall initially be based on the purchasing agency's reasonable estimate of the amount of construction that the purchasing agency believes is likely to actually be done during the full term of the contract or during the particular year of a multiyear contract, as applicable.

(b) For construction-manager-at-risk construction services and design-build construction services, the amount of the payment bond shall be the price of construction and shall not include the cost of any design services, preconstruction services, finance services, maintenance services, operations services or other related services included in the contract.  The conditions and provisions of the payment bond regarding the surety's obligations shall follow the form required under section 34-222, subsection F or section 34-610, subsection F, as applicable.

B. For design-bid-build construction, the bonds prescribed in subsection A of this section shall be provided on and at the same time as execution of the construction contract.  For construction-manager-at-risk, design-build and job-order-contracting construction services, the bonds prescribed in subsection A of this section shall be provided only on and at the same time as execution of a contract or an amendment to a contract that commits the contractor to provide construction for a fixed price, guaranteed maximum price or other fixed amount within a designated time frame.

C. If the prime contract or specifications require any persons supplying labor or materials in the prosecution of the work to furnish payment or performance bonds, these bonds 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 and financial institutions pursuant to title 20, chapter 2, article 1. Notwithstanding any other statute, the bonds shall not be executed by an individual surety or sureties, even if the requirements of section 7-101 are satisfied.