Georgia Construction, Bond & Lien Law Blog


GA Court of Appeals–If Contractor Does Not Give Notice, Then No Additional Claims Allowed

Posted in Contracts,Georgia Case Law,Government Contracting,Strict Compliance by Blue Blog on the April 4th, 2014

Georgia Road Construction Law

by Mark A. Cobb

Last week, the Georgia Court of Appeals decided Western Surety Company v. Department of Transportation holding that a construction contract’s claim notice provisions were enforceable which, in turn, invalidated the prime contractor’s request for additional funds due to increased material costs.  This holding underscores every contractor and subcontractor’s need to be aware of their contractual deadlines for providing notices on construction projects.

Background and Facts: This construction contract dispute involved the Georgia Department of Transportation (“DOT”), a government contractor, and two sureties.  The DOT contracted with the GC to make road improvements in Georgia, and as a part of the contract the Sureties issued a payment bond and a performance bond to the DOT, as obligee.  After the project was started, the GC experienced increased material costs (for the asphalt and other petroleum-related products) and suffered financial difficulties.  The GC advised the Surety that it could not continue to perform under the contract and planned to voluntarily abandon the project. Consequently, the surety stepped in to complete the project pursuant to the terms of the performance bond.

The Issue: The surety ended up suing the DOT for, among other things, the additional material costs.  The sureties, however, acknowledge that neither the original GC nor the Sureties themselves “strictly followed the claim notice requirements set forth under the contract.”

What Did the Contract Provision Require for Notice?  The construction contract in dispute required written notice of any potential claims; it further specified that failure to provide timely notice was a waiver of the claim. Thus, if notice was not properly given, then the claim would automatically be denied.  Specifically, the contract’s provision stated as follows:

NOTICE OF POTENTIAL CLAIM: In any case in which the Contractor believes that it will be entitled to additional compensation, the Contractor shall notify the Engineer in writing of its intent to claim such additional compensation. Such notice shall be given in order that the [DOT] can assess the situation, make an initial determination as to who is responsible, and institute appropriate changes or procedures to resolve the matter.

    a. Claims for Delay — The [DOT] shall have no liability for any delay which occurred more than one week prior to the filing of such written notice. Failure of the Contractor to give such written notice in a timely fashion will be grounds for denial of the claim.

    b. All Other Claims Except Acceleration and Delay — If the Contractor does not file such written notice before beginning the work out of which such claim arises, then the Contractor hereby agrees that it shall have waived any additional compensation for that work and the Contractor shall have no claim thereto.

The Sureties Argument: The Sureties claimed that the claim notice requirements were not applicable to the specific case because, among other things, the DOT waived strict compliance with the notice requirements, the GC and the Sureties substantially complied with the notice and claim procedures, and the DOT had actual notice of the claim.

The Holding: As the court pointed out, the parties had agreed (in their construction contract) that any additional material costs would require specific notice from the GC or Surety under the Contract and that compliance of this requirement would be “an essential condition precedent to any recovery of damages by the Contractor.”  The Georgia Court further reminded the parties that “As a rule, ‘”[a]ny notice requirement must be reasonably construed.’ And substantial compliance with a notice provision may present an issue for the jury if ‘[t]he evidence … appears to be ‘in the spirit’ of the contract provision.’ [citations omitted].  Then, as the Court applies the facts in the trial court record, it concluded that none of the communications by the GC or the Sureties reasonably or substantially complied with the requirement that timely notice of a claim be given to the DOT.  Thus, the Georgia Court of Appeals ruled that deadlines and notice provisions on construction contracts may be enforceable and, if proper notice isn’t given, it may preclude a party from seeking (much less recovering) additional money for its damages including increased material costs.

Practical Lesson: Regardless whether you are a prime contractor, specialty subcontractor or a sub-subcontractor working in Georgia, it is vital that you understand each term of your contract.  When we review construction contracts for our clients, we create a list of deadlines and notice requirements and suggest that the client post it conspicuously on the project file, the project manager’s desk or other pertinent place as a reminder to strictly comply with the notice obligations; failure to meet each and every deadline may result in the loss of your claim, the inability to file a materialmen’s lien, or to seek additional compensation.

