Surety Paving Success
Wednesday, May 16, 2018
The principal, a licensed paving contractor with $80 million of bonding capacity was contracted to perform multiple municipal road projects. One project owner tendered its intent to declare the principal in default and terminate it. That project owner agreed to allow the principal to continue performing while the surety investigated through its counsel and an engineering consultant. Ultimately, the principal was declared to be in default and terminated based on project delay. Thereafter, the principal filed suit against the project owner for wrongful termination.
The surety negotiated a takeover agreement utilizing the defaulted principal’s primary paving subcontractor. The surety’s investigation revealed design and engineering defects, and a change order was executed for the corrective work necessary to remediate these issues.
The surety negotiated the payment of the contract balance from the project owner, less liquidated damages for delays. The principal and the project owner reached a settlement including, at the surety’s suggestion, a termination for convenience with certain future bidding provisions, and the project owner paid funds to the principal. Ultimately, the entire project was completed.
The total pay-out by the surety for completion, legal fees, and consultant costs was over $1.177 million, with a 100% recovery made by the surety from the contract balance and recovery from the principal.