If a subcontractor on a construction project for the state, county or municipal government entity is not paid by the general contractor, what should the subcontractor do to get paid?

By: David W. Wulfers

In Oklahoma, a contractor receiving award of a construction contract exceeding $50,000 for construction or repair of a public or private building or improvements on public real property must furnish a bond payable to the state in a sum not less than the total sum of the contract, or an irrevocable letter of credit issued for the benefit of the state by a financial institution in a sum not less than the total sum of the contract.^[1]  The purpose of the bond or irrevocable letter of credit is to insure the work will be properly and promptly performed according to the contract and that the contractor will pay its subcontractors and suppliers of labor, material, rental of machinery or equipment, and repair of and parts for equipment the contract requires the contractor to furnish.^[2]

If a subcontractor who has a direct contractual relationship with the contractor who furnished the bond is not paid by the contractor for the labor and materials it provides to the project, what should that subcontractor do?  First, that subcontractor should ask the agency, institution, department, commission, municipality or government entity which entered into the construction contract with the contractor for a copy of the bond.^[3]  Second, that subcontractor should establish the last day it performed labor or furnished material or parts to the project for which it makes the claim.  Third, that subcontractor should make sure a lawsuit is filed against the surety on the bond within one year from the day on which the last of its labor was performed or material or parts furnished for which the claim is made.^[4]

What if a subcontractor or supplier of labor or materials does not have a direct contractual relationship with the contractor who furnished the bond, but contracted with a subcontractor on the project?  In that instance, in addition to doing the above three items, it must give written notice to the contractor and surety on the bond within 90 days from the date on which it performed the last labor or furnished the last material or parts for which the claim is made.^[5]  The notice should state the amount claimed and the name of the party to whom the material or parts was furnished or for whom the labor was done.^[6]  The notice should be served by mailing it by registered or certified mail, postage prepaid, to the contractor, together with a copy to the surety on the bond.

If a lawsuit is necessary to collect the amount due the subcontractor or supplier, the safest course of action is to name the contractor and surety as defendants, as well as any person or entity with whom the claimant contracted.^[7]  In addition to recovering the amount due, the claimant is also entitled to interest on that amount.^[8]

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