 

 

2013 Infrastructure Report Card Shows State of America

Posted in Current Legal Issues,Georgia Projects,Government Contracting by Blue Blog on the May 1st, 2013

Georgia Construction Law Information 2013

 

by Mark Cobb

Every four years, the American Society of Civil Engineers (ASCE) produces a report evaluating the state of America’s infrastructure and grades them on a scale of A+ (great) to F- (lousy), and they recently released their 2013 report card.  Their report card covers 16 infrastructure categories and provides information on all 50 states in each of the 16 areas including bridges, drinking water, roads and schools.  Sadly, the cumulative national grade (or C.P.A.) was a D+.  Although this is abysmal, Georgia’s individual score was slightly higher coming in with a C-.

I don’t know about you, but my parents would not have been happy if I had come home with these grades!

Here’s a breakdown of the 16 categories showing the national performance and Georgia’s performance:

Georgia Subcontractor Payment

In addition to providing the overview of the infrastructure, the ASCE also pinpoints specific facts which led to the scores.  Here are some of the key facts relating to Georgia’s Infrastructure and our future construction possibilities:

  • Dams:  Georgia’s dam safety program has 7.5 full-time employees that each oversee over 4,000 state regulated dams, 484 of which are considered his hazard dams;
  • Drinking Water:  Georgia has reported that it has $8.9 billion in drinking water infrastructure improvements  needed in the next 20 years;
  • Hazardous Waste:  Georgia has 15 sites on the National Priorities List;
  • Wastewater: Georgia has reported that is needs $89 million in wastewater Infrastructure improvements;
  • Bridges: Six percent (6 %) or 878 bridges in Georgia are considered structurally deficient; another 12.7 % or 1,871 bridges in Georgia are considered functionally obsolete;
  • Roads: Nineteen percent (19 %) of Georgia’s roads are in poor or mediocre condition; in addition, driving on roads in need of repair costs Georgia motorists $374 million a year in extra vehicle repairs and operating costs which amounts up to $60 per motorist;
  • Parks and Recreation:  Georgia has an unmet need of $123 million for its parks system; and
  • Schools:  It is estimated that Georgia schools have $5.2 billion in infrastructure funding needs.

IS THERE ANY GOOD NEWS?!  If there is a silver lining to this report, it is the fact that our future depends upon financing and completely a lot of infrastructure improvements in Georgia which means, of course, there should be quite a bit of work for Georgia’s contractors and specialty contractors (and the suppliers to those jobs too!)  To see the full report and many more details, please click here; to read more details related to Georgia’s state report card, please click here.

Don’t forget to leave your comments about the state of our infrastructure below:

Georgia School Projects–Make Your Claim against the Surety Now!

Posted in Government Contracting,Little Miller Act,Payment Bonds by Blue Blog on the August 24th, 2012

Georgia Surety Payment Bond Claim

Since the school projects throughout Georgia are finishing up, we are noticing that some of our clients who furnished labor or materials on Georgia public school projects are calling us to say that they are not being paid.  Fortunately for them, there is usually a payment bond covering the school project which helps guarantee that they will get paid.  These payment bond statutes are generally found in the O.C.G.A. Section 36-91-90 et seq. and are commonly referred to as Georgia’s Miller Act or Georgia’s Little Miller Act (the Miller Act is the federal government’s version of a similar statute covering federal public works projects in Georgia as well as throughout the entire country.)

Many times, it appears as though our clients are promised payments and our clients feel confident that–if they are patient enough–payment will be forthcoming.  Perhaps, for example, the whole project has been “slow pay” or the municipal authority in charge of the project is withholding final payment to the general contractor for some reason unrelated to our client.

Although we hope that our clients are correct and patience will result in payment, it is vital that they make a timely payment bond claim in order to “guarantee” payment.  Some clients are concerned about the legal costs associated with making a payment bond claim and enforcing a payment bond claim in Georgia.  There are multiple strategies which the Cobb Law Group regularly employs when working with public works collection matters.

And, if the project has been “slow pay” project and the client reasonably believes payment will eventually be made, then we advocate (i) making a timely payment bond claim (which is a relatively simple and cost-effective procedure), and (ii) then advising the surety that, although our client’s rights pursuant to the payment bond have been preserved, we request ample time to allow our client and the obligee opportunity to amicably resolve the matter.

Thus, a specialty subcontractor or supplier has (i) met its minimum obligations under the terms of the payment bond, (ii) has not incurred excessive legal fees, and (iii) has maintained the right to pursue its remedies under the payment bond if necessary.

