From the industry association representing companies that provide sureties and other bonds, released May 26, 2014:
For Immediate Release: May 26, 2014
Recent remarks by Nick McGrath, Minister of Transportation and Infrastructure for Newfoundland and Labrador about the use of surety bonds on public projects are completely preposterous. So says Steve Ness, the President of the Surety Association of Canada.
“Mr. McGrath clearly doesn’t understand surety bonds; nor does he comprehend how they work to protect public construction buyers from serious losses.” said Ness. His comments were made in response to a statement made by Minister McGrath following the ministry’s decision to release Humber Valley Paving from its obligations to complete an unfinished project without making a claim on its performance surety bond. The government instead opted to see to the completion itself and has now retendered the uncompleted portion of the project. In explaining this controversial decision, McGrath stated: "If I had called in the bonds, I would not have got the job done on time and on budget," [sic (comma in original)]
In dismissing McGrath’s claim, the Surety Association of Canada pointed out that taxpayers will now be on the hook for any cost escalation that comes with retendering the project, including the costs of retendering; costs that are usually picked up by a performance bond. As for completing the job on time, Ness suggested that any time a contractor needs to be replaced, delays are unavoidable and have nothing to do with the bonding process. “It simply takes time for a replacement contractor to scope out and price the remaining work and to ramp up their completion team.” Ness said.
The ministry’s decision to release Humber Valley Paving has given rise to a harsh criticism from the opposition parties who point out that Premier-to-be Frank Coleman was, until recently, a shareholder in the company. Some have suggested that the deal was made for political and not public interest reasons.
However, when asked about the appropriateness of the government’s course of action, the Surety Association was cautious in its response. “The optics are terrible here, but we understand that there may have been other issues at play that could have led the ministry to choose the path they did.” Ness said. He expressed support for Premier Tom Marshall’s decision to refer the matter to the province’s Auditor General, but remained critical of the remarks made by Minister McGrath. “The Minister’s comments about the surety bond process were completely irresponsible and just plain wrong.” he said.
The Surety Association of Canada was formed in June 1992 to act as “The Voice of Surety in Canada” and as a resource for the construction and business communities from coast to coast. Its membership consists of major construction bonding companies along with members from the insurance brokerage community, legal fraternity and other industry related entities. The combined business of its member surety companies comprises 94 % of all surety premiums written in Canada.
Contact: Steven D. Ness