What Contractors Should Know About the Miller Act
If you are a government contractor or supplier, you have likely heard of the Miller Act. You may have had to post a bond for a government project, or you may know someone who has filed a Miller Act claim to receive payment. But you may not know all the details of this U.S. law.
What Is the Miller Act?
The Miller Act is the common name for federal statute 40 U.S.C. §§ 3131–34, a law passed in 1935 and recodified in 2002. 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.
The prime contractor posts a payment bond to protect the suppliers and subcontractors. It guarantees that these workers will be paid for their materials and labor. The prime contractor posts a performance bond to guarantee the federal government that the project will be completed according to the contract.
If the contractor defaults, the surety will take over the contract, replace the contractor, or provide funding for the original contractor.
Why Was the Law Created?
The Miller Act replaced a similar law called the Heard Act, which lawmakers believed was too limited. 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. In addition, subcontractors and suppliers cannot sue the federal government if their contractors do not pay them. So the payment bond protects their interests.
What Does the Miller Act Cover?
The Miller Act applies only to federal construction, alteration, or repair projects. It has no bearing on state, county, private, and commercial projects. And while prime contractors provide the payment and performance bonds, they are not protected by the Miller Act. If they complete a project and are not paid, they may have to file a lawsuit against the federal government.
Also, note that a Miller Act payment bond does not cover all suppliers and subcontractors. It protects first and second-tier subcontractors, as well as first-tier suppliers. It also protects second-tier suppliers working under contract with a first-tier subcontractor. The bond does not cover third-tier suppliers or subcontractors, or second-tier suppliers who are under contract with another supplier.
When Are Claims Filed?
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. They should send the claim to the prime contractor and provide a copy to the surety. Claimants must be prepared to show delivery verification, so it is advised that claims be sent by certified mail, with return receipt requested. 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.
Are Waivers Allowed?
Providing payment and performance bonds is a general demand, and waivers are quite rare. If the project is set in a foreign country and providing a bond is deemed impractical, a waiver may be allowed. There are exceptions for specific projects involving the U.S. Army, Navy, Air Force, or Coast Guard. Additionally, the Secretaries of Transportation and Commerce may make exceptions for projects involving the Merchant Marine and the Coast and Geodetic Survey. However, for all federal projects contracted at $100,000 or higher, prime contractors should proceed under the assumption that posting payment and performance bonds is required.
If you are a contractor bidding on a federal project, be sure you know your responsibilities regarding the Miller Act. If you are a supplier or subcontractor, be sure you understand your rights. In either case, if you have questions about the Miller Act, consider seeking legal counsel. You will benefit from having all your questions answered before you agree to the terms of any contract.
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.