Bill No. 30-0438, a U.S. Virgin Islands Senate bill approved in committee at the end of October could, if passed, pave the way for local contractors to receive additional priority when bidding for government contracts in the territory.

Local contractors already have significant standing when it comes to government contracts. Under the terms of the “Preferred Provider Act of 1971”, the Department of Property and Procurement is compelled to accept the bids of local contractors, provided those bids do not exceed the amount of the lowest outside bid by more than 15 percent.

The new legislation, sponsored by Senator Diane Capehart, would pull a variety of other agencies under the umbrella of the law. This would mean that, for example, contracts offered up for bidding by the University of the Virgin Islands, the Virgin Islands Water and Power Authority and any hospitals in the Territory would be subject to the terms of the Preferred Provider Act. As a result, a wider range of contracts would be available to local providers.

The law has actually been amended a number of times since its initial passage. Among the changes have been severe reductions to bonding requirements. For bids of less than $300,000, bonds cannot exceed 2 percent, and for bids of more than $500,000, the bond cap is 5 percent. Meanwhile, contractors are also subject to performance bonds of 25 percent of the total bid.

However, some government contractors believe that even these limits result in surety bonds that are difficult for smaller contractors to post, and prevent companies that could perform necessary work from bidding on jobs that they could efficiently and skillfully complete. In response to these concerns, the new proposal allows a means for contractors to avoid bid and performance bonds altogether by offering other options. Among these is a provision that would require 20 percent of the performance bond cap of 25 percent of the bid to be placed in escrow. For a $200,000 contract, for example, a builder would merely need to put $10,000 in escrow rather than the $50,000 that would be required under the existing law.

With the proposed changes in Bill No. 30-0438, local contractors may find themselves with a considerably larger selection of contracts available to them. If the bill becomes law, the role of local contractors in the U.S. Virgin Islands economy could expand significantly in a relatively quick timeframe.

BoltNagi is an established and well-respected government relations law firm serving clients throughout the U.S. Virgin Islands.