Why should you know the benefits of filing a bond claim? As a contractor, liens are usually your greatest defense. In most cases, liens are the leverage contractors rely on to ensure they are paid on time. However, utilizing this tool is not quite as easy when working on a government contract. A lien cannot be filed against property owned by the government, such as airports, Air Force bases, Army bases, or any federal building. Thankfully, though, there is still protection for those companies supplying labor and material to federal or other governmental projects in the form of a bond claim. As we explained in our previous blog article, a payment bond is a guarantee of payment for anyone who is owed money for labor or materials supplied to the project on which the bond was issued. In this blog, learn how to use filing a bond claim to your advantage.
The Benefit of Filing a Bond Claim
The contractor hired by the government is responsible for obtaining a payment bond for the full amount of the contract. The government has no liability if the general contractor fails to provide a bond as required. It is always best to obtain a copy of the bond before you sign any government construction contracts to do any work on a federal or state project. You can obtain a copy of the bond from the general contractor or the U.S. General Services Administration local to the project. Another important thing to note on government bond claims is that there is a limit to who can file a bond claim. If you are in Place 4 or below of the construction food chain, you do not have the right to file a bond claim.
What are the Steps Required for a Valid Bond Claim?
The only legal requirement is to send the general contractor your notice of bond claim within 90 days of your last work or last materials supplied and then file a suit to enforce your bond claim within one year of the last work or last materials supplied. Those may be the only legal requirement for a bond claim, but that is not the most effective way to get your company paid. The most effective way to get paid is to send the notice of bond claim to the bond company as well. Once you put the bond company on the notice of a claim, they have the option to pay the claim or receive an explanation from the general contractor as to the reasons you have not been paid.
The laws that require a bond on Federal projects and the steps required to have a valid bond claim are known as the Miller Act. Most states have modeled what is required to have a valid bond claim on state projects after the Miller Act. Most states have what is referred to as the “Little Miller Act” which has the same requirements to file a bond claim on a state project as a federal project. Understanding what this act consists of is your key to payment and protection, so be sure to do the research needed to see your company succeed.
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As a contractor working on a state or federal project, it is essential to understand how you can protect your payment when your lien rights are no longer enforceable. Bond claims are a winning tactic and having a clear understanding of how you can use them to your advantage is the best way to ensure you get paid what you are owed on your projects. So, when you are considering pursuing government projects, be sure you understand how bonds can work against you and how they can work for you. Ultimately, you are responsible for the success of your company. Educating yourself is the first and most essential step to setting yourself up for success.
This article is intended as a general educational overview of the subject matter and is not intended to be a comprehensive survey of recent jurisprudence, nor a substitute for legal advice for a specific legal matter. If you have a legal issue, consult an attorney.