How to get paid for public work

Knowing your rights and
responsibilities is key

BY RUSSELL O'ROURKE
The prime contractor you bid to on the state or local public job just called; they are accepting your bid. You read my last column, so you knew to qualify your bid so that you can negotiate a fair contract. To assure that you are paid, you still need to remember your mechanic’s lien and payment bond rights. To make sure you, your subs and suppliers are paid, you need to know your and their rights and responsibilities. The rights are the same, the responsibilities different.
First, your Notice of Furnishing–You do not need to serve one. Your contract is with the “principal contractor” (a contractor that has a contract with the public owner). It does not hurt to serve an NOF. Ask for a Notice of Commencement, which you need, at the same time; it may encourage timely payment–serving it benefits you.

Subs in Ohio
On a public project in Ohio, as a first-tier subcontractor, your lien or bond rights are not lost if you do not serve your NOF. Your subcontractors and suppliers must serve their NOF to have lien rights, and, if their contract is over $30,000, to have bond rights. (Mechanic’s Liens and Payment Bond Claims both secure your payment, but because they have different means of doing so, it is often wise to do both. A lien tends to pay you faster, the bond to be more secure).
You need the NOC for four reasons: 1) to assure your contractor IS a principal contractor; 2) for the name and address of the public officer designated to receive lien documents, if you have to file a lien; 3) for the name and address of your contractor’s surety, if you need to serve a bond claim; and 4) to provide for your subs and suppliers, and their subs and suppliers if they ask.
Every subcontractor and supplier below you (subcontractors of subcontractors have lien rights, but suppliers of suppliers do not, although they frequently serve an NOF anyway, just to get in the payment stream) must serve their NOF on your principal contractor within 21 days of their first work on the job to preserve their full lien rights, and, if their contract is greater than $30,000, full bond rights. They only need to serve their NOF on your
contractor, not the owner or you.
Now, you just want to do your work and get paid in full. With the economy, more and more companies seem to be filing liens and bond claims to be sure that they are paid. We have all heard of the “reputable” contractor that has gone out of business (or pled guilty), leaving subs and suppliers unpaid. When that happens, you want to be sure that you still have the right to be paid for your work. If you have not been paid in full, including retainage, you have a limited time period to file your lien and/or serve your Bond Claim, even if your retainage or other payment is not yet payable to you. A public lien has to be served on the owner within 120 days of your last day of work on the project, but, as the lien is against the funds still owed to the contractor, your lien will only be as good as the funds remaining on that contract. This is another circumstance where serving a bond claim, in addition to filing a lien, will be helpful. It is important to note, however, that there is a different time period to file your bond claim.
Bond claims need to be served within 90 days following the date of the acceptance of the project as complete by the owner, regardless of when you finished your work. This means that if you are an early finishing contractor, you may have substantially longer to file your bond claim than your lien. If you are a late finishing contractor, you could potentially have as little as 90 days.

Getting into the stream
Hopefully, if you serve your NOF, you will get in the payment stream and be paid, in full, without having to file the lien or the bond claim, however, failing to serve an NOF could keep you from being recognized in the payment stream and delay your payment or keep your subs and suppliers from being paid at all.
To be sure that your company is paid for its work, serve your NOF on time, get the NOC and watch your lien and bond deadlines carefully. Then give your attorney enough lead time to handle them for you properly so that you can
be paid all that you are due. BXM

R. Russell O’Rourke is principal of O’Rourke & Associates Co., LPA.
For more, contact the Builders Exchange for a schedule of seminars near you.