CHAPTER 2253. PUBLIC WORK PERFORMANCE AND PAYMENT BONDS
GOVERNMENT CODE
TITLE 10. GENERAL GOVERNMENT
SUBTITLE F. STATE AND LOCAL CONTRACTS AND FUND MANAGEMENT
CHAPTER 2253. PUBLIC WORK PERFORMANCE AND PAYMENT BONDS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 2253.001. DEFINITIONS. In this chapter:
(1) "Governmental entity" means a governmental or
quasi-governmental authority authorized by state law to make a
public work contract, including:
(A) the state, a county, or a municipality;
(B) a department, board, or agency of the state, a county, or a
municipality; and
(C) a school district or a subdivision of a school district.
(2) "Payment bond beneficiary" means a person for whose
protection and use this chapter requires a payment bond.
(3) "Prime contractor" means a person, firm, or corporation that
makes a public work contract with a governmental entity.
(4) "Public work contract" means a contract for constructing,
altering, or repairing a public building or carrying out or
completing any public work.
(5) "Public work labor" means labor used directly to carry out a
public work.
(6) "Public work material" means:
(A) material used, or ordered and delivered for use, directly to
carry out a public work;
(B) specially fabricated material;
(C) reasonable rental and actual running repair costs for
construction equipment used, or reasonably required and delivered
for use, directly to carry out work at the project site; or
(D) power, water, fuel, and lubricants used, or ordered and
delivered for use, directly to carry out a public work.
(7) "Retainage" means the part of the payments under a public
work contract that are not required to be paid within the month
after the month in which the public work labor is performed or
public work material is delivered under the contract.
(8) "Specially fabricated material" means material ordered by a
prime contractor or subcontractor that is:
(A) specially fabricated for use in a public work; and
(B) reasonably unsuitable for another use.
(9) "Subcontractor" means a person, firm, or corporation that
provides public work labor or material to fulfill an obligation
to a prime contractor or to a subcontractor for the performance
and installation of any of the work required by a public work
contract.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 1999, 76th Leg., ch. 62, Sec. 8.20, eff.
Sept. 1, 1999.
Sec. 2253.002. EXEMPTION. This chapter does not apply to a
public work contract entered into by a state agency relating to
an action taken under Subchapter F or I, Chapter 361, Health and
Safety Code, or Subchapter I, Chapter 26, Water Code.
Added by Acts 1997, 75th Leg., ch. 793, Sec. 18, eff. Sept. 1,
1997.
SUBCHAPTER B. GENERAL REQUIREMENTS; LIABILITY
Sec. 2253.021. PERFORMANCE AND PAYMENT BONDS REQUIRED. (a) A
governmental entity that makes a public work contract with a
prime contractor shall require the contractor, before beginning
the work, to execute to the governmental entity:
(1) a performance bond if the contract is in excess of $100,000;
and
(2) a payment bond if:
(A) the contract is in excess of $25,000, and the governmental
entity is not a municipality or a joint board created under
Subchapter D, Chapter 22, Transportation Code; or
(B) the contract is in excess of $50,000, and the governmental
entity is a municipality or a joint board created under
Subchapter D, Chapter 22, Transportation Code.
(b) The performance bond is:
(1) solely for the protection of the state or governmental
entity awarding the public work contract;
(2) in the amount of the contract; and
(3) conditioned on the faithful performance of the work in
accordance with the plans, specifications, and contract
documents.
(c) The payment bond is:
(1) solely for the protection and use of payment bond
beneficiaries who have a direct contractual relationship with the
prime contractor or a subcontractor to supply public work labor
or material; and
(2) in the amount of the contract.
(d) A bond required by this section must be executed by a
corporate surety in accordance with Section 1, Chapter 87, Acts
of the 56th Legislature, Regular Session, 1959 (Article 7.19-1,
Vernon's Texas Insurance Code).
(e) A bond executed for a public work contract with the state or
a department, board, or agency of the state must be payable to
the state and its form must be approved by the attorney general.
A bond executed for a public work contract with another
governmental entity must be payable to and its form must be
approved by the awarding governmental entity.
