Identification of Public Project Payment Bond Claimants

Prime contractors working on public projects are often required to provide a payment bond to ensure adequate financial protection for those subcontractors and suppliers providing labor, materials, equipment, or other services.  For federal government projects, this requirement is contained in the Miller Act.  40 U.S.C. §§ 3131–3134.  Many states have adopted similar laws, commonly known as “Little Miller Acts,” for work performed on state government projects.  Unlike private projects, lien rights do not exist on public work and payment bonds provide an important source of recovery for contractors that have not been paid for their work.    Read More ›

Amending the AIA A401-2007 to Avoid Pro Rata Share Backcharges for Job Site Cleanup

On most construction projects the parties’ contractual agreement addresses who is responsible for keeping the various work areas clean.  Generally, those who generate trash on a project must get rid of the trash.  Typically, it is the responsibility of the subcontractor to clean up and remove from the jobsite, or place in a dumpster provided by the prime contractor, all trash and debris including scrap materials, waste materials, rubbish, packaging materials, and crates and pallets used to ship materials and fixtures to the project site.  Frequently, the subcontract will require the subcontractor to remove all trash and debris resulting from the subcontractor’s work at the end of each work day.   

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Procedural Differences for Claims on Standard Form Performance and Payment Bonds

Construction suretyship is a three-part relationship in which a surety provides performance and payment bonds guarantying the performance of a contractor to an owner and the contractor’s subcontractors and suppliers. A contractor may also demand performance and payment bonds from its subcontractors. A surety’s obligation under a performance or payment bond only arises if the claimant complies with all required procedural steps or conditions precedent for making a demand on the bond. In the private sector, the terms of a bond document control these procedural requirements, and often, parties will agree to use standardized bond forms from associations such as the American Institute of Architects (AIA), the Engineers Joint Contract Documents Committee (EJCDC) or ConsensusDocs. Read More ›

Discretionary Protection - State Bonding Requirements in P3 Projects

Public-private partnerships (“P3s”) have become an increasingly popular procurement method for public projects.  P3s refer to the partnership between a public government agency—which can be federal, state, or local—and a private entity.  The private entity’s role in the P3 agreement may involve the finance, design, construction, operation, ownership, or maintenance of facilities, infrastructure, or services for public use.  Not only does a partnership with a private entity increase the amount of funding available for public projects, but it also often allows for faster completion at a lower cost.     Read More ›

Minimize the Inherent Risk in "Scope Bidding" by Amending Your Form Subcontract

Subcontractors must exercise particular care if the project specifications are performance specifications or otherwise described by so-called “scope” criteria.  A scope specification is one that describes the general scope of the project in terms of design, dimension, and major components of the work but does not list or describe all of the work required for full performance of the contract.  One example of a scope specification is as follows:

This document indicates the general scope of the project in terms of architectural design, the dimensions of the building, the major architectural parts and the type of structural, mechanical, and electrical systems.  This document does not necessarily indicate or describe all work required for full performance and completion of the Contract Documents.  On the basis of the general scope indicated or described, the contractor shall furnish all items required for the proper execution and completion of work.  Decisions of the architect, as to the work included within the scope of this document, shall be final and binding on the contractor and the owner.

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A Primer on the Miller Act's Federal Bonding Requirements

If you have ever been involved with a federal construction project—either as a contractor, subcontractor, supplier, or surety—you have probably had to deal with the Miller Act. That’s not surprising. Few pieces of legislation are more ubiquitous when it comes to construction work on federal projects. Passed by Congress in 1935, the Miller Act generally requires general contractors on all federal public works projects to post two surety bonds as a condition of awarding the contract: a performance bond guaranteeing performance of the work and a payment bond guaranteeing payment of subcontractors and suppliers. These surety bonds are commonly referred to as Miller Act bonds, and they pose unique issues and opportunities for participants on federal projects.    Read More ›

An Overview of the Difference Between Indemnity Obligations and Obligations to Provide Additional Insured Coverage

One of the most important risk-shifting devices in a construction contract is the indemnification provision because it protects one party from financial loss and damages arising from future problems occurring during the project. Indemnification is a promise that one party will make good on any loss, damage, or liability incurred by another. There are two parties in an indemnity relationship – an indemnitor and an indemnitee. An indemnitor gives indemnity while the indemnitee receives indemnity. When a duty to indemnify is triggered, the indemnitor undertakes the obligation to cover the loss or damage that has been or might be incurred by the indemnitee. The indemnitor also agrees to assume the responsibility for liability resulting from third-party claims against the indemnitee. For example, an indemnification clause may require a general contractor to indemnify the owner for a claim for damages asserted by a subcontractor’s employee who was injured on the jobsite.       Read More ›

Public Policy Limitations on Indemnity for Sole or Partial Negligence

Contractors often develop standard contracts for use on a variety of projects, tailored most often to the demands and particular needs of the owner and the project involved. Often these standard contracts include indemnification provisions that require the subcontractor to indemnify the general contractor for a variety of claims. Depending on the claims themselves and the state law that governs interpretation and enforcement of the contract, these indemnification clauses may or may not be enforceable in cases where the claims arise from the negligence, gross negligence or willful misconduct of the general contractor. In preparation for beginning a new project and reviewing subcontracts to be used on that job, it is advisable for contractors to review their standard subcontracts and seek advice as to whether the indemnity provisions therein might run into problems of enforcement in the chance of a claim involving  negligence.     Read More ›

Anti-Indemnification Statutes and Their Impact upon Insuring Indemnification Obligations Versus Those of an Additional Insured

Construction projects are inherently risky endeavors. A myriad of things that can go wrong range from damaging a tree on neighboring property, to the structural failure of a completed building, and the loss of limb or life. One of the most important reasons one enters into a contract while participating in a construction project is to transfer those types of risks to one or both of the contracting parties. There are a number of contractual mechanisms parties can use to transfer the responsibility of paying for damages caused by the occurrence of such events.      Read More ›

ISO 2013 Additional Insured Endorsements Revisions - What the Construction Industry Needs to Do

New risks associated with recent revisions to the standard ISO Additional Insured endorsements language have not been addressed by many in the construction industry. Although these revisions occurred in April of 2013, many participants in the construction industry have failed to take adequate measures to protect themselves from the risks associated with these revisions.       Read More ›