CONTENTS Statements of— Page Hon. J. Will Taylor, a Representative in Congress from the State of 12 Hon. John F. Dockweiler, a Representative in Congress from the 12 Hon. Theodore Christianson, a Representative in Congress from the Hon. Edward H. Cushman, counsel, American Institute of Steel 23, 85 Hon. Harry L. Haines, a Representative in Congress from the State of Pennsylvania___ Gen. Washington Bowie, Jr., general counsel for the Fidelity & Hon. E. R. Witman, assistant chief, legal section, Procurement Hon. J. H. Bilbrey, representing the National Surety Co__- Hon. William K. Laws, chief of legal section, Procurement Division, Communications from the Secretary of the Treasury -38, 103 BONDS OF CONTRACTORS ON PUBLIC WORKS FRIDAY, MARCH 8, 1935 HOUSE OF REPRESENTATIVES, COMMITTEE ON THE JUDICIARY, SUBCOMMITTEE No. 1, Washington, D. C. The subcommittee met at 10:30 a. m., Hon. John E. Miller (chairman) presiding. Mr. MILLER. The committee will come to order. The subcommittee has voted to direct its attention to H. R. 2068, introduced by Mr. Taylor; and H. R. 6018, by Mr. Mead; and H. R. 5054, by Mr. Dockweiler; and H. R. 4461, by Mr. Collins. All these bills deal with the same general subject; and it was the thought of the subcommittee that we would like to have the reaction and opinion of members in reference to those bills that deal with the general subject of requiring a bond for the benefit of laborers and materialmen who deal with subcontractors on public works. (The bills under consideration follow :) [H. R. 2068, 74th Cong., 1st sess.] A BILL For the protection of subcontractors, labor, and materials employed in public works Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That every contract with the United States for the construction or repair of public work, where the amount is in excess of $2,000, shall be accompanied— (1) By a performance bond, with good and sufficient surety or sureties, upon which suit may be brought by the United States within twelve months from final settlement under the contract. (2) By an additional bond, with good and sufficient surety or sureties, including, among other things, the obligation that the contractor shall promptly make payment to all persons supplying labor or material for such work. Every person, copartnership, association, or corporation who, whether as subcontractor or otherwise, has supplied labor or material for such work, whether or not the said labor or material enter into and become component parts of the work or improvement contemplated, and who has not been paid therefor, shall have the right to sue on said additional bond in the name of the United States for his, their, or its use and benefit, in the appropriate court of the United States for the district in which the contract was to be performed, irrespective of the amount in controversy, and not elsewhere, and to prosecute the same to final judgment for such sum or sums as may be justly due him, them, or it, and to have execution thereon: Provided, however, That the United States shall not be liable for the payment of any costs or expenses of any such suit. No such suit shall be commenced prior to ninety days from the date upon which the said person, copartnership, association, or corporation furnished, supplied, or performed the last of the labor or material for which the said claim is made, and every such suit shall be commenced not later than twelve months from the date of final settlement under the contract. Any such person, copartnership, association, or corporation who has no contractual relationship, express or implied, with the contractor furnishing the said additional bond, shall not have a right of action upon the said additional bond unless the said person, copartnership, association, or corporation shall have given written notice to the contractor or his surety within ninety days after such labor and/or material has been supplied, stating with substantial accuracy the amount claimed and the name of the party with whom the said person, copartnership, association, or corporation contracted. Said notice shall be served either in the manner now or hereafter provided by law for the service of a summons, save that service need not be made by the marshal, or by mailing said notice by registered mail, postage prepaid, in an envelop addressed to the contractor at his last known place of business or to the surety at its principal office or place of business. Any claimant under such bond shall, upon application therefor and furnishing an affidavit to the General Accounting Office that he has supplied labor or materials for such work and payment therefor has not been made, be furnished, at the cost of the applicant, with a certified copy of the said contract and additional bond, upon which he may bring suit, and he and his sureties on said bond shall also be furnished by the General Accounting Office with a statement of the date when final settlement has been made under the contract, which statement of the date of final settlement shall be conclusive upon the parties. A copy of said additional bond and contract, certified as aforesaid, shall be prima facie evidence of the contents and due execution and delivery of the original. If the full amount of the liability of the sureties on said additional bond is insufficient to pay all amounts awarded in such suits, the same shall be prorated among the judgment creditors. In any such suit, the sureties on the additional bond may pay into court for distribution among all claimants the full amount of their liability under the additional bond, and, upon so doing, they will be relieved from further liability. (b) Performance bonds or other security may be required in cases other than those specified in paragraph (a) of this section. (c) Whenever any bond, guaranty, or undertaking, with surety or sureties, is required by this Act, United States bonds or notes may be furnished as provided by section 1126 of the Revenue Act of 1926 (44 Stat. L. 122). (d) Performance bonds may be waived for work to be done in a foreign country when the head of the department finds that the procurement of a bond is impracticable. This Act shall take effect upon approval, but any contract entered into or any rights or remedies that have accrued prior to that date shall be settled, adjusted, determined, and enforced without regard to this Act. [H. R. 4027, 74th Cong., 1st sess.] A BILL To provide that moneys paid to contractors shall constitute trust funds; misapplication thereof to constitute a larceny; and to amend and supplement the Act entitled "An Act for the protection of persons furnishing materials and labor for the construction of public works ", approved August 13, 1894, as amended by Act approved February 24, 1905 Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Act entitled "An Act for the protection of persons furnishing materials and labor for the construction of public works", approved August 13, 1894 (28 Stat. L. 278), as amended by the Act approved February 24, 1905 (33 Stat. L. 811), is hereby further amended and supplemented by adding at the end thereof the following section: MONEYS PAID TO CONTRACTOR OR SUBCONTRACTOR TO CONSTITUTE A TRUST FUND; MISAPPLICATION A LARCENY.-The funds received by a contractor from the United States, or by a subcontractor from a contractor, for the construction of any public building or the prosecution and completion or for the repair of any public building or public work under a contract with the United States, shall constitute trust funds in the hands of such contractor or subcontractor to be applied first to the payment of claims of subcontractors, architects, engineers, surveyors, laborers, and material men arising out of the improvement, and for the payment of premiums on surety bonds or bond filed and premiums on insurance accruing during the making of the improvement, and said trust shall be deemed discharged when all such claims are paid. Any contractor or subcontractor or any officer, director, or agent of any contractor or subcontractor who |