(f) A bond required under this section must clearly and
prominently display on the bond or on an attachment to the bond:
(1) the name, mailing address, physical address, and telephone
number, including the area code, of the surety company to which
any notice of claim should be sent; or
(2) the toll-free telephone number maintained by the Texas
Department of Insurance under Subchapter B, Chapter 521,
Insurance Code, and a statement that the address of the surety
company to which any notice of claim should be sent may be
obtained from the Texas Department of Insurance by calling the
toll-free telephone number.
(g) A governmental entity may not require a contractor for any
public building or other construction contract to obtain a surety
bond from any specific insurance or surety company, agent, or
broker.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 1995, 74th Leg., ch. 76, Sec. 5.43(a), eff.
Sept. 1, 1995; Acts 2001, 77th Leg., ch. 380, Sec. 1, eff. Sept.
1, 2001; Acts 2001, 77th Leg., ch. 614, Sec. 2, eff. Sept. 1,
2001; Acts 2003, 78th Leg., ch. 1275, Sec. 2(86), eff. Sept. 1,
2003.
Amended by:
Acts 2005, 79th Leg., Ch.
728, Sec. 11.122, eff. September 1, 2005.
Acts 2009, 81st Leg., R.S., Ch.
1304, Sec. 1, eff. September 1, 2009.
Sec. 2253.022. PERFORMANCE AND PAYMENT BONDS; INSURED LOSS. (a)
A governmental entity shall ensure that an insurance company
that is fulfilling its obligation under a contract of insurance
by arranging for the replacement of a loss, rather than by making
a cash payment directly to the governmental entity, furnishes or
has furnished by a contractor, in accordance with this chapter:
(1) a performance bond as described by Section 2253.021(b) for
the benefit of the governmental entity; and
(2) a payment bond as described in Section 2253.021(c) for the
benefit of the beneficiaries described by that subsection.
(b) The bonds required to be furnished under Subsection (a) must
be furnished before the contractor begins work.
(c) It is an implied obligation under a contract of insurance
for the insurance company to furnish the bonds required by this
section.
(d) To recover in a suit with respect to which the insurance
company has furnished or caused to be furnished a payment bond,
the only notice required of a payment bond beneficiary is the
notice given to the surety in accordance with Subchapter C.
(e) This section does not apply to a governmental entity when a
surety company is complying with an obligation under a bond that
had been issued for the benefit of the governmental entity.
(f) If the payment bond required by Subsection (a) is not
furnished, the governmental entity is subject to the same
liability that a surety would have if the surety had issued the
payment bond and the governmental entity had required the bond to
be provided. To recover in a suit under this subsection, the only
notice required of a payment bond beneficiary is a notice given
to the governmental entity, as if the governmental entity were
the surety, in accordance with Subchapter C.
Added by Acts 1997, 75th Leg., ch. 1132, Sec. 3, eff. Sept. 1,
1997.
Sec. 2253.023. ATTEMPTED COMPLIANCE. (a) A bond furnished by a
prime contractor in an attempt to comply with this chapter shall
be construed to comply with this chapter regarding the rights
created, limitations on those rights, and remedies provided.
(b) A provision in a bond furnished by a prime contractor in an
attempt to comply with this chapter that expands or restricts a
right or liability under this chapter shall be disregarded, and
this chapter shall apply to that bond.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.024. INFORMATION FROM CONTRACTOR OR SUBCONTRACTOR.
(a) A prime contractor, on the written request of a person who
provides public work labor or material and when required by
Subsection (c), shall provide to the person:
(1) the name and last known address of the governmental entity
with whom the prime contractor contracted for the public work;
(2) a copy of the payment and performance bonds for the public
work, including bonds furnished by or to the prime contractor;
and
(3) the name of the surety issuing the payment bond and the
performance bond and the toll-free telephone number maintained by
the Texas Department of Insurance under Subchapter B, Chapter
521, Insurance Code, for obtaining information concerning
licensed insurance companies.
(b) A subcontractor, on the written request of a governmental
entity, the prime contractor, a surety on a bond that covers the
public work contract, or a person providing work under the
subcontract and when required by Subsection (c), shall provide to
the person requesting the information:
(1) the name and last known address of each person from whom the
subcontractor purchased public work labor or material, other than
public work material from the subcontractor's inventory;
(2) the name and last known address of each person to whom the
subcontractor provided public work labor or material;
(3) a statement of whether the subcontractor furnished a bond
for the benefit of its subcontractors and materialmen;
(4) the name and last known address of the surety on the bond
the subcontractor furnished; and
(5) a copy of that bond.
