Bell Nunnally attorneys Randall K. Lindley and Benjamin L. Riemer authored the Business Credit article “Don’t Become Roadkill: New TxDOT Rules Can Alter Deadlines on Highway Projects.” (Business Credit is a publication of the National Association of Credit Management.) The piece discusses how Comprehensive Development Agreements (CDAs) create significant differences when it comes to asserting lien claims and payment bond claims under Texas law, an issue of particular concern to subcontractors and suppliers providing materials or labor on Texas construction projects.
For public works projects in Texas, state law requires governmental entities to ensure that general contractors obtain payment and performance bonds. Relevant deadlines are set forth in Chapter 2253 of the Texas Government Code. However, per legislation passed in 2005, the Texas Department of Transportation (TxDOT) has the ability to enter into CDAs. TxDOT describes CDAs as a tool to “enable private development by sharing the risks and responsibilities of design and construction.” With a CDA, typical payment and performance bonds are joined by alternative forms of credit, such as a letter of credit, as available forms of security for a project. If negotiations set in place the latter, the claim process will vary based on requirements set forth in a project’s security documents – presenting a very real risk to subcontractors and suppliers who erroneously follow Chapter 2253’s protocol.
Lindley and Riemer highlight and explore the key differences with respect to asserting claims under CDAs and Chapter 2253.They note that subcontractors and suppliers must obtain a copy of the CDA, ideally before any labor or materials are provided, and review its terms to determine if there is an alternative form of security on a project. The article concludes with a warning that subcontractors and suppliers should use “an abundance of caution in seeking to protect their financial interests in connection with work performed or materials provided on TxDOT projects.”
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