Surety Bond Quarterly - Summer 2015 - 17

owners an added incentive to ensure
compliance with the bonding requirements. Without question, it is the
public owners, and not the subcontractors, that are in the best position
to ensure that contractors comply
with the bonding requirements. Yet,
as set forth in the 50-state survey
chart accompanying this article, the
majority of jurisdictions do not recognize such a cause of action.
No remedy for the "hapless
subcontractor" on federal projects
A subcontractor on a federal Miller
Act project has no recourse against
the federal government in the event
that the required payment bond
is not posted. In Arvanis v. Noslo
Engineering Consultants, Inc., 739
F.2d 1287 (7th Cir. 1984), cert. denied,
496 U.S. 191 (1985), two unpaid subcontractors brought suit against the
federal government after the prime
contractor, who failed to post a Miller
Act payment bond, went into bankruptcy. In dismissing the subcontractors' claims, the court ruled that the
federal government has no affirmative obligation to ensure that a prime
contractor obtains the payment and
performance bonds required by the
Miller Act. The court further held that
the claims were barred by the government's sovereign immunity. The
court noted, with a tangible sense of
disappointment, that it is the "hapless subcontractor" and not the federal government that is left "holding
the bag" when a prime contractor
fails to obtain the required bonding.
Although the court recognized that
the outcome was "unjust," it noted
that it was up to Congress to address
the issue by amending the statute.
Significantly, although the court
in Arvanis advises subcontractors to
protect themselves by inquiring with
the contracting officers to ensure that
the required bonds have been posted,
under the statutory language of the
Miller Act, in order to obtain a certified copy of the payment bond, the
subcontractor must first submit an
affidavit to the government certifying
that it has not been paid for its work,
which may be far too late. See U.S.C.

§ 3133(a). However, subcontractors
and suppliers should take note that
the Federal Acquisition Regulations
provide methods for subcontractors
and prospective subcontractors to
obtain information about the payment bond posted by the prime
contractor as well as a copy of the
bond itself prior to entering into the
subcontract or performing work on
the project. The regulations provide
that the contracting officer must furnish this information to subcontractors or prospective subcontractors
on request. FAR 28.106-6(b). The
regulations similarly require a prime
contractor to provide "a prospective
subcontractor or supplier offering to
furnish labor or material" with a copy
of its payment bond upon request.
FAR 52.228-12.
Accordingly, subcontractors and
suppliers on federal projects are well
advised to use these tools to obtain
a copy of the prime contractor's payment bond prior to executing a subcontract for the project, rather than
waiting until payment disputes arise.
Differing approaches by the states
A subcontractor's ability to assert a
claim for payment directly against
a public owner for failing to require
the prime contractor to post a statutorily required payment bond varies
widely from state to state. In a small
minority of jurisdictions, a public
entity's liability for failing to require
bonds is set forth expressly by statute. For example, in Connecticut, a
subcontractor is expressly authorized
by statute to bring suit for payment
directly against a municipality (but
not against the state) for failing to
ensure compliance with the bonding
requirement. See Conn. Gen. Stat.
§ 49-41(d). Similarly, in Idaho, a public
body that fails to ensure compliance
with the bonding requirement must,
on demand, promptly make payment
directly to unpaid subcontractors.
See Idaho Code Ann. § 54-1928. The
potential consequences to a municipality for failing to ensure that payment bonds are posted are even more
dire in Missouri. Not only does the
statute, Mo. Rev. Stat. § 107.170,

create an express duty on public
entities to ensure that the required
bonds are in place, but also public
officials may be held personally liable
for the claims of unpaid subcontractors if they fail to ensure that bonds
are posted. See Union Pacific R.R. v.
St. Louis Marketplace, Ltd. P'ship, 212
F.3d 386 (8th Cir. 2000) (Mo.).
However, as noted by the Alaska
Supreme Court, most courts in states
that do not expressly impose liability
by statute on the public owners have
read the bonding statutes narrowly
and have declined to impose liability
by implication. See Imperial Mfg. Ice
Cold Coolers, Inc. v. Shannon, 101
P.3d 627, 632 (Alaska 2004).
In rejecting an implied cause of
action against the public entity, the
court in Imperial Mfg. held that such a
rule "would be contrary to the premise on which the Little Miller Act is
based, which is that neither the government nor government property
may be charged by those with whom
the government has no contractual
relationship. We believe that if the
legislature had intended to impose
government liability - in effect as the
school district puts it, to require public entities 'to pay twice for a public
project' - this intention would have
been expressed because it is a significant variation from the existing
norm." Imperial Mfg., 101 P.3d at
630. Other courts have refused to
impose liability on public owners on
the grounds that subcontractors have
a means of verifying the existence of
the payment bond prior to entering
into a subcontract. See Blanchard v.
Burns, 162 S.W. 63 (Ark. 1913).
In contrast, courts that have recognized an implied cause of action
against public owners for failing
to require bonds have focused on
the importance of protecting the
rights of subcontractors and suppliers that are deprived of the right
to file mechanic's liens against
public property. For example, in
Walt Rankin & Associates v. City of
Murieta, 84 Cal. App. 4th 605 (2000),
the California Court of Appeals held
that a municipality has a mandatory
duty to ensure that payment bonds

