I have a subcontractor requesting payment for their performance bond. The project is for DOT, just this week we completed precon meeting and finalized a start date. No work has been done to date. We normally pay our subs once work has been completed, we have been paid then we pay our subs. Do we need to pay the bond before work has started, or tell them we will pay them once we are paid by the client?
Hello,
This is a business question and highly dependent upon the relationship and what you want to provide to the subcontractor.
Technically, the sub should understand how government contracting works and know that there will be a lot of costs fronted before the first check is received. In reality, the subcontractor sees the performance bond as an additional cost that is not related to the construction and they will want to be paid something for it.
One possible solution is to front the money but let them know VERY CLEARLY that it is an advance against their first pay app and will be deducted from their request. Let them know in writing and get a signature if you want to be super careful.
Otherwise, you can decide how you want to handle it. So long as you pay them for it as you would ordinarily, they don't have a claim against you or the project but their britches are gonna be burning if they feel like they are being taken advantage of. And consider explaining to them again how government contracting payments work.
E. Aaron Cartwright III
214.789.1354
Aaron@EACLawyer.com