What the Changes to the Public Project Payment Bond Laws Mean For General Contractors & Subcontractors



Practice Areas

Robinson Bradshaw Publication
March 12, 2013

Most of the attention surrounding the recent changes to North Carolina’s lien laws has been focused on the new lien agent requirements that apply to most private projects commenced on or after April 1, 2013. However, the legislature has also made significant changes to the payment bond provisions applicable to contracts awarded by North Carolina public bodies. These new provisions became effective January 1, 2013. They are primarily intended to address the “double payment problem” that often arises on public projects when remote subcontractors or suppliers make claims against the general contractor’s payment bond. The bonding company typically pays the claim and then seeks reimbursement from the contractor, who may have paid its subcontractor unaware of the amounts owed to a lower-tier subcontractor.

The new payment bond requirements primarily affect general contractors and subcontractors (and not owners). This alert provides a quick synopsis of the new requirements.

On public projects requiring a payment bond, the amended laws require:

Critically, subcontract agreements are unenforceable against the lower-tier subcontractor until the Contractor’s Project Statement has been provided in accordance with these provisions.

As is the case with the recently enacted lien agent laws, the changes to the public project payment bond statutes add new procedural requirements, which were already highly technical. General contractors seeking to avoid “double payment” and subcontractors (including suppliers) seeking to preserve their rights to recover on the payment bond should seek counsel from competent construction lawyers to ensure full compliance with these important changes.

Main Menu