(c) Information requested shall be provided within a reasonable
time but not later than the 10th day after the receipt of the
written request for the information.
(d) A person from whom information is requested may require
payment of the actual cost, not to exceed $25, for providing the
requested information if the person does not have a direct
contractual relationship with the person requesting information
that relates to the public work.
(e) A person who fails to provide information required by this
section is liable to the requesting person for that person's
reasonable and necessary costs incurred in getting the requested
information.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 2001, 77th Leg., ch. 380, Sec. 2, eff.
Sept. 1, 2001.
Amended by:
Acts 2005, 79th Leg., Ch.
728, Sec. 11.123, eff. September 1, 2005.
Sec. 2253.025. INFORMATION FROM PAYMENT BOND BENEFICIARY. (a)
A payment bond beneficiary, not later than the 30th day after the
date the beneficiary receives a written request from the prime
contractor or a surety on a bond on which a claim is made, shall
provide to the contractor or surety:
(1) a copy of any applicable written agreement or purchase
order; and
(2) any statement or payment request of the beneficiary that
shows the amount claimed and the work performed by the
beneficiary for which the claim is made.
(b) If requested, the payment bond beneficiary shall provide the
estimated amount due for each calendar month in which the
beneficiary performed public work labor or provided public work
material.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.026. COPY OF PAYMENT BOND AND CONTRACT. (a) A
governmental entity shall furnish the information required by
Subsection (d) to any person who applies for the information and
who submits an affidavit that the person:
(1) has supplied public work labor or material for which the
person has not been paid;
(2) has contracted for specially fabricated material for which
the person has not been paid; or
(3) is being sued on a payment bond.
(b) The copy of the payment bond or public work contract is
prima facie evidence of the content, execution, and delivery of
the original.
(c) An applicant under this section shall pay any reasonable fee
set by the governmental entity for the actual cost of preparation
of the copies.
(d) A governmental entity shall furnish the following
information to a person who makes a request under Subsection (a):
(1) a certified copy of a payment bond and any attachment to the
bond;
(2) the public work contract for which the bond was given; and
(3) the toll-free telephone number maintained by the Texas
Department of Insurance under Subchapter B, Chapter 521,
Insurance Code, for obtaining information concerning licensed
insurance companies.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 2001, 77th Leg., ch. 380, Sec. 3, eff.
Sept. 1, 2001.
Amended by:
Acts 2005, 79th Leg., Ch.
728, Sec. 11.124, eff. September 1, 2005.
Sec. 2253.027. LIABILITY OF GOVERNMENTAL ENTITY. (a) If a
governmental entity fails to obtain from a prime contractor a
payment bond as required by Section 2253.021:
(1) the entity is subject to the same liability that a surety
would have if the surety had issued a payment bond and if the
entity had obtained the bond; and
(2) a payment bond beneficiary is entitled to a lien on money
due to the prime contractor in the same manner and to the same
extent as if the public work contract were subject to Subchapter
J, Chapter 53, Property Code.
(b) To recover in a suit under Subsection (a), the only notice a
payment bond beneficiary is required to provide to the
governmental entity is a notice provided in the same manner as
described by Subchapter C. The notice must be provided as if the
governmental entity were a surety.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 2003, 78th Leg., ch. 515, Sec. 1, eff.
Sept. 1, 2003.
SUBCHAPTER C. NOTICE REQUIREMENTS
Sec. 2253.041. NOTICE REQUIRED FOR CLAIM FOR PAYMENT FOR LABOR
OR MATERIAL. (a) To recover in a suit under Section 2253.073 on
a payment bond for a claim for payment for public work labor
performed or public work material delivered, a payment bond
beneficiary must mail to the prime contractor and the surety
written notice of the claim.
(b) The notice must be mailed on or before the 15th day of the
third month after each month in which any of the claimed labor
was performed or any of the claimed material was delivered.
(c) The notice must be accompanied by a sworn statement of
account that states in substance:
(1) the amount claimed is just and correct; and
(2) all just and lawful offsets, payments, and credits known to
the affiant have been allowed.
