Contracts and Claims
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Statutory Bond in Public Works Projects

Philip W. Goodin & Joshua C. Dickinson

Construction performed for public entities is a staple source of work for the construction industry. These projects, however, are often times regulated by state and federal law, and can present significant challenges and additional expenses to general contractors. One such example is statutory bonds.

Most states require that general contractors obtain performance and payment bonds for all public works projects. The payment bonds are necessary to protect subcontractors and materialmen who supply labor and materials to the project. While these subcontractors and materialmen could normally protect their interests in the event of non-payment by a construction lien, most states do not allow liens to be filed on public property. The reason for such a rule is to prevent foreclosure and sale of publicly owned property.

In an attempt to address this perceived deficiency, and to encourage subcontractors to take on such public works projects, most states require that the project instead be bonded. An example of a statutory bond statute is Section 107.170 of the Missouri Revised Statutes .

Statutory bonding requirements on public works projects, however, varies significantly from state to state. It is vitally important that the general contractor make itself aware of the specific requirements of the jurisdiction where the project is located. Failure to understand these requirements can lead to delays.

Subcontractors should also be aware of the bonding requirements and should learn the terms of the specific bond in place for the project. Because the subcontractor lacks lien protection and lacks privity of contract with the owner, the bond may be the only recourse for the subcontractor to recover funds for its work if the general contractor breaches its duty to pay.

Philip W. Goodin & Joshua C. Dickinson practice with the Construction Litigation Team at Spencer Fane Britt & Browne LLP, a law firm with offices in Kansas City, Overland Park, St. Louis, and Omaha. They can be reached at (816) 474-8100 or (913) 345-8100.

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