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17


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Table of Contents for the Digital Edition of Surety Bond Quarterly - Summer 2015

NASBP Upcoming Meetings & Events
2015-2016 NASBP Executive Committee
From the CEO - There is Poetry in Surety Claims, Surely
Practical Insights: What You Need to Know - Hiding in Plain Sight: Specifications as a Source of Risk
Profile: President Susan Hecker
Developing Your Leadership Vision
Liability Issues - Can Public Owners be Held Liable to Subcontractors and Suppliers for Failure to Require General Contractors to Obtain Required Payment Bond?
An Introduction to Probate Bonds
Class Act - Surety Team’s Cooperative Efforts Enable School to Open on Time
NASBP’s Attorney Advisory Council - Participants Opine on Current Risk Management Challenges and Business Opportunities
The AIA Describes Updated and Expanded Design-Build Documents Family
Contractor Practices That may Result in Construction Claims to Recover for Delays and increased Costs
NASBP Annual Meeting Speakers - Veterans can benefit private sector, but need help finding jobs
Index to Advertisers
Surety Bond Quarterly - Summer 2015 - cover1
Surety Bond Quarterly - Summer 2015 - cover2
Surety Bond Quarterly - Summer 2015 - 3
Surety Bond Quarterly - Summer 2015 - 4
Surety Bond Quarterly - Summer 2015 - 5
Surety Bond Quarterly - Summer 2015 - 6
Surety Bond Quarterly - Summer 2015 - 2015-2016 NASBP Executive Committee
Surety Bond Quarterly - Summer 2015 - From the CEO - There is Poetry in Surety Claims, Surely
Surety Bond Quarterly - Summer 2015 - 9
Surety Bond Quarterly - Summer 2015 - Practical Insights: What You Need to Know - Hiding in Plain Sight: Specifications as a Source of Risk
Surety Bond Quarterly - Summer 2015 - 11
Surety Bond Quarterly - Summer 2015 - Profile: President Susan Hecker
Surety Bond Quarterly - Summer 2015 - 13
Surety Bond Quarterly - Summer 2015 - Developing Your Leadership Vision
Surety Bond Quarterly - Summer 2015 - 15
Surety Bond Quarterly - Summer 2015 - Liability Issues - Can Public Owners be Held Liable to Subcontractors and Suppliers for Failure to Require General Contractors to Obtain Required Payment Bond?
Surety Bond Quarterly - Summer 2015 - 17
Surety Bond Quarterly - Summer 2015 - 18
Surety Bond Quarterly - Summer 2015 - 19
Surety Bond Quarterly - Summer 2015 - 20
Surety Bond Quarterly - Summer 2015 - 21
Surety Bond Quarterly - Summer 2015 - An Introduction to Probate Bonds
Surety Bond Quarterly - Summer 2015 - 23
Surety Bond Quarterly - Summer 2015 - 24
Surety Bond Quarterly - Summer 2015 - 25
Surety Bond Quarterly - Summer 2015 - 26
Surety Bond Quarterly - Summer 2015 - Class Act - Surety Team’s Cooperative Efforts Enable School to Open on Time
Surety Bond Quarterly - Summer 2015 - 28
Surety Bond Quarterly - Summer 2015 - 29
Surety Bond Quarterly - Summer 2015 - NASBP’s Attorney Advisory Council - Participants Opine on Current Risk Management Challenges and Business Opportunities
Surety Bond Quarterly - Summer 2015 - 31
Surety Bond Quarterly - Summer 2015 - The AIA Describes Updated and Expanded Design-Build Documents Family
Surety Bond Quarterly - Summer 2015 - 33
Surety Bond Quarterly - Summer 2015 - Contractor Practices That may Result in Construction Claims to Recover for Delays and increased Costs
Surety Bond Quarterly - Summer 2015 - 35
Surety Bond Quarterly - Summer 2015 - NASBP Annual Meeting Speakers - Veterans can benefit private sector, but need help finding jobs
Surety Bond Quarterly - Summer 2015 - 37
Surety Bond Quarterly - Summer 2015 - Index to Advertisers
Surety Bond Quarterly - Summer 2015 - cover3
Surety Bond Quarterly - Summer 2015 - cover4
Surety Bond Quarterly - Summer 2015 - outsert1
Surety Bond Quarterly - Summer 2015 - outsert2
Surety Bond Quarterly - Summer 2015 - 43
Surety Bond Quarterly - Summer 2015 - 44
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