38-26-105. Public works contractor's bond - conditions - applicability - definitions.
Statute text
(1) Subject to subsection (2) of this section, any person, company, firm, or corporation entering into a contract for more than fifty thousand dollars with any county, municipality, or school district for the construction of any public building or the prosecution or completion of any public works or for repairs upon any public building or public works is required before commencing work to execute, in addition to all bonds that may be required of it, a penal bond with good and sufficient surety to be approved by the board or boards of county commissioners of the county or counties, the governing body or bodies of the municipality or municipalities, or the district school board or boards, conditioned that such contractor shall at all times promptly make payments of all amounts lawfully due to all persons supplying or furnishing such person or such person's subcontractors with labor, laborers, materials, rental machinery, tools, or equipment used or performed in the prosecution of the work provided for in such contract and that such contractor will indemnify and save harmless the county, municipality, or school district to the extent of any payments in connection with the carrying out of any such contract which the county or counties, municipality or municipalities, and school district or school districts may be required to make under the law. Subcontractors, materialmen, mechanics, suppliers of rental equipment, and others may have a right of action for amounts lawfully due them from the contractor or subcontractor directly against the principal and surety of such bond. Such action for laborers, materials, rental machinery, tools, or equipment furnished or labor rendered must be brought within six months after the completion of the work.
(2) Notwithstanding the monetary qualification provided in subsection (1) of this section, the state, or the governing body of any county, municipality, school district, or other political subdivision determining it to be in the best interest of this state, or any county, municipality, school district, or other political subdivision may require the execution of a penal bond for any contract of fifty thousand dollars or less.
(3) This section applies to all contracts for more than fifty thousand dollars awarded to a private entity for the construction of any public building or the prosecution or completion of any public works or for repairs upon any public building or public works that is situated or located on publicly owned property using any public or private money or public or private financing.
History
Source: L. 15: p. 395, 1. C.L. 9514. CSA: C. 39, 4. CRS 53: 86-7-4. C.R.S. 1963: 86-7-4. L. 75: Entire section amended, p. 821, 17, effective July 18. L. 79: Entire section amended, p. 1392, 1, effective May 25; entire section amended, p. 888, 13, effective July 1. L. 81: Entire section amended, p. 1824, 1, effective May 28. L. 85: (1) amended, p. 1201, 1, effective May 10. L. 2000: (1) amended, p. 212, 17, effective August 2. L. 2019: (1) amended and (3) added, (SB 19-138), ch. 117, p. 495, 3, effective August 2.
Annotations
Editor's note: Amendments to this section by House Bill 79-1146 and Senate Bill 79-306 were harmonized.
Annotations
Cross references: For the legislative declaration in SB 19-138, see section 1 of chapter 117, Session Laws of Colorado 2019.
Annotations
ANNOTATION
Annotations
Analysis
I. General Consideration.
II. Six-month Limitation for Commencement of Suit.
I. GENERAL CONSIDERATION.
Law reviews. For article, "Contractual Rights of Persons Not Parties to the Contract in Colorado", see 3 Rocky Mt. L. Rev. 175 (1931). For article, "Labor and Material Claims on State Public Works Projects", see 24 Colo. Law. 2165 (1995).
Statutory remedy is in lieu of mechanic's lien statute. Flaugh v. Empire Clay Prods., Inc., 157 Colo. 409, 402 P.2d 932 (1965).
Remedy is designed to protect those who supply labor and materials for public buildings. Flaugh v. Empire Clay Prods., Inc., 157 Colo. 409, 402 P.2d 932 (1965).
Effect of section. For purposes of giving effect to this section, the actions of subcontractors in purchasing materials and labor are imputed to the principal contractor; however, no such relationship can be extended beyond the statutory remedy. Flaugh v. Empire Clay Prods., Inc., 157 Colo. 409, 402 P.2d 932 (1965).
Both principal and surety not required parties. Although this section allows both the principal and surety to be sued, it would be too narrow a construction to say it requires both to be made parties. Fountain Sand & Gravel Co. v. Chilton Constr. Co., 40 Colo. App. 363, 578 P.2d 664 (1978).
Test for recovery. Under this section requiring contractors with cities to give bond to secure the payment of bills for labor and materials, recovery may be had for hay and auto truck repairs under a bond covering a grading and paving contract, the test being not whether the labor and materials entered into the work, but whether they were necessary for doing what the contractor had to do. Stryker v. Tolliver & Kinney Mercantile Co., 77 Colo. 347, 236 P. 993 (1925).
Fringe benefits recoverable under section. Fringe benefits, including vacation benefits, retirement pension benefits, health insurance payments, unemployment insurance payments, and apprenticeship and industry advancement funds, are recoverable as "amounts lawfully due" under subsection (1). Trustees of Colo. Carpenters & Millwrights Health Benefit Trust Fund v. Pinkard Constr. Co., 604 P.2d 683 (Colo. 1979).
