The Miller Act (40 U.S.C.Section 3131 to 3134) is the law requiring contract surety bonds on federal construction projects. The Miller Act requires that every contractor bidding on a federal project has to post a performance bond and a payment bond covering all labor and material. The law is required on contract exceeding $100,000 working or planning to work on any building or property of the United States. Under the Miller, Act is extremely important to record all related contracts, invoices, delivery tickets and precisely record where the material or labor was supplied, who was the person in charge to receive or supervise the delivery and identify the location where the material will be used.
Miller Act Requirements
The Miller Act requires that the contractor shall provide the government with:
- A performance bond as required by the contracting officer providing protection for the government.
- A payment bond to protect labor, suppliers, and materials. The payment bond should be equal to the total contract amount by specified terms or as required by the contracting officer. The payment bond amount shall not be less than the amount required under the performance bond.
- The payment bond will cover subcontractor suppliers, and labors directly related with the prime contractor.
- The payment bond will also cover subcontractors and suppliers contracted by subcontractors, called second-tier claimants.
- A contracting officer may waive the requirement of a performance bond and payment bond for work under a contract that is to be performed in a foreign country.
- The Federal Acquisition Regulation could request additional protection or bonds to contractors being contracted between $25,000 and $100,000.
- The Miller Act now prohibits a prime contractor from requiring its subcontractor to waive its payment bond rights before beginning work.
Many states in the U.S. have adapted the Miller Act for use at the state level. These state statutes may be referred to as, "Little Miller Acts."
Miller Act: Rights of Suppliers
The Miller Act, under its statutes, provided some warranties to all material and labor suppliers performing construction works under the bonded contract. These rights are:
Certified Copy: The supplier or subcontractor can request a certified copy of a payment bond, only if they can demonstrate by submitting an affidavit that the payment for their work has not been made, or that the person is being sued on the bond. Fees and costs of producing the copy shall be covered by the subcontractor.
Civil Action: When the supplier or subcontractor has not been paid in full within 90 days after the person completed the labor or furnished the required material, might bring a civil action on the payment bond covering the unpaid portion of his/her contract. If your labor or material was actually used on another job, you still have rights under the Miller Act, but limited exceptions might apply.
The second-tier claimants can also bring a civil action as stated in the previous section. This claim must specify with accuracy the amount claimed, the name of the person to whom the material or labor was furnished.
Court Location: The civil action under the Miller Act shall be presented in the United States District Court in which the contract was to be performed or executed.
When to File: If a civil action under the Miller Act is to be filed, it must be presented no later than one year after the labor or material was performed or furnished.
Liability: The Government is not liable for the payment of any costs or expenses of any civil action brought under this subsection.
Waiver Clause: A waiver clause in a subcontract is void unless it has been signed after the subcontractor started work.
Miller Act Recoverable Costs
Under The Miller Act some costs can be recovered depending on the facts supporting the claim:
- Labor performed on the job site.
- Professional services will not be recovered unless they were part of the scope of work under the bonded contract.
- Office personnel without any on-site related work are not recoverable.
- All material to be used or entirely consumed on the project.
- When the material is bought for the project but will have a prolonged used after the project completion, it will not represent any recoverable cost.
- Rental costs associated directly to the bonded contract.
- Materials that were never installed nor used in the project or moved to another project will not represent recoverable costs under the Miller Act.
- Federal courts have determined in certain situations that delay and cost incurred due to changes could be recovered.
- Attorney's fees and other related costs might be recovered depending on contractual language and conditions.