(d) The statement of account shall include the amount of any
retainage applicable to the account that has not become due under
the terms of the public work contract between the payment bond
beneficiary and the prime contractor or between the payment bond
beneficiary and a subcontractor.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.042. COPY OF AGREEMENT AS NOTICE OF CLAIM FOR UNPAID
LABOR OR MATERIAL. A payment bond beneficiary has the option to
enclose with the sworn statement of account, as the notice for a
claim under a written agreement for payment for public work labor
performed or public work material delivered, a copy of the
written agreement and a statement of the completion or the value
of partial completion of the agreement.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.043. NOTICE OF CLAIM FOR UNPAID LABOR OR MATERIAL WHEN
WRITTEN AGREEMENT DOES NOT EXIST. (a) Except as provided by
Section 2253.044, if a written agreement does not exist between
the payment bond beneficiary and the prime contractor or between
the payment bond beneficiary and the subcontractor, the notice
for a claim for unpaid bills must contain:
(1) the name of the party for whom the public work labor was
performed or to whom the public work material was delivered;
(2) the approximate date of performance or delivery;
(3) a description of the public work labor or material for
reasonable identification; and
(4) the amount due.
(b) The payment bond beneficiary must generally itemize the
claim and include with it copies of documents, invoices, or
orders that reasonably identify:
(1) the public work labor performed or public work material
delivered for which the claim is made;
(2) the job; and
(3) the destination of delivery.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.044. NOTICE OF CLAIM FOR MULTIPLE ITEMS OF LABOR OR
MATERIAL. The notice for a claim for lump-sum payment for
multiple items of public work labor or material must:
(1) describe the labor or material in a manner that reasonably
identifies the labor or material;
(2) state the name of the party for whom the labor was performed
or to whom the material was delivered;
(3) state the approximate date of performance or delivery;
(4) state whether the contract is written or oral;
(5) state the amount of the contract; and
(6) state the amount claimed.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.045. NOTICE OF CLAIM FOR UNPAID LABOR OR MATERIAL
UNDER WRITTEN UNIT PRICE AGREEMENT. The notice for a claim for
public work labor performed or public work material delivered by
a payment bond beneficiary who is a subcontractor or materialman
to the prime contractor or to a subcontractor and who has a
written unit price agreement that is wholly or partially
completed is sufficient if the beneficiary attaches to the sworn
statement of account:
(1) a list of units and unit prices set by the contract; and
(2) a statement of those completed and partially completed
units.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.046. NOTICE REQUIRED FOR CLAIM FOR PAYMENT OF
RETAINAGE. (a) To recover in a suit under Section 2253.073 on a
payment bond for a claim for payment of retainage, a payment bond
beneficiary whose contract with a prime contractor or
subcontractor provides for retainage must mail written notice of
the claim to the prime contractor and the surety on or before the
90th day after the date of final completion of the public work
contract.
(b) The notice shall consist of a statement of:
(1) the amount of the contract;
(2) any amount paid; and
(3) the outstanding balance.
(c) Notice of a claim for payment of retainage is not required
if the amount claimed is part of a prior claim made under this
subchapter.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.047. ADDITIONAL NOTICE REQUIRED FOR PAYMENT BOND
BENEFICIARY WITHOUT DIRECT CONTRACTUAL RELATIONSHIP WITH PRIME
CONTRACTOR. (a) To recover in a suit under Section 2253.073 on
a payment bond, a payment bond beneficiary who does not have a
direct contractual relationship with the prime contractor for
public work labor or material must mail notice as required by
this section.
(b) A payment bond beneficiary who contracts with a
subcontractor for retainage must mail, on or before the 15th day
of the second month after the date of the beginning of the
delivery of public work material or the performance of public
work labor, written notice to the prime contractor that:
(1) the contract provides for retainage; and
(2) generally indicates the nature of the retainage.
(c) The payment bond beneficiary must mail to the prime
contractor written notice of a claim for any unpaid public work
labor performed or public work material delivered. The notice
must be mailed on or before the 15th day of the second month
after each month in which the labor was performed or the material
was delivered. A copy of the statement sent to a subcontractor is
sufficient as notice under this subsection.
(d) The payment bond beneficiary must mail to the prime
contractor, on or before the 15th day of the second month after
the receipt and acceptance of an order for specially fabricated
material, written notice that the order has been received and
accepted.
(e) This section applies only to a payment bond beneficiary who
is not an individual mechanic or laborer and who makes a claim
for wages.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.048. MAILING NOTICE. (a) A notice required by this
subchapter to be mailed must be sent by certified or registered
mail.
