Overview:
House backs Senate’s push to modernize construction bonding rules, boosting limits for Palauan-owned contractors while keeping protections for government projects.
By: L.N. Reklai
KOROR, Palau — A bill designed to help Palauan-owned construction companies compete for government projects moved forward this week after the House of Delegates agreed with the Senate’s reasoning and raised the proposed bonding thresholds even higher.
The House Committee on CIP, Energy, Communication and Public Utilities has approved Senate Bill 12-22, SD1, with amendments, redesignating it as SB 12-22, SD1, HD1. Lawmakers say current bonding requirements are outdated and no longer match today’s construction costs .
“Your committee fully supports the Senate’s intent to modernize bonding requirements so they better reflect today’s construction costs and allow more local contractors to participate in government projects,” the committee report said .
Higher limits for local builders
Under the House version, wholly Palauan-citizen-owned contractors would only be required to post full performance and payment bonds when a contract exceeds $300,000, up from the $250,000 level proposed by the Senate. The $100,000 bonding threshold for non-Palauan-owned companies would remain unchanged .
Contracts at or below $300,000 awarded to fully Palauan-owned companies would automatically be exempt from bonding requirements — a move lawmakers say removes a major barrier for small contractors.
“This change reduces financial barriers for local contractors on smaller projects,” the committee noted .
Flexibility with safeguards
The House also raised the upper range for mid-size projects to $600,000, allowing the Procurement Officer to waive bonding for Palauan-owned companies or reduce bond amounts for others when bonding would limit competition and the move is in the government’s best interest. Any waiver or reduction must be backed by a written risk explanation .
For contracts above $600,000, bonding could be reduced but not waived, and could not fall below 50% of the contract value.
Lawmakers stressed the bill does not eliminate protections for public funds.
“Your committee believes that Senate Bill No. 12-22, SD1, as amended, appropriately balances the need to support Palauan-owned businesses [and] protect public funds,” the report said . The committee has recommended passage of the bill, advancing it to the next stage in the legislative process