Georgia Construction, Bond & Lien Law Blog

Considerations for Contractors and Suppliers Before Bidding

Posted in Affidavit of Nonpayment,Filing Materialmen's Liens,Subcontractor Liability by Blue Blog on the December 7th, 2020

Tips for Contractors Before Furnishing Materials

By Mark A. Cobb

As readers from our last post know, we are just days away from launching the Second Edition of the Georgia Construction Handbook for Materialmen’s Liens and Payment Bonds.  Since Georgia’s new lien laws begin to take effect on January 1, 2021, this new edition is vital for all contractors, subcontractors, design professionals, and material suppliers.  As we wait the final printing from the publisher, we are sharing parts of the handbook to our loyal readers.  Last week, we discussed some of the updated deadlines regarding Affidavit of Nonpayments.  This week, we are previewing the section on pre-bidding tips:

The best time to ask for something from someone is when they want something in return.  Thus, the best time to perform due diligence on an entity (and its principals) is when the relationship begins with a new project owner, prime contractor, subcontractor, or supplier, it is the best time to perform due diligence on that entity and its principals.

Every construction tier effectively extends credit to those above them.  Thus, it may be useful to obtain a credit application (even if it is called a “New Client Intake Form”) to collect useful information to determine an owner or a contractor’s credit worthiness or assist in the due diligence investigation; it can also help gather information that might assist in pursuing bad-debt. At a minimum, make sure that credit applications include the following:

  • the client’s full, legal name (verify it with the Secretary of State)
  • entity type (corporation, LLC, partnership)
  • the client’s tax ID number
  • the client’s owners’ full name and address
  • the client’s owners’ physical, residential address
  • the owner(s) social security number
  • the owner(s) spouse’s name
  • current bank account information
  • require clients to UPDATE credit applications regularly to keep the information current
  • make sure it is LEGIBLE!

DUE DILIGENCE requires more than information from a client or customer; each entity entering into a contract should have their team independently verify the work ethic and payment history of each new relationship.  Such information may include the following:

  • prior or pending lawsuits
  • do prior or pending projects have liens filed against them
  • local media information about the company (or principals)
  • internet search for information
  • are they bondable

Depending upon the nature of the CONTRACT, the other party should sign an agreement of your written terms.  Consider including the following:

  • a joint-check provision
  • jurisdiction and venue consents can save money and inconvenience
  • provisions that allow collection of interest, attorney’s fees and collection costs
  • mediation provisions  (or other ADR language)

 

In all levels of contracting, PERSONAL GUARANTEES can be used, consider the following:

  • make sure the guarantee meets current legal requirements to be enforceable
  • get more than one person to execute a guarantee (e.g., a principal’s spouse)
  • obtain the guarantor’s social security number and physical, residential address
  • get a copy of the guarantors’ driver’s license
  • have it witnessed by someone who can later testify that the guarantor signed it
  • UPDATE the guarantees and verify credit worthiness

As discussed in more detail below, Georgia’s statutory notice scheme may require that notices to the project owner and the general contractor be sent; although your subcontractor may not have all of the necessary information, try to get the following:

  • the project name
  • the project location
  • the general contractor’s name and address
  • the project owner’s name and address
  • the subcontractor’s payment bond information
  • the general contractor’s payment bond information
  • a copy of the Notice of Commencement

In order to take advantage of some of the useful collection techniques such as materialmen’s lien and payment bond claims, claimants must make certain that its internal accounting procedures comply:

  • keep track of labor, services, and material by project (and customer)
  • apply payments properly
  • have a calendaring system which provides deadlines
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