How do I calculate cost to complete after a contractor defaults?
Add the reasonable cost to finish the remaining work, the cost to correct defective work, and extra reprocurement and delay costs. Subtract the unpaid balance left on the original contract. The positive difference is the owner's excess-cost claim against the contractor or its surety.
What is a performance bond claim?
On a bonded project, if the contractor defaults the owner makes a claim on the performance bond. The surety must remedy the default — by completing the work, arranging a completion contractor, or paying the owner's excess completion costs — up to the penal sum of the bond.
The Miller Act requires performance and payment bonds on most federal construction contracts over a threshold amount. It protects the government (performance) and subcontractors/suppliers (payment) when a prime contractor defaults or fails to pay, giving unpaid subs a federal bond-claim remedy in lieu of a lien.
Can the owner recover reprocurement costs?
Yes. When a defaulting contractor is terminated for cause, the owner can generally recover the reasonable excess cost of reprocuring the completion work, provided the owner mitigates damages and the reprocurement is conducted reasonably and documented.