This Concrete Subcontractor has a big problem. How wouldyousolve it?Facts:*.The bond applicant, we will call 'Subby,' is a highly experienced subcontractor who performed concrete work on a school job.*.Subby was not required to give a Performance & Payment Bond to the GC.*.The GC, "Gigunda Const.,"hasgiven a P&P bond to the school district.*.The GC claims that the concrete Subbyinstalled has failed a critical strength test. As a result,Gigunda is demanding a 2 year maintenance bond to cover potential defects.*.Subby has disputed this charge and feels theyarein compliance with the contract.*.Since the requested maintenance bond will run to the GC and not the school district, it appears the issue must arise from within the subcontract terms (not directly with the school district).*.Subby has an ongoing relationship with a major bonding company:"Wonderful Surety."*.Wonderful Surety has refused to provide the maintenance bond.*.Subby's agent called us for help. Is it possible some of our sureties may support it?Issues*.The work is not covered by a performance bond.*.Subby's current surety has refused to support them.*.If Subby ignores the problem, the GC may ultimately have a performance claim ontheirbond. The GC, and their surety, are responsible for the entire project, including the subcontracted work.*.If Subby ignores the problem, the GC may have to fix it - and will back charge them for the costs.*.If Subby doesn't provide the maintenance bond, the GC will withhold the remaining money in theirsub contract.*.Gigunda's subcontract may have imposed the GC contract conditionsautomatically on to the subs(possiblyincluding concrete strength requirements).*.It would be normal for the subcontractto state that Subby must protect Gigunda from claims arising from their work.Possible Solutions-Which One Do You Like Best?1.Subby can ask a new surety to provide the maintenance bond.2.Subby can rip out the questionable work at their own expense and re-do it to Gigunda's satisfaction.3.Subby can review the subcontract to determine what strength requirements were indicated, and if Subbyis actually in violation.4.Gigunda can presstheirsurety to issue the maintenance bond. (Although this would be unlikley ifGigundais the beneficiary.)5.Subby could refuse to get the maintenance bond or replace the work (do nothing.)6.Subby could ask Gigunda for a contract amendment providing additional money to rip out / replace the questionable work.7.Subby could let Gigunda hold money for 2 years in lieu of the bond (the entire bond amount).So you chose: #_____ConclusionThe next step we recommend is #3,"review the subcontract requirements."Subby is an experienced concrete company that is convinced their work product is correct. They are not aware of the strength requirements that are thebasis of this dispute - but a careful legal review is needed.Subby should also ask the GC to cite where these strength requirements appear in the subcontract.If the workisin violation of the subcontract, Subby will have to choose between paying to replace it now, or face the difficult task of obtaining the maintenance bond. It is possible that no surety will support this without requiring substantial collateral, or maybe evenfull collateral.Pretty tough, but the bond would offer some important advantageseven if full collateral is required:1.Subby couldtotally avoid the cost of replacing the workif the concrete performs successfully. Only time will tell, and filing the bond gives them that time.2.The bond is better for Subby than letting Gigunda hold funds. If Gigunda concludes the concrete has failed during the 2 years, they will have to go through the surety's claim department for recovery. That's better than just letting the GC use their money if they want. This type of advantagealways existsfor bond applicants when choosing between a surety bond or putting up cash directly with an obligee / beneficiary.Steve Golia is an experienced provider of bid and performance bonds for contractors. For more than 30 years he has specialized in solving bond problems for contractors, and helping them when others failed.The experts at Bonding Pros have the underwriting talent and market access you need. This is coupled with spectacular service and great accessibility.Contact us today and discuss how you start a new bonding relationship for your company, or increase your current bonding capacity. Call 856-304-7348.Visit usClick!Not available in all states including Idaho.Article Source:http://EzineArticles.com/expert/Steven_Golia/152522
No comments:
Post a Comment