Payment Bond Claims on Public Works Projects
november 15, 2017
As an alternative to materialman lien claims, which are not allowed on public works projects, Georgia
law requires general contractors to obtain a payment bond on any public works project worth more than $100,000.00. The State, county, municipal corporation or any public board can actually require a payment bond on projects worth less than $100,000. The amount of the payment bond must equal the total amount to be paid out under the main contract. The payment bond must run in favor of all subcontractors and materialmen supplying labor and materials on the public works project.
In order to meet the requirements of the law, the payment bond must include the specific statement that it is intended for all persons furnishing work or material for the public or that the contract is to be construed to be in accordance with the applicable statutes.
The bond statutes are to be liberally construed for the protection of those who provide labor and materials on public works projects. This means that it is possible to proceed on the payment bond for things which are not lienable under the material lien statutes.
If a public body fails to require a payment bond on a public works project, it is responsible for any loss incurred by a materialman as a result. A materialman pursuing a claim against county which failed to require a payment bond must still meet the filing requirements of law by presenting its claim to the county within 12 months of the time the claim becomes payable.
A second tier contractor can proceed against a payment bond on a public works project. Subcontractor is construed to mean a contractor who has a contract with the prime (general) contractor or in a direct chain of contracts leading to the prime contractor, performed services in furtherance of the goals of the prime contract. The second tier contractor may include in its claim amounts that the second tier contractor is contractually obligated to pay third tier contractors. A third tier contractor is a subcontractor to the second tier contractor.
The next installment addressing the application of payment bonds will address material suppliers and their claims on payment bonds.
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