A Review of the Miller Act

Mar 29, 2017

A brief reminder of the Miller Act’s purpose and how to ensure coverage.

The Miller Act has two elements. It requires prime contractors on some, but not all, federal government projects to obtain performance bonds that protect the government (the owner) if the prime defaults on its contractual obligations.

The Miller Act also requires prime contractors to obtain a payment bond that provides funds to pay subcontractors and suppliers that file suit if they are not paid. Some state construction projects are covered under what Seth Smiley, in his article in Construction Law Monitor, refers to as “’Little Miller Acts.’” These are state statutes that mirror the Miller Act.

The Miller Act was enacted in 1893 to help prevent expensive construction delays on federal projects caused by contractors’ “abandonment or non-performance.”

According to Mr. Smiley, Congress instituted the performance bond requirement to ensure that only contractors who were serious about fulfilling their contractual obligations would obtain government contracts.

The bonds also defray “some of the cost of potential non-performance and the need for a substitute.”

The payment bond was designed to encourage subcontractors and suppliers to perform work for the federal government, which in many situations is immune from litigation because of “sovereign immunity.”

This is the provision that is most important to subs and suppliers although the performance bond requirement provides them with some assurance the prime contractors for whom they are working are, at least in theory, financially solvent.

Mr. Smiley indicates that filing a Miller Act claim is “relatively straightforward.” If a subcontractor or supplier is covered under the Act, they have 90 days to send a “Miller Act Notice to the prime contractor from the date on which they last performed work or supplied material to the job.”

“First tier subs and suppliers” also have one year from the date of their last “furnishing” to submit a claim to the bonding company.

Second tier subs and suppliers owed money by first tier subs and suppliers can file claims against the prime contractor. This gives them one year from that date to file a Miller Act suit in federal court.

Mr. Smiley emphasizes that filing requirements are strict. Complying with deadlines is essential.

The author suggests that you contact an attorney if the need to file suit for payment arises.

Keep in mind that third tier subs and suppliers are not covered under the Miller Act.

Source—

What the Miller Act Means for You, Seth Smiley, Construction Law Monitor, Nov. 6, 2015.