1. What is the Miller Act?
The Miller Act is a federal statute that requires prime contractors on most federal construction projects to furnish payment and performance bonds, each with a value equivalent to the contract price. Such bonds, issued by sureties, provide a source of guaranty for the performance of the work and payment of subcontractors and suppliers. Performance bonds protect the government (the bond’s obligee) in case the contractor (the bond’s principal) defaults on the work, while payment bonds protect both the government and downstream subcontractors and suppliers in the event the contractor defaults on its payment obligations.
This article addresses the applicability of the Miller Act to specific claimants in the chain of privity and the required procedures and timing that these claimants must adhere to for asserting payment bond claims. Miller Act payment bond claims are a powerful tool for assuring payment for qualified claimants on federal construction projects. As explained below, the Miller Act provides a claim mechanism under which a qualified subcontractor or supplier can file a claim against the surety and the contractor pursuant to the payment bond in order to recover unpaid amounts.
2. To Which Contracts Does the Miller Act Apply?
The Miller Act applies to all contracts greater than $100,000 for “the construction, alteration, or repair of any public building or public work” where the federal government is the owner. The Miller Act does not apply to public construction contracts entered into by state and local governmental entities.
Most states have their own variation of the Miller Act, commonly referred to “Little Miller Acts,” which may apply in public contracts involving state and local government entities. Although similar in concept and general outline, to the Miller Act, the substance and procedure of Little Miller Act can vary greatly. Subcontractor payment and performance bonds are not Miller Act bonds, even if issued on a federal project.
3. Who Can File a Claim Under the Miller Act?
The Miller Act affords protection to first and second-tier subcontractors and material suppliers. Specifically, it applies to the following four groups:
- first-tier subcontractors who contracted directly with a prime contractor;
- first-tier material suppliers who contracted directly with a prime contractor;
- second-tier subcontractors who contracted directly with a first-tier subcontractor; and
- second-tier material suppliers, who contracted directly with a first-tier subcontractor.
The Miller Act does not apply to second-tier suppliers who contracted directly with a first-tier supplier. Additionally, lower tier subcontractors and material suppliers are not protected under the Miller Act and cannot file a payment bond claim. Design professionals who contract directly with prime contractors or first-tier subcontractors do not qualify for protection under the Miller Act, even if they perform on-site construction administration services.
4. What Are the Timing Requirements?
The Miller Act specifies certain notice and claim filing requirements that must be strictly followed. Claimants in direct privity with the prime contractor do not need to satisfy notice requirements. All second-tier subcontractors and suppliers must provide written notice to the prime contractor (further described below) within 90 days after the last day of its furnishing labor or materials. This notice is a statutory and mandatory prerequisite to a valid Miller Act claim.
A civil action against the payment bond by any claimant cannot be filed until 90 days after the last day of furnishing labor or materials. Any civil action brought under the Miller Act must be filed within one year of the last day of the claimant’s furnishing labor or materials. These timing requirements must be strictly followed; failure to comply can be fatal to a claim.
5. What Are the Notice Requirements?
These notice requirements do not apply to first-tier subcontractors and suppliers who are in direct privity with the prime contractor, as the prime contractor should already be aware that it has not made payments to its first-tier subcontractors and suppliers. Moreover, the statute does not require notice to be provided to the surety.
A second-tier subcontractor and supplier must provide notice to the prime contractor (who is the principal on the payment bond). The notice must:
- be in writing;
- state with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor was done or performed; and
- be served on the prime contractor using a method that provides for third-party verification of delivery (such as certified mail) or by the U.S. marshal.
6. Where Do Miller Act Claims Get Adjudicated?
The federal district courts have exclusive jurisdiction over Miller Act claims, with limited exceptions. Under the Miller Act, a civil action must be filed “in the name of the United States for the use of the person bringing the action” and in “the United States District Court for any district in which the contract was to be performed and executed, regardless of the amount in controversy.” This jurisdictional requirement means a Miller Act claim cannot be asserted in state court. However, courts consider the venue provision of the Miller Act to be permissive (and therefore waivable), and tend to enforce the parties’ contractual venue provision over the Miller Act venue requirement. In limited circumstances, arbitration may be permitted – when the parties agree to arbitrate after the work has been performed or the materials furnished.
7. Key Takeaways
Miller Act payment bonds provide a powerful payment enforcement mechanism for qualified first and second-tier subcontractors and suppliers. Construction attorneys should pay particular attention to the statute’s notice and filing requirements, which can impact the viability of a claim. Additionally, when filing or defending against a civil action that asserts Miller Act claims, attorneys should verify that the jurisdictional requirements of the Miller Act are satisfied (i.e., in federal district court), and be mindful that the parties’ contractually agreed-upon venue provision likely governs.