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Changed roles-during the job. How does that affect bond claim rights?

We are looking to file a claim for non-payment and want to know how our changing project roles affects bond claim rights. We started a public hospital job as a sub for a GC, but mid-project that GC got kicked off the job. We made an agreement with the property owner/public entity to finish the job for them. Now we are trying to collect on both phases of that job via a bond claim. I saw that bond claims aren't available for prime contractors. Can you please weigh in?

1 reply

Apr 1, 2019

That's an interesting situation, and ultimately, the ability to recover payment from the payment bond may depend on when the work was performed. Amounts that were owed by a customer but were not paid are very likely recoverable from that contractor's payment bond. After all, that's what the payment bond is for - to ensure that the subcontractors and suppliers on a public project are paid, even if the contractor can't make payment. However, payment bond claims to recover amounts that became due after the prime contractor was fired might not be appropriate. That is, if the prime contractor was no longer the one who was tasked with making payment, making a claim against their payment bond might not be the right way to go about recovering what's owed. In a situation where a prime contractor is terminated mid-project on a public work, generally, a property owner/public entity will be entitled to look to the terminated contractor's performance bond in order to make sure the project is completed. Upon hiring a new contractor to take the terminated contractor's place, payment to that newly-appointed prime contractor would generally come from either the surety or the public entity. For contractors working directly under the property owner/public entity, payment bond claims are typically inappropriate because that unpaid contractor is usually the one who provided the bond in the first place. While there's little protection available for payment recovery between a public entity and their contractor, discussing the payment issue with the public entity should help provide some clarity as to where payment should be coming from. Since this is a pretty unique situation, it might also be helpful to consult a local construction attorney about how best to proceed. They'll be able to review all relevant documentation - including any agreement with a property owner/public entity - and help to determine the best recovery method available. For a little more background on Georgia bond claims, this resource might help: Georgia Public Project Overview and Statutes.

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