Cost-Reimbursement Contracts

1 week ago

What remedies are available to a “materials supplier who supplies materials to a General Contractor who has entered into a Cost-Reimbursement Contract with the US Government (i.e–The Bonding requirements under the Miller Act have been waived) Ryan A. Beason General Counsel for GCLI

Senior Legal Associate Levelset

Typically, when unpaid on a federal construction project, claimants would have the ability to potentially make a payment bond claim against the contractor’s bond. But, when the Miller Act’s bonding requirements are waived, as you mentioned above, it may be harder to find protection.

Generally, if unpaid on a job where payment bond requirements have been waived, pursuing legal actions directly against a customer – like under breach of contract theory – will be a secondary option. Though, it may be worth checking with the project’s contractor to determine whether some alternate form of security was provided for the project in lieu of a payment bond.

Note, though, that the False Claims Act may also come into play – particularly if a contractor has billed the federal government for their subs’ or suppliers’ work or material but not paid them for it. Under the False Claims Act, a contractor could find themselves in hot water if they’ve knowingly overbilled the federal government. So, the threat of blowing the whistle under the False Claims Act might also provide a little leverage.

More on the False Claims Act and construction here: (1) The False Claims Act: What Construction Businesses Need to Know; and (2) Federal Contractors, Subs and Suppliers: Take Extra Care Billing Federal Jobs

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