Payment bonds on public projects in Massachusetts are governed by G.L. c. 149, § 29. There is no statutorily prescribed form of payment bond. The coverage of payment bonds issued under G.L. c. 149, § 29 includes expenses related to the project, such as:
- labor and materials used or employed in the project;
- specially fabricated materials, unsuitable for use elsewhere, regardless of whether they are delivered to, or incorporated into, the project;
- transportation charges for materials;
- rental costs of equipment; and
- payments to health and welfare plans, unemployment-benefit plans, and other fringe benefits provided for in collective bargaining agreements.
Unlike payments bonds under the Miller Act, G.L. c. 149, § 29 protects every tier of subcontractor or supplier. Peters v. Hartford Acc. and Indem. Co., 377 Mass. 863 (1979).
A. Labor and Materials “Used or Employed in the Project.”
The emphasis on the “broadly remedial” purpose of G.L. c. 149, § 29 has led to several decisions allowing recovery for materials supplied and intended for the project, even if the materials were not ultimately physically incorporated into the project. See e.g., Advanced Kiosks v. LM Holdings, LLC, 25 Mass. L. Rptr. 357 (2009).
In Advanced Kiosks, a Superior Court justice relied upon another Superior Court decision in George H. Dean, Inc. vs. Fireman’s Ins. Co. of Newark, Mass. Super., 1996 WL 680083 (Botsford, J., Oct. 25, 1996), noting that the deciding judge in that decision exhaustively reviewed the decided cases to determine that, in order to recover under a bond, “the product which was supplied … need not have been actually incorporated into the as-built structure but need only have been… furnished by virtue of a contract.” Id.
In George H. Dean, Inc., the judge looked to the decision in International Heating & Air Cond. Corp. v. Rich Const. Corp., 372 Mass. 134, 138 (1977) and ultimately found for the claimant regardless of any evidence as to what amount of structural steel was actually incorporated into the project and what amount was simply delivered pursuant to the purchase order. Id.
B. Specially Fabricated Materials.
G.L. c. 149, § 29 provides for payment for specially fabricated materials as follows:
payment by the contractor and subcontractors for labor performed or furnished and materials used or employed therein … and including also any material specially fabricated at the order of the contractor or subcontractor for use as a component part of said public building or other public work so as to be unsuitable for use elsewhere, even though such material has not been delivered and incorporated into the public building or public work.
G.L. c. 149, § 29. The Massachusetts Appeals Court held in C. C. & T. Const. Co. v. Coleman Bros. Corp., 8 Mass. App. Ct. 133 (1979) that a G.L. c. 149, § 29 bond “covers the conversion by a contractor of specially fabricated materials, which conform to job specifications, and were originally intended for incorporation in the work.” Id. at 138.
For specially fabricated materials, if the claimant does not have a direct contractual relationship with the contractor bond principal (i.e., a second-tier subcontractor/supplier), the claimant must have given “the contractor principal written notice of placement of the order and the amount thereof not later than twenty days after receiving the final approval in writing for the use of the material” in order to maintain the claim. G.L. c. 149, § 29.
The Massachusetts Supreme Judicial Court, however, held in Lawrence Plate & Window Glass Co. v. Varrasso Bros., 353 Mass. 631, 634 (1968) that G.L. c. 149, § 29 does not require the twenty-day notice for “specially fabricated goods in a situation where the materials have been used or employed in the construction or repair of the public buildings which were the subject of the contract so long as the claimant has otherwise complied with the requirements of § 29.”
G.L. c. 149, § 29 makes the “purchase price less its fair salvage value” the measure for a bonding company’s liability for specially fabricated materials. C. C. & T. Const. Co., Inc. v. Coleman Bros. Corp., 8 Mass. App. Ct. 133, 136 (1979).