Performance and Payment bonds are a valuable tool for both public and private construction projects. In public works, the bonds are usually required by law. This is because it a sub contractor or supplier cannot place a lien on public property, a remedy that is available for private construction projects.
If the owner on a private construction project requires a performance and payment bond, that owner then has a third party guarantee that the project will be delivered per the plans and specifications, lien free. So what happens when subs and/or suppliers do not get paid on a bonded job? the payment bond is there specifically to make sure everyone that is due to get paid gets paid, at no additional cost to the taxpayers (Public works projects) or project owners (private projects). A payment bond is a third party (a large insurance company) guarantee that subcontractors and suppliers will get paid what they are due. So how does one make a claim?
Legally the surety company has to investigate the claim. The surety will contact the principal (party that the bond was required of) and inform them of the claim. If it is determined that the principal does in fact owe the money and is not able to make the payment, the surety company will have no choice and will have to settle the claim.
Tips, keep it simple. Don’t try to “pad” the claim with items you would not expect to paid by the general contractor. If the surety has to wade through a claim and determine what is legitimate and what isn’t, this will slow the process. Try talking tot he principal (usually a general contractor) first. Often times there are legitimate issues leading to the non payment. Finally make sure you are within the lien period to file your claim. This period varies but can be as short as 60 days from when the work was completed.