In April, important payment protections were put in place for subcontractors and suppliers for public work projects that were financed by public-private partnerships.
This new law provides that a contractor with a prime contract for over $100,000 on a public-private project must provide both payment and performance bonds.
This law was initiated by the American Subcontractors Association to address the increase in projects for public use that are financed by public-private partnerships. The government uses these financing arrangements to take advantage of private sector equity and financing rather than using public funds at the tax payer’s expense.
Under the new law, a payment bond is required to be for the full contract price for the protection of the supplier who is providing the materials and labor to the contractor or subcontractor. Additionally, the performance bond must state that the contractor will build or install what was agreed to in the contract.
Prior to this, subcontractors and suppliers were in a vulnerable position in public-private projects. Unless otherwise specified, some projects were exempt to both mechanic’s lien laws and payment bonds leaving them without adequate assurance of payment.