The Miller Act is a federal law that protects subcontractors and suppliers working on federal construction projects exceeding $100,000. When general contractors win such a project, they are required to obtain performance and payment bonds. Surety companies issue these bonds that guarantee the project will be completed (performance bond), and subcontractors and suppliers receive payment for their work and materials (payment bond).
The use of corporate surety bonds emerged in the 19th century due to a growing need for financial safeguards in public construction projects. In 1894, the Heard Act offered limited protection for subcontractors and suppliers on federal construction projects. The Miller Act, passed in 1935, addressed these shortcomings by requiring contractors to secure performance and payment bonds. These bonds act as financial guarantees; the performance bond ensures project completion, while the payment bond ensures subcontractors and suppliers receive payment for their contributions.
The Miller Act's significance extends beyond immediate financial security. By requiring bonds, the government weeds out unreliable contractors and fosters confidence in those awarded projects. Further, payment bonds allow subcontractors and suppliers to participate safely in projects without the fear of nonpayment. If the general contractor does not pay a subcontractor or supplier, the Miller Act can help them recover the owed funds by filing a claim against the payment bond.
However, not everyone involved in a construction project is eligible to file a Miller Act claim. The act protects only first-tier subcontractors or material suppliers who have a contract with the prime contractor and second-tier subcontractors or material suppliers who have a contract with a first-tier subcontractor. The Miller Act does not cover suppliers beyond the second tier or designers, even if they perform onsite services.
Keeping time limits and following proper procedures are critical when filing a Miller Act claim. This includes maintaining a paper trail of key documents such as the signed contract with change orders, invoices, delivery receipts for materials, payment records (checks or confirmations), and any communication regarding performance or payment issues. Having these documents readily available becomes essential for filing a Miller Act claim to recover unpaid funds.
Second-tier subcontractors and suppliers must be aware of a notice requirement: within 90 days of the last day they furnished labor or materials, they must send a written notice to the prime contractor. This notice should detail the amount owed and the intention to file a Miller Act claim. Individuals should send the notice by certified mail to have a clear delivery record.
Individuals cannot file a lawsuit against the payment bond sooner than 90 days or later than one year from the last day of furnishing labor or materials. Missing these deadlines jeopardizes the entire claim. Federal district courts are the exclusive venue for filing Miller Act claims, regardless of the amount.
While not mandatory, subcontractors and suppliers should notify the government agency and surety company. This notification may encourage them to get involved and expedite the payment process. Even first-tier subcontractors and suppliers may initiate the process sooner by sending a notice.
By following the proper notice requirements and deadlines, subcontractors and suppliers can protect their rights and recover outstanding balances owed to them. Early action is often the key to resolving the issue. In many cases, the surety company will step in to avoid litigation.
