Subcontractors Performing Work on Public Construction Projects in Illinois Must Satisfy Additional Notice Requirements to Perfect Claims on Bonds and Letters of Credit

In August 2011, the Illinois State legislature enacted an amendment to the Public Construction Bond Act (the “Act”) that increases the notice requirements a subcontractor must satisfy in order to sue for payment on a bond or letter of credit issued in the name of the State or a political subdivision for public construction project.  30 ILCS 550/2. 

 Prior to the amendment, a subcontractor was only required to (1) file a verified notice of its action with the "officer, board, bureau or department awarding the contract" within 180 days of the date on which the last item of work was performed or material was furnished by the subcontractor and (2) provide a copy of the same verified notice to the contractor within 10 days of filing the notice with the State.

Public Act 97-0487 amended Section 2 of the Act to include several additional notice requirements.  A subcontractor must now also file a verified notice with the "Clerk or Secretary" of the same political subdivision within 180 days of the date on which the last item of work was performed or material was furnished, and provide a copy of that notice to its contractor within 10 days of filing the notice with the Clerk or Secretary.  Thus, under the amended Act, a subcontractor must essentially duplicate the notice it was already required to provide to state officials, or forfeit its claim for payment against the applicable bond or letter of credit.  But that is not all.  The Act was also amended to require all notices to include a brief description of the subcontractor's contract as well as a description of the work performed and the amount due and unpaid as of the date of the notice.

Besides changing the Act’s notice requirements, the August amendments also extended the limitations period for all actions brought under the Act.   Prior to the amendment, all actions had to be brought no earlier than 120 days after the date on which the last item of work was performed or material provided and no later than six months from the same date.   The Act now requires all actions to be filed no later than one year after the date on which the last item of work was performed or material was furnished by the subcontractor.  However, the lengthening of the limitations period will be of little solace to subcontractors who fail to adhere to the new notice requirements.

Subcontractors who perform work on public projects in Illinois must be aware of the new notice requirements and should adjust their internal policies and procedures to conform to them.  Otherwise, they will put themselves at risk of not perfecting their claims.  The amendment to the Act becomes effective on January 1, 2012.