Regardless, a claimant cannot let any deadline slip away; thus, it is important to review some of the essential deadlines on making timely claims on payment bonds on Georgia public works projects:

Deadline Number 1: If you were a third tier supplier or subcontractor working for any one other than the project’s general contractor or the municipal authority, then you may have had to send a Notice to Owner and a Notice to Contractor within the first 30 days that you began working or supplying to the project.

Deadline Number 2: If did not receive payment in full, then you must make a claim against a Georgia Public Works project within 90 days of the last day in which you were physically on the job or furnished materials to the jobsite.

Deadline Number 3: Generally speaking a payment bond claimant must bring an action against the bond (a civil lawsuit) within one year from the completion of the contract and the acceptance of the public building or public works by the proper public authorities.

If you have provided services, labor or materials on a Georgia public school project (or any federal, state or municipal project) and have not received payment in full, please contact us to discuss your rights under Georgia’s Little Miller Act (or any other construction law or business law matter you may have!)

This is a general information article and should not be construed as legal advice or a legal opinion. The content above has been edited for conciseness and additional relevant points are omitted for space constraints. Readers are encouraged to seek counsel from a construction lawyer for advice on a particular circumstance.

Payment Bond Claims on Public Works Projects in Georgia

Posted in Government Contracting,Payment Bonds,Public Works Projects by Administrator on the May 10th, 2012

Payment Bond Claims in GeorgiaThe pundits continue to debate the state of the economy, but since we represent so many construction professionals, we are able to notice trends pretty quickly ourselves.  To no one’s surprise, government contracting work has increased, and this has given much-needed work to subcontractors, and suppliers in Georgia.  Many clients who had stayed away from public works projects have since embraced them.

Unfortunately, we have noticed that government contract jobs in Georgia have been “slow pay”.  What does that mean for those working and supplying on government jobs?  Practically speaking, it means that our clients’ cash flow is interrupted–usually for no reason.  It also means that they are having to enforce their payment bond claim rights in Georgia.

Almost every day, we receive a telephone call from a specialty subcontractor or a supplier who is not getting paid for their work and materials on a government project.  Fortunately, if a payment bond claim is timely filed, then their likelihood of recovery is very good.  Here are some important points to keep in mind if you are working on a government project.

  • Know Whether the Project Owner is a Governmental Entity: Be very careful to identify the owner of the public works project on which you are working.  Some projects may look like they are owned by the Federal, state or local government, but, in fact, they are owned by a private entity.  Public or military housing projects can be owned by a private corporate and then leased back to the government.  Determining the owner helps determine which set of requirements apply in your particular situation.  Development Authorities, Housing Authorities, and similar “government” organization can blur the distinction between owners.  (Remember, just because there is a payment bond covering the project does not mean that it is a government project–payment bonds may be found on private projects too!)
  • Know the Government Entity Layer: If you know that your project is a government contract, then you must determine for which governmental layer the project belongs.  Generally speaking, your government project may be Federal, State of Georgia, or a local municipality (such as a county or city government).  Each of these three layers of government are covered by their own statutes and requirements for payment bond enforcement.  All Federal projects are covered by The Miller Act; all State of Georgia projects are coverer by The Little Miller Act so it is vital to apply the proper rules to your slow-pay issue.
  • Meet the Deadline for Filing a Payment Bond Claim in Georgia: Typically, you must file a claim within 90 days of the last day in which you worked on the governmental project.
  • Get a copy of the Payment Bond: The surety issuing the payment bond covering your project will have certain requirements and can help identify owners, general contractors and addresses.  Some general contractors make obtaining copies of the payment bond available, some do not.
  • Make Sure that You Sent A Notice to Owner/Notice to Contractor: If you are a third tier supplier or subcontractor then you must send a Georgia Notice to Owner (“NTO”) and a Georgia Notice to Contractor (“NTC”) on all projects owned by the State of Georgia or any local municipality.  These NTO’s and NTC’s must be sent within thirty days of the first day in which you began working on the government project or you began supplying on the government project.  If you fail to do this, you may be prohibited from filing a claim against the payment bond.

If you have any questions about contractor rights or suppliers’ rights regarding government bond claims on projects located anywhere in Georgia, please contact us.

 

This is a general information article and should not be construed as legal advice or a legal opinion. The content above has been edited for conciseness and additional relevant points are omitted for space constraints. Readers are encouraged to seek counsel from a construction lawyer for advice on a particular circumstance.