Warranty & Performance Surety Information
For more than two years, the City of Meridian has been evaluating its warranty process for development of new infrastructure. In some instances the City has been required to repair defects at its own expense on new developer-donated projects during the warranty period. As a result, important changes have been made to the development process in the City of Meridian. Beginning on January 1, 2012, all new land development projects will need to comply with new performance and warranty surety requirements. These requirements include:
Warranty Period and Surety Changes:
- All project warranty periods for infrastructure being donated to or accepted by the City will be extended from one year to two years in length
- The City will perform project warranty inspections of all projects during the Warranty Period
- Owners/developers shall provide the City a Warranty Surety for 20% of the actual construction cost of the infrastructure prior to the City’s acceptance of the infrastructure
- Acceptable forms of surety: warranty bond, letter of credit, cash, or cash equivalent
Performance Surety Changes:
- The Performance Surety amount for public infrastructure improvements has increased from 110% to 125% of the contractor’s itemized bid. Non-life safety improvements shall remain at the 110% level.
- Acceptable forms of surety: performance bond, letter of credit, cash, or cash equivalent
To further explain the process, the City will be offering an informational meeting for the developing community. This meeting will be held from 4:30-6:00 PM on December 7, 2011, at the Meridian City Hall Conference Rooms A & B. City staff, as well as bond and insurance specialists, will be on hand to answer any questions you may have. If you are unable to attend this meeting, there is information on our website or you may contact me directly.
Background: Need for change
In 2008, Public Works maintenance staff began reporting an increased number of deficiencies on newly installed infrastructure installed by private developers and turned over to the City. Staff reviewed the information and the Department instituted a utility infrastructure warranty inspection program to study the scope of the problem. Over the following 18 months, several projects were found to be out of compliance with Meridian utility specifications after acceptance but during the warranty period. In some of these cases, the City had to repair the problems at its expense because the responsible party was either unwilling or unable to correct the deficiencies during the warranty period. These situations resulted in a review of the City’s Project Surety Program. The broad findings of this review follow:
- The City of Meridian does not currently require the posting of a surety to cover the warranty period following the completion of construction of private development projects. This has proven to be problematic and costly for the City in those circumstances where a contractor or owner of a project is financially unable or unwilling to address warranty deficiencies.
- The one-year warranty period is not sufficient for adequately testing the efficacy of the infrastructure.
- The City’s Unified Development Code (UDC) Performance Surety Amount of 110% is not adequate to cover additional cost factors like bid variability, economic/inflationary factors, project management/administrative costs, rework costs, construction contingencies or project timing costs associated with completion of the project.
In light of these concerns, the Public Works Department assembled a team of individuals from several City divisions and departments as well as industry experts from the bonding, insurance and legal fields to gather information, answer questions and provide recommendations to the group. The Department also developed a stakeholder focus group comprised of a number of large land developers with whom several meetings were held to refine the proposal. Additionally, the Department conducted a regional benchmarking study of 25 northwest entities comprised of 19 regional cities, five highway districts, and one sewer district to identify the surety practices to further strengthen the proposal. The Workgroup tried to identify areas where the City might be unreasonably exposed to financial burdens resulting from performance or warranty failures on projects where utility infrastructure was built for or donated to the City. Nearly 40 meetings were held to discuss the issues, find solutions and chart a path forward. In addition to meeting with the Building Contractors Association (BCA) twice, several public comment opportunities and hearings took place with the Planning and Zoning Commission and the City Council. The ordinance enabling the changes takes effect on January 1, 2012.
Implementation:
Owners/developers will need to be prepared for these changes to avoid delays in moving land development projects through the City approval process. To this end, the City has developed the enclosed materials to assist you with understanding these changes and how they might impact your development projects. Enclosed please find:
For additional information please contact:
Bruce Freckleton
Development Services Manager
City of Meridian
33 E. Broadway Avenue, Suite 102
Meridian, Idaho 83642
bfreckleton@meridiancity.org
208.887.2211