Date Published: April 4, 2014

Unfortunately, it seems to be a common theme of late; a contractor defaults on a public works construction project. In Crowley, TX a surety had to takeover a portion of the an important project, concrete work at Crowley’s Veteran’s Memorial Plaza (click here for article).  The good news is that a surety bond was in place, as the law requires it to be, and the public entity is not out any money.  How?

The Miller Act of 1935 requires that contractors doing business in public works construction to provide performance and payment bonds when the contract exceeds a certain dollar amount, depending on the state.  The bonds are backed by a surety company, who offer a guaranty to the public entity that the contractor will fulfill its obligation to complete the contract.  If it does not, the surety company will step in and either give the public entity the funds to hire another contractor or hire another contractor itself to complete the work.  All at no additional expense to the public.

Sounds reasonable right? For some reason, many public entities (usually public-private partnerships) still try and waive the bond requirement to save money.  That’s the irony of course.  You can save money by not having insurance as well, but when an accident happens you sure wish you had insurance.  When it comes to tax dollars, public officials have a duty to protect those dollars and follow the guidelines of the Miller Act, which require performance and payment bonds on public contracts.

In this example, the City of Crowley is close to having a new contractor on the site to help finish the plaza and it’s well deserved Memorial.

Bonds are here to stay because it’s a valuable product.  A general or subcontractor, regardless if in the public works arena or not, will likely have a job at some point that will need to be bonded.  It’s easy to get set up on an initial bond line, and it costs nothing. Contact us today for a consultation.  877-654-2327

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