Texas Public Work Bonds: Chapter 2253 Thresholds, Claim Notices and Deadlines

Texas reads every bond against the statute. Under §2253.023, a bond furnished in an attempt to comply with chapter 2253 is construed to comply, and any provision that expands or restricts a right or liability under the chapter is disregarded. Shortened suit periods, added notice steps or claimant exclusions written into a bond form generally do not change the statutory terms, which is why sureties and claimants both start with the chapter.

The bond must display the surety's name, mailing address, physical address and telephone number for claim notices, or the Texas Department of Insurance toll-free number with a statement that the address can be obtained there (§2253.021(f)). An entity may not require the bond from a specific surety, agent or broker. Nor may it use a reverse auction for services on a contract that needs a chapter 2253 bond.

Surety qualification adds a second test. Insurance Code §3503.005 limits chapter 2253 bonds to sureties authorized to write surety bonds in Texas, and when a bond exceeds $100,000 the surety must also hold a U.S. Treasury certificate of authority or have reinsurance for liability over $1 million from a qualifying reinsurer. A municipality taking sealed bids may also require the surety to designate an agent who resides in the county for notices and service of process, under §3503.003.

Every payment bond claimant must mail written notice of the claim to both the prime contractor and the surety on or before the 15th day of the third month after each month in which claimed labor was performed or material delivered (§2253.041). Work done in March is noticed by June 15. The notice carries a sworn statement of account stating that the amount is just and correct and that known offsets, payments and credits were allowed, and it must show unpaid retainage not yet due.

A claimant without a direct contract with the prime has an earlier deadline. Section 2253.047 requires it to mail the prime contractor notice of unpaid labor or material by the 15th day of the second month after each month of work, so the March work above must reach the prime by May 15. A copy of the statement sent to the subcontractor is enough for that notice. If its subcontract provides for retainage, it must also tell the prime by the 15th day of the second month after it begins work, and for specially fabricated material it must give notice by the 15th day of the second month after it accepts the order.

Section 2253.048 requires certified or registered mail. Notice to the prime goes to its residence or last known business address. Notice to the surety may go to the address on the bond or its attachment, to the address on file with the Texas Department of Insurance or to any other address the law allows. Sections 2253.042 through 2253.045 describe what the notice must contain for written agreements, unwritten agreements, lump-sum claims and unit price contracts.

Retainage gets its own claim. Under §2253.046, a beneficiary whose contract provides for retainage must mail notice of a retainage claim to the prime contractor and the surety on or before the 90th day after final completion of the public work contract, stating the contract amount, the payments received and the outstanding balance. No separate notice is needed if the amount was already part of an earlier claim. Section 2253.076 limits a retainage claim to the retainage in the claimant's own contract and never more than 10 percent of that contract.

Government Code §2252.032 limits what the entity can hold. On public works contracts of $400,000 or more, other than TxDOT contracts under Transportation Code chapter 223, retainage may not exceed 10 percent on contracts under $5 million or 5 percent on contracts of $5 million or more, with exceptions for dams and certain Texas Water Development Board projects. A prime may not hold a greater percentage from subcontractors than the entity holds from it, and the entity may not withhold retainage after the work is complete, including during the warranty period.

There is one surety-specific exception. On application for final payment, §2252.032(f) lets the entity keep retainage if there is a bona fide dispute over noncompliant work or if the surety on an outstanding bond does not agree to the release. Contractors should ask the surety for its consent early in closeout so retainage is not held for paperwork.

A beneficiary may sue the principal or surety, jointly or severally, if the claim is not paid before the 61st day after the notice is mailed, and may recover the unpaid balance and reasonable attorney fees (§2253.073). Suit must be brought in a county where any part of the public work is located (§2253.077) and no later than the first anniversary of the date the claim notice was mailed (§2253.078). Suits on the performance bond have a separate limit of one year after final completion, abandonment or termination of the contract.

Information flows both ways. On written request, a prime contractor must give a supplier the entity's name and address, copies of the payment and performance bonds and the surety's name within 10 days, and may charge up to $25 to a requester it has no contract with (§2253.024). A beneficiary must give the prime or surety its agreement or purchase order and its statements of the amount claimed within 30 days after a written request (§2253.025). The entity must furnish a certified copy of the payment bond and contract to an unpaid claimant that submits the affidavit §2253.026 describes.

Two provisions change who bears a loss. If the entity fails to obtain a required payment bond, §2253.027 makes it liable as a surety would have been and gives beneficiaries a lien on money due the prime. And under §2253.071, a surety that completes the contract or pays a performance bond loss has a claim to the remaining contract proceeds ahead of the prime's other creditors, which is one reason sureties track the unpaid contract balance closely after a default.

Bid security comes from the bidding statute. Local Government Code §262.032 lets a county require a bid bond of 5 percent of the total contract price, from a surety authorized in Texas, on public works or contracts over $100,000. The same section lets a county require a performance bond in the full contract amount on contracts over $50,000 within 30 days after signing, separate from any chapter 2253 performance bond. For cities, §252.044 requires the bidder awarded a public works contract to execute a bond in the full contract price, conditioned on faithful performance and executed under chapter 2253.

Alternative delivery shifts the bond amount and timing. Under Government Code §2269.258, when a construction manager-at-risk contract is awarded before a guaranteed maximum price is set, the performance and payment bonds each equal the construction budget in the request for proposals. The CMAR delivers them within 10 days after signing unless it furnishes a bid bond or other acceptable security that the bonds will follow at GMP. Design-build contracts follow similar rules under §2269.311 and §2269.367, and bonds are not required for the design portion.

Payment timing matters to claims too. Under the Prompt Payment Act, an entity's payment is generally overdue on the 31st day after the later of delivery, completion or invoice. For a political subdivision whose governing body meets once a month or less, the date is the 46th day. A vendor must pay subcontractors their share within 10 days after it is paid (§2251.021, §2251.022). Chapter 2251 states that it does not affect chapter 2253, so bond notice dates still run on the chapter 2253 calendar.