The principal was terminated from a $6.1 million federal project for the construction of 2 warehouses and 2 support buildings. The project owner alleged defective work and 4 months of project delays. The principal disputed termination and appealed. Nevertheless, the surety proceeded with a takeover under a complete reservation of the rights and completed the project, including all corrective work. In doing so, the surety spent $4 million in excess of the contract balance. The project owner held approximately $350,000 in claimed liquidated damages and back charges. At the time of termination, the principal owed its subcontractors and suppliers $700,000 for work on the project, but it was asserting a pay-when-paid defense unavailable to it after termination. The surety settled and satisfied all verified payables, ratifying subcontract and supply agreements where possible.
The principal, a large specialty concrete contractor with a bonding capacity of $40 million had a backlog of 7 open projects. The payment and performance exposure for the account was approaching its capacity limit. Two of the principal’s ongoing subcontracts were on VA projects, one in Florida and the other in San Juan, Puerto Rico. Payment bond claims were made on multiple of the principal’s projects. The principal requested a meeting with its surety to discuss financial assistance. At this meeting, the surety learned that, while there were no performance claims on either VA project, both of those projects had been delayed over a year. The principal, therefore, was dealing not only with the challenges of doing work in Puerto Rico for the first time but doing so without any compensation for the delays. Similarly, the principal’s general contractor on the Florida VA project was struggling with mounting pressures and costs stemming from a year-plus delay and had been very slow to pay the principal’s payment applications.
Shortly after the meeting between the principal and surety, the general contractor on the Florida VA project issued a notice of intent to declare the principal in default, because it received notices of non-payment from a couple of the principal’s sub-subcontractors. The surety hired consultants to review financials and records and discovered that its principal had been financing its own work on both these delayed VA projects for over a year, had reached its maximum line of credit and was simply unable to make payroll or pay its subs and suppliers. The surety reviewed the open projects and discovered that the quality of the principal’s work was excellent and that the open jobs were profitable. The surety began to finance the principal’s payroll and payments for labor, materials, and equipment.
The principal then asserted claims against the VA on both projects for its delay-related costs and expenses. The surety took an assignment of these claims and helped the principal complete the projects and pay its sub-subcontractors and suppliers. Through the surety’s financial assistance, the principal successfully completed both VA projects as well as its other 5 open projects. As a result of the surety’s assistance, the principal never defaulted on any of its projects. The surety’s financing and infusion of cash flow allowed the principal to stay in business, complete the projects and avoid insolvency. The principal was successful in recovering sufficient funds on its claims against the VA to fully reimburse the surety for all losses, costs, and expenses incurred, with a surplus balance remitted to the principal.
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.