Public WorksQuestion 1627 of 1632

A city awards a $180,000 paving contract. Because the city's land cannot be liened, the prime must post security that unpaid workers, subcontractors and suppliers can reach. What must it furnish, and from whom?

a.A performance bond from an admitted surety insurer, furnished before work commences on site
b.A payment bond from an admitted surety insurer, furnished before work commences on site
c.A payment bond, which the prime's own bank may supply as a letter of credit in lieu of a bond
d.No bond, because suppliers on a public job serve a stop payment notice instead of holding security

Explanation

Civil Code §9550 requires a direct contractor awarded a public works contract involving an expenditure in excess of $25,000 to give a PAYMENT bond before commencement of work, and §9554(a) requires that bond to be executed by an admitted surety insurer. The payment bond exists precisely because public property cannot be liened: it stands behind the workers, subcontractors and suppliers who have no lien to record. A performance bond answers to the awarding body for completion of the work, which is a different promise to a different party.

Law Reference: Civil Code §9550; §9554(a)

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