Attorney's fees. Section 38-26-106 and this section, which require execution of a payment and performance bond, do not expressly allow for the attorney's fees, and the general rule is that, absent express statutory authority or an enforceable contract provision, attorney's fees are not recoverable. Cement Asbestos Prods. Co. v. Hartford Accident & Indem. Co., 592 F.2d 1144 (10th Cir. 1979).
Trustees and union negotiating trust have standing. Trustees of a fringe benefit trust and a union which negotiated a collective bargaining agreement which included a fringe benefit trust on behalf of its members both have standing to bring actions to recover payments due the respective trust funds. Trustees of Colo. Carpenters & Millwrights Health Benefit Trust Fund v. Pinkard Constr. Co., 604 P.2d 683 (Colo. 1979).
Section does not apply to equipment. Neither this section nor 38-26-106 covers equipment, whether rented or purchased. CPS Distrib., Inc. v. Federal Ins. Co., 685 P.2d 783 (Colo. App. 1984).
Subsection (1) does not apply to breach of contract damages. As a general rule, such damages, including lost profits, are not recoverable under public works bond statutes. Lenon v. St. Paul Mercury Ins. Co., 136 F.3d 1365 (10th Cir. 1998).
A subdivision agreement calling for the construction of certain public improvements prior to the annexation of a subdivision or the issuance of certificates of occupancy for structures built in the subdivision does not constitute a contract for the construction of public improvements pursuant to this section. Brannan Sand & Gravel v. F.D.I.C., 928 P.2d 1337 (Colo. App. 1996), rev'd on other grounds, 940 P.2d 393 (Colo. 1997).
Applied in Newt Olson Lumber Co. v. Sch. Dist. No. 8, 83 Colo. 272, 263 P. 723 (1928); Sch. Dist. No. 28 v. Denver Pressed Brick Co., 91 Colo. 288, 144 P.2d 487 (1932); Cont'l Cas. Co. v. Rio Grande Fuel Co., 108 Colo. 472, 119 P.2d 618 (1941); Lovell Clay Prods. Co. v. Statewide Supply Co., 41 Colo. App. 166, 580 P.2d 1278 (1978).
II. SIX-MONTH LIMITATION FOR COMMENCEMENT OF SUIT.
Legislative intent. The legislative intent is to provide for prompt and speedy settlement of disputes involving laborers and materialmen on public buildings. Gen. Elec. Co. v. Webco Constr. Co., 164 Colo. 232, 433 P.2d 760 (1967).
"Completion" construed. "Completion", as used in subsection (1), means substantial completion. Hensel Phelps Constr. Co. v. Gen. Signal Corp., 460 F.2d 109 (10th Cir. 1972).
What constitutes substantial completion must, of course, ultimately rest on the facts of each case, but as a general proposition, work which is an integral part of a continuing effort to finish a project in conformance with contract specifications, especially when performed reasonably soon after actual construction ceases, is not insubstantial. Hensel Phelps Constr. Co. v. Gen. Signal Corp., 460 F.2d 109 (10th Cir. 1972).
Applicability of six-month limitation. The six-month limitation for commencement of suit contained in subsection (1) is applicable to actions against surety bonds posted by public works contractors under the provisions of 38-26-106; and the limitation is not restricted to the types of public bodies specifically mentioned in this section but includes hospital districts. United States Fid. & Guar. Co. v. Empire Clay Prods., Inc., 28 Colo. App. 26, 470 P.2d 878 (1970); Hensel Phelps Constr. Co. v. Gen. Signal Corp., 460 F.2d 109 (10th Cir. 1972).
Limitation period does not begin at time of abandonment. Under this section the six-month period, within which an action may be brought by a subcontractor for a balance due, begins at the time of the completion of the work, and not at the time of the abandonment of work by the principal contractor. Allen v. Well, 75 Colo. 608, 227 P. 833 (1924).
Failure to meet statutory requirements does not deprive subcontractor of common-law claims. Failure of a subcontractor or materialman to meet the statutory requirements of this section and 38-26-106 and 38-26-107, e.g., time limitations within which a claim must be filed, does not deprive it of its common-law claims against the principal contractor and the principal contractor's surety. Montezuma Plumbing & Heating, Inc. v. Hous. Auth., 651 P.2d 426 (Colo. App. 1982).
The specific statute of limitations provision in this section controls over the general civil action provision in 13-80-101. The provisions in this section specifically apply to the construction project that is the subject of the plaintiff's action while the provision in 13-80-101 is a general and broad provision that encompasses all common law actions. Pat's Constr. Serv., Inc. v. Ins. Co. of the W., 141 P.3d 885 (Colo. App. 2005).
Longer period of limitation permitted. Although this section prescribes a six-month limitation on actions on a labor and material bond, neither this section nor 38-26-106 prohibit the parties from establishing a longer period of limitation in the bond. Montezuma Plumbing & Heating, Inc. v. Hous. Auth., 651 P.2d 426 (Colo. App. 1982).