On public projects (i.e. public schools, colleges, cities, townships) over $50,000, the contractor hired by the governmental/public body must deliver before starting work: (1) a Performance Bond assuring performance to the owner; and (2) a Payment Bond assuring payment to subcontractors, suppliers and laborers. Both Bonds are signed by the Contractor and the Surety (an insurance company).
Subcontractors and Suppliers should make it standard practice to obtain a copy of the Payment Bond before starting work on the project. First, make a request to the contractor for a copy of the Payment Bond. If unsuccessful, make a written request to the governmental body.
Once receiving the Payment Bond, be sure to verify whether your customer is the Contractor who signed the Bond. If yes, there are no preliminary notice requirements, however, it is a good idea to send a notice of claim to both the contractor and governmental body if not paid within 90 days after the last day of work.
If your customer is not the Contractor who signed the Payment Bond, then you are likely a subcontractor to a subcontractor or a supplier to a subcontractor. In such case, you generally have 2 notice requirements: (1) a certified written notice to the contractor within 30 days after your first work or material supply stating what work you are doing and the name of your customer, and (2) a certified written notice to the contractor and governmental body within 90 days after your last work or material supply stating the balance owed, and that you are relying on the Payment Bond.