Chapter 10 - § 10.1 • OVERVIEW OF THE COLORADO PUBLIC WORKS ACT

• Jurisdiction: Colorado

§ 10.1 • OVERVIEW OF THE COLORADO PUBLIC WORKS ACT

§ 10.1.1—Overview

The Colorado Public Works Act encompasses §§ 38-26-105 through 38-26-110 of the Colorado Revised Statutes. The Act provides financial security to subcontractors and suppliers on public projects in Colorado. Subcontractors and suppliers do not have a right to recovery against public property under the Colorado mechanics' lien statutes, and thus the Public Works Act contains the sole remedies available to them.

In the case of Flaugh v. Empire Clay Products, Inc.,¹ the court stated that C.R.S. §§ 38-26-105 to -108, inclusive, were enacted in lieu of the mechanics' lien statute, to protect materialmen supplying materials for a public works project. The court stated: "The statutory remedy . . . is designed to protect those who supply labor and materials for public buildings such as are involved herein."²

The clear policy underlying Colorado law is that laborers and suppliers of materials in construction projects are to be paid.³ "The CPWA creates separate and independent remedies for claimants including rights against the contractor's payment bond, see § 38-26-105, 16A C.R.S. (1992 Supp.), rights against the contractor's performance bond, see id. § 38-26-106, and a right to establish a lien against retained contract funds, see id. § 38-26-107."⁴

The Colorado Public Works Act provides protection by requiring the general contractor on most state and local projects to provide bonds to guaranty payment to unpaid subcontractors and suppliers for labor performed and materials supplied. Those requirements are set out in C.R.S. §§ 38-26-105 and -106 and discussed in detail in §§ 10.2 and 10.3, below.

The payment bonds are put in place to help ensure that all subcontractors, laborers, and materialmen are paid for the labor and materials that they have supplied. The contractor takes out "insurance" in the form of payment and performance bonds, and the surety is the "insurance company." The surety guarantees that, should the contractor fail to pay the subcontractors, laborers, and/or materialmen, the surety will make such payments.

The bonds, in theory, will guaranty that the claims of unpaid subcontractors, laborers, and materialmen will be paid promptly and in full. Although this does happen frequently, there are occasions when the bonds do not protect the unpaid claimants. Some common reasons why claims may go unpaid, even if there is a bond in place are as follows:

1) The claimants have failed to comply with the timing or other requirements set forth in the Colorado Public Works Act;
2) Multiple claims are made on the bonds in excess of the funds available;
3) The surety goes into receivership or bankruptcy; and
4) The principal on the bond contests the amounts claimed. This would necessitate litigating the issues and most likely the expenditure of attorney fees that may not be recoverable.

Thus, it is important to remember that just because the contractor has a bond (or, as it is said, "the job is bonded"), this is not a guarantee that the claimant is going to be paid.

The performance bonds required under the Act also must contain provisions guarantying payment to unpaid claimants.

The Public Works Act also has a...