The Metropolitan Transit Authority of Harris County tentatively plans to use "parent guarantees" rather than performance bonds to make sure the four main companies involved in the project fulfill their obligations, Feibel wrote.
(Metro CEO Frank) Wilson said that the contract ensures the four parent companies share “joint and several liability” for the proper building of the new light rail system. “They have pledged their corporate assets,” he added.
An outside lawyer for Metro, Nancy Smith of the Nossaman law firm, said that Texas law allows an option for a public agency that cannot obtain performance bonds: In that case, the agency can assume the risk of its contractor failing to perform or to pay its subcontractors.
Metro chose this option, she said.
The decision, Feibel wrote, concerned the national surety industry, which provides the bonds for construction projects by public agencies. Local leaders, including mayoral candidate and Houston council member Peter Brown and Bill King, president of SureTec Insurance Company, questioned the move.
Metro President and CEO Frank J. Wilson told the Chronicle that he was complying with the state law but had to explore a different method because performance bonds for a $1.46 billion contract would be too expensive and difficult to obtain.
“We went out and got 100 percent performance bonds, just not in the traditional way,” he said. Bond underwriters object because they can't get business from the contract, he said.
More in today's Houston Area Asides over at Lose an Eye, It's a Sport.
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