By Lauren White, RCS Assistant Editor.
Government contractors or suppliers may have heard of, or are familiar with, the Miller Act. Whether their experience was posting a bond for a government project or having a colleague file a claim to receive payment, there are numerous details to this U.S. law that might surprise you.
Also known as federal statute 40 U.S.C §§ 3131–34, the Miller Act was passed in 1935, and in 2002 it was recodified. According to Cotney Construction Law, “This law requires that when any contract worth $100,000 or more is awarded for the construction, alteration, or repair of any federal government public building or public work, the prime (or general) contractor is required to provide a surety payment bond and a surety performance bond.”
Suppliers and subcontractors are protected by the payment bond, which guarantees that they receive payment for their materials and labor. And the performance bond is posted by the prime contractor to ensure “the federal government that the project will be completed according to the contract,” Cotney Construction Law explains.
The surety takes over the contract, replaces the contractor or will provide funding for the original contractor if the contractor defaults.
Why it was created
This act replaced the Heard Act, a similar, but limited law according to lawmakers. “Its purpose is to ensure that if a contractor defaults on a federal project, the government does not have to manage the project’s costs or delays,” shared Cotney Construction Law. Additionally, if subcontractors and suppliers aren’t paid by their contractors, they can’t sue the federal government. Their interests are protected by the payment bond.
What it covers
The Miller Act only applies to projects concerning construction, alteration or repair to federal buildings not state, county, private or commercial projects. Prime contractors are not protected by the Miller Act, even though they are responsible for the payment and performance bonds. "If they complete a project and are not paid, they may have to file a lawsuit against the federal government,” according to Cotney Construction Law.
Miller Act payment bonds don’t cover all suppliers and subcontractors. First- and second-tier subcontractors and suppliers, in addition to second-tier suppliers who are working under contract with a first-tier subcontractor are protected. Third-tier suppliers and subcontractors, and second-tier suppliers under contract with another supplier are not covered by the bond.
“First-tier subcontractors and suppliers who have not received payment for a federal project should file a Miller Act Claim 90 days after, but within one year, of providing final labor or materials for the project,” Cotney Construction Law advises. The claim should be sent to the prime contractor and a copy should be given to the surety. It is suggested that claims are sent by certified mail with a return receipt requested since claimants need to be able to show proof of delivery. “Lower-level subcontractors and suppliers who have not been paid must file a claim within 90 days of providing final labor or materials for the project,” according to Cotney Construction Law.
Waivers are rare since providing payment and performance bonds are a general demand. However, for projects that take place in a foreign country a waiver might be granted if securing a bond is considered impractical.
Exceptions do apply for projects involving the U.S. Army, Navy, Air Force and Coast Guard in addition to the Merchant Marine and the Coast and Geodetic Survey, which are made by the Secretaries of Transportation and Commerce.
With that being said, all federal projects that are contracted at $100,000 or more, it is recommended that prime contractors, “...proceed under the assumption that posting payment and performance bonds is required,” Cotney Construction Law shares.
Whether you are a contractor bidding on a federal project or a supplier or subcontractor, it’s important to understand your responsibilities and your rights. Regardless of your role, consider seeking legal counsel to have your questions answered before agreeing to the terms of a contract.
Consult an experienced construction attorney like Cotney Construction Law to learn more about the Miller Act.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.