(b) A notice required by this subchapter to be mailed to a prime
contractor must be addressed to the prime contractor at the
contractor's residence or last known business address.
(c) A person satisfies the requirements of this subchapter
relating to providing notice to the surety if the person mails
the notice by certified or registered mail to the surety:
(1) at the address stated on the bond or on an attachment to the
bond;
(2) at the address on file with the Texas Department of
Insurance; or
(3) at any other address allowed by law.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993. Amended by Acts 2001, 77th Leg., ch. 380, Sec. 4, eff.
Sept. 1, 2001.
SUBCHAPTER D. CLAIMS ON BONDS; ENFORCEMENT
Sec. 2253.071. TERMINATION OR ABANDONMENT OF CONTRACT; PROCEEDS
OF CONTRACT. (a) The proceeds of a public work contract are not
payable, until all costs of completion of the contract work are
paid by the contractor or the contractor's surety, to a
contractor who furnishes a bond required by this chapter if:
(1) the contractor abandons performance of the contract; or
(2) the contractor's right to proceed with performance of the
contract is lawfully terminated by the awarding governmental
entity because of the contractor's default.
(b) The balance of the public work contract proceeds remaining
after the costs of completion are paid shall be paid according to
the contractor's and the surety's interests as may be established
by agreement or by judgment of a court.
(c) A surety that completes a public work contract or incurs a
loss under a performance bond required under this chapter has a
claim to the proceeds of the contract prior to all other
creditors of the prime contractor to the full extent of the
surety's loss. That priority does not excuse the surety from
paying an obligation under a payment bond.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.072. STATE NOT LIABLE FOR COSTS. The state is not
liable for payment of a cost or expense of a suit brought by any
party on a payment bond furnished under this chapter.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.073. SUIT ON PAYMENT BOND. (a) A payment bond
beneficiary who has provided public work labor or material under
a public work contract for which a payment bond is furnished
under this chapter may sue the principal or surety, jointly or
severally, on the payment bond if the claim is not paid before
the 61st day after the date the notice for the claim is mailed.
(b) Suit may be brought under Subsection (a) for:
(1) the unpaid balance of the beneficiary's claim at the time
the claim was mailed or the suit is brought; and
(2) reasonable attorney fees.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.074. COSTS AND ATTORNEY FEES. A court may award costs
and reasonable attorney fees that are equitable in a proceeding
to enforce a claim on a payment bond or to declare that any part
of a claim is invalid.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.075. ASSIGNMENT OF CLAIM. A third party to whom a
claim is assigned is in the same position as a payment bond
beneficiary if notice is given as required by this chapter.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.076. LIMITATIONS ON CERTAIN CLAIMS; MAXIMUM RETAINAGE.
(a) The amount of a subcontractor's claim, including previous
payments, may not exceed the proportion of the subcontract price
that the work done bears to the total of the work covered by the
subcontract.
(b) A claim for specially fabricated material that has not been
delivered or incorporated into the public work is limited to
material that conforms to and complies with the plans,
specifications, and contract documents for the material. The
amount of the claim may not exceed the reasonable cost, less the
fair salvage value, of the specially fabricated material.
(c) A claim for retainage in a notice under this subchapter is
not valid for an amount greater than the amount of retainage
specified in the public work contract between the payment bond
beneficiary and the prime contractor or between the payment bond
beneficiary and the subcontractor. A claim for retainage is never
valid for an amount greater than 10 percent of the amount of that
contract.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.077. VENUE. A suit under this chapter shall be
brought in a court in a county in which any part of the public
work is located.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.078. STATUTE OF LIMITATIONS. (a) A suit on a
performance bond may not be brought after the first anniversary
of the date of final completion, abandonment, or termination of
the public work contract.
(b) A suit on a payment bond may not be brought by a payment
bond beneficiary after the first anniversary of the date notice
for a claim is mailed under this chapter.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.
Sec. 2253.079. CRIMINAL OFFENSE FOR FALSE AND FRAUDULENT CLAIM.
(a) A person commits an offense if the person wilfully files a
false and fraudulent claim under this chapter.
(b) An offense under this section is subject to the penalty for
false swearing.
Added by Acts 1993, 73rd Leg., ch. 268, Sec. 1, eff. Sept. 1,
1993.