In California there are approximately 110 Native American Tribes, so it isn’t surprising there is a lot of Tribal work opportunities for contractors. While Tribal Nations can be great owners to work for, there are some unique risks that contractors need to be aware of. We will address the risks most important to surety companies in this article and potential ways to mitigate them. It’s important to note that we are not lawyers and therefore cannot give legal advice, so any Tribal contract you get we would recommend running by your attorney.
Limited Waiver of Sovereign Immunity
What many contractors don’t realize about Tribal Nations is they have what is called sovereign immunity. Essentially, this means the Tribe cannot be sued unless they waive that right for a specific purpose. So, if you get into a dispute about things like a change in conditions or you don’t get paid, you wouldn’t be able to sue the Tribe. Thus, you will always want to make sure that there is a limited waiver of sovereign immunity with respect to the project you are performing to allow for suits relating to the contract.
Governing Law
It's important to know which law will govern the contract, because if it’s Tribal law, that may be totally different than the state or federal law you are used to, and it may tilt in the Tribe’s favor.
Dispute Resolution
This section in the contract will outline how the Tribe plans to resolve disputes whether that is in Tribal court, state or federal court, mediation, or arbitration. If the contract calls for Tribal court, you’ll want to gain an understanding of how the Tribe’s court system works. Is it a panel of judges that decide cases or is it handled by jury? In either case, you won’t necessarily be getting a “jury of your peers”, which could result in a major disadvantage. It is generally best for cases to be handled in state or federal court, so you know the rules of the game.
Project Financing
Many Tribes have strong revenues and are well financed, but not surprisingly, Tribes are not created equal in this regard. Contractors should gain an understanding of the Tribe’s financial wherewithal and how the Tribe intends to pay for the work (i.e. is the Tribe paying for the work themselves or financing it through a bank).
Subcontractors
In order to get an understanding of the factors outlined above, subcontractors need to request a copy of the prime’s contract with the Tribe and see the extent that their subcontract passes through these prime contract conditions.
It’s very helpful to also confirm if the prime has provided performance and payment bonds to the general contractor, because the payment bond will serve as a source of payment protection to the subcontractor if the prime doesn’t meet their obligations.
Conclusion
Tribal work can be excellent opportunities for contractors, and the key like most things in construction is to manage the risk. Our experience is many Tribes address these in their contracts without even being asked and those that haven’t addressed them are receptive to the changes.
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