Iowa subcontractors convinced the Iowa Supreme Court that the Iowa Department of Transportation (“IDOT”) should cover unpaid balances the general contractor owed to subcontractors. Although this ruling will only apply to situations where the IDOT has waived the bonding requirement for certain contractors, it’s still a great win for subcontractors.
This case, Star Equipment v Iowa, involved the construction of a roadside rest area along Interstate 80. Universal Concrete was selected as the general contractor and, as a Targeted Small Business, IDOT waived the construction surety bond requirement. IDOT accepted the work in September, 2011, but Universal Concrete failed to pay three of its subcontractors, totaling about $30,000. IDOT retained about $3,500 and told the subcontractors that they could split the $3,500, but no other funds would be paid.
The subcontractors sued, arguing that when IDOT waived the bonding requirement for a general contractor, IDOT guaranteed that the subcontractors would be paid. The Iowa Supreme Court agreed, finding that Iowa law permitted subcontractors to recover from IDOT amounts they could have recovered from the surety if IDOT had not waived the bond.
Also of note is that the Iowa Supreme Court allowed the subcontractors to recover their attorney fees from IDOT, including fees incurred at trial court and on appeal. Given the cost of litigation, I’m sure IDOT ended up paying significantly more than the $30,000 originally demanded by the subcontractors.
Take Away: If you do not get paid on an IDOT jobs and the general contractor was not required to post a bond, you may be able to recover from IDOT.