The Miller Act: An Overview On Making Claims For Payment On Federal Projects

The Miller Act:
An Overview on Making Claims for Payment on Federal Projects

The Miller Act is a federal statutory scheme that is intended to protect certain levels of subcontractors from general contractors who fail to pay them. In essence the Act provides for a payment bond remedy for those who furnish labor or materials to a federal public works project.

What Requirements Placed on General Contractors by the Act?

On any federal project over $25,000 the general contractor must furnish a payment bond. The Miller Act allows a general to post certain assets in lieu of a bond. It should be noted that since the general contractor is the principal on the bond it is not entitled to pursue a claim against the bond.

A federal project is one where federal funds are used for the improvements or if the federal government has a financial interest in the project

If a bond is required and the procuring agency fails to enforce the requirement a unpaid claimant may be able to pursue the procuring agency.

Who Can Make a Claim Against a Miller Act Bond?

The Miller Act payment bond provides for payment of all persons supplying labor or material used in the work covered by the general contract. However the only first and second-tier subcontractors and material suppliers can make a claim against the bond. First-tier subcontractors/material suppliers are those with contracts directly with the prime contractor, and second-tier subcontractors/material suppliers are those with contracts directly with first-tier subcontractors. Thus third and lower tier subcontractors and suppliers, lenders, and employees of third and lower tier subcontractors cannot make a Miller Act claim. However, both an assignee of a first or second tier subcontractor/material supplier can make a claim and a lower tier subcontractor can make a claim if the first tier subcontractor who agrees to directly pay a lower tier subcontractor can may make a Miller Act Bond claim

What Notice Requirement Are Placed on Subcontractors and Suppliers as a Prerequisite to Filing a Claim?

A first tier subcontractor or supplier does not have to file a preliminary notice. All other eligible lower tier subcontractors and material suppliers must give the prime contractor written notice within 90 days after they last furnished labor or material. The last day for furnishing labor and/or materials is determined by whether or not the work in question was part of the original contract work. The notice must inform the prime contractor that a claim for payment is being made and include the following information: (a) the claimant has furnished and labor and material to the project, (b)who the work and/or materials were supplied to, and (c) the balance owed.

The notice may be sent to the prime contractor by first class postage paid mail. It is a good practice to send the notice with a return receipt requested.

How is The Miller Act Bond Claim Perfected?

Within one year after the claimant last furnished labor the and/or materials the claimant must file a lawsuit in the appropriate federal court. However, there is a bar on filing the lawsuit for a period of ninety days after the claimant last furnished labor the and/or materials. If a lawsuit is not filed in a timely manner the bond claim will fail. Attorney fees can only be recovered if there is an attorneys fee provision in the contract.

Conclusion

The Miller Act is an excellent payment remedy for first and second tier subcontractors. The requirements placed on the first and second tier claimants are slight in comparison to those placed on a mechanics lien claimant. However, the success of the claim is dependent on giving the appropriate preliminary notice. Since the remedy is against the bond or security that the prime contractor posts potential claimants should satisfy themselves that the bonding company is solvent, or if assets are posted they are of the value represented by the prime contractor.

This article, ©1997, was written by William C. Last, Jr. Mr. Last is an attorney specializing in Construction Law. He can be contacted at 415-764-1990. This bulletin is published periodically to provide general information about current legal issues. If you have a specific legal question or need legal advice, you should contact an attorney. issues, and will gladly make them available upon request