Home>Levelset Community>Legal Help>Is it true that in the state of Texas a general contractor is not required to get a surety bond unless the project is $50,000 or more? We were subcontracted for a project at TxDOT Which is a state agency

Is it true that in the state of Texas a general contractor is not required to get a surety bond unless the project is $50,000 or more? We were subcontracted for a project at TxDOT Which is a state agency

TexasRecovery Options

Our deadline to file a bond claim against a general contractor at a state owned building is tomorrow. When we reached out to acquire the bond information we were told that the general contractor is not required to have a bond unless the project is $50,000 or more. Is that true and the state of Texas? If so do we have any other options? Or is our only option to take them to arbitration question ?

1 reply

Nov 15, 2018

That's a good question. Sec. 2253.021(2)(B) of the Texas Little Miller Act requires that a payment and performance bond be present for public jobs where "the governmental entity is a municipality or a joint board created under Subchapter D, Chapter 22, Transportation Code." If such a job exists and the prime contract does not exceed $50,000, it's possible that a payment bond was not secured for the job. However, there is still protection on these projects. Under Sec. 53.231(b), parties performing work on these jobs are able to file a lien on the project funds (known as a "Lien on Public Funds") as long as notice is provided under Sec. 53.231-234 That section requires that notice be sent not later than the 15th day of the 2nd month following the month during which labor/material was provided and unpaid - and the notice must be sent to "(1) the officials of the state, county, town, or municipality whose duty it is to pay the contractor; and (2) the contractor at the contractor’s last known business or residence address." Of course, a Lien on Public Funds can only be effective against any amounts that are owed by the public entity but unpaid to the contractor at the time the claim is made, and on small jobs, payments from the public entity to the contractor may certainly be made before the deadline to send the notice required. Thus, another option for recovery could be more fruitful. For one, as mentioned above, taking a payment claim to arbitration can be effective. Plus, the costs of litigation can be avoided. Another option may be to send a demand letter specifying specific legal threats - such as, potentially, breach of contract, unjust enrichment, or a claim under the Texas prompt payment laws, to name a few options. Considering nobody wants to deal with litigation, demand letters can be very effective - especially when sent via an attorney. Finally, if other options don't succeed, filing a claim in Texas small claims court (up to $10,000) or pursuing traditional litigation could be effective - but both options can be risky, and litigation can be particularly expensive.

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