§ 2–357.02. Contract performance and payment bonds in construction contracts.

(a)(1) When a construction contract is awarded in excess of $100,000, the following bonds or security shall be delivered to the District and shall become binding on the parties upon the execution of the contract:

(A) A performance bond satisfactory to the District, executed by a surety company authorized to do business in the District or otherwise secured in a manner satisfactory to the District, in an amount equal to 100% of the portion of the contract price that does not include the cost of operation, maintenance, and finance; and

(B) A payment bond satisfactory to the District, executed by a surety company authorized to do business in the District or otherwise secured in a manner satisfactory to the District, for the protection of all persons supplying labor and material to the contractor or its subcontractors for the performance of the construction work provided for in the contract.

(2) The payment bond required by paragraph (1)(B) of this subsection shall be in an amount equal to 100% of the portion of the contract price that does not include the cost of operation, maintenance, and finance.

(b) The CPO may:

(1) Reduce the amount of performance and payment bonds for construction contracts to 50% of the amounts established in subsection (a) of this section;

(2) Substitute for a bond required by subsection (a) of this section, a letter of credit in an amount equal to at least 10% of the portion of the contract price that does not include the cost of operation, maintenance, and finance, in cases in which the contractor:

(A) Is a nonprofit corporation, as defined in § 29-401.02(6), or an entity controlled, directly or indirectly, by a nonprofit corporation;

(B) Had a net worth of at least $1 million in the preceding fiscal year;

(D) Has done business as a construction contractor for at least 5 years.

(c) This section shall not limit the authority of the District to require a performance bond or other security in addition to such bonds or in circumstances other than specified in subsection (a) of this section.

(d)(1) A person who has furnished labor or material to the contractor or its subcontractors for the work provided in the construction contract, in respect of which a payment bond is furnished under this section, and who has not been paid in full before the expiration of a period of 90 days after the day on which the last of the labor was done or performed by such person or material was furnished or supplied by such person for which claim is made, shall have a right of action on the payment bond for the amount unpaid at the time of institution of the action and to prosecute the action for the amount due to the person.

(2) Any person having a direct contractual relationship with a subcontractor of the contractor, but no contractual relationship express or implied with the contractor furnishing the payment bond, shall have a right of action upon the payment bond upon giving written notice to the contractor within 90 days after the date on which the person did or performed the last of the labor or furnished or supplied the last of the material upon which the claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor was done or performed. The notice shall be personally served or served by other form of receipted transmittal that confirms actual delivery to the contractor at any place the contractor maintains an office or conducts its business or at the contractor’s residence.

(e) An action instituted upon a payment bond shall be brought in a court of competent jurisdiction within the District, but an action suit shall not be commenced after the expiration of one year after the day on which the last of the labor was performed or material was supplied by the person bringing the action. The obligee named in the bond need not be joined as a party in the action.

(f) An action instituted under this section shall not be commenced after one year from the date that the final labor was performed or the material was supplied.