The Miller Act was passed to provide an opportunity for subcontractors and suppliers to recover for unpaid labor and material on federal projects, since mechanics liens cannot be filed against public property. For federal projects where the prime contract exceeds $100,000, the Act requires that general contractors provide performance bonds and a payment bond sufficient to cover the entire amount of the prime contract. In order to recover for nonpayment, protected parties must file a claim against the general contractor and surety under the payment bond.
To establish an enforceable claim, a subcontractor must first show that payment is owed. After establishing a right to payment, other specific requirements must be met. These requirements are explored below.
Who does it protect?
The Miller Act does not alter a contractor’s rights regarding claims for nonpayment. Instead, it provides security to those who are covered by the act. The Act covers first and second-tier subcontractors, first-tier suppliers, and second-tier suppliers under contract with a first-tier subcontractor, but not those second-tier suppliers under contract with another supplier. Third-tier suppliers and subcontractors are not covered by the Miller Act, and they may recover under traditional contract or quasi contract remedies.
How do Subcontractors and Suppliers Obtain Security?
For first-tier subcontractors and suppliers, the process is simple. In order to file a bond claim under the Miller Act, first-tier subcontractors may have to provide initial notice to the general contractor. It may be beneficial to send notice even if not required. Regardless, all subcontractors must wait until 90 days after they last furnished labor or materials to the project before they can file a claim. This period provides an opportunity for the subcontractor to be paid without having to file a claim, and any bond claims filed before the end of this period will be considered premature.
Second-tier subcontractors and second-tier suppliers covered by the Act must also comply with the 90 day wait period, but all second-tier subcontractors and suppliers must provide written notice of their claim to the general contractor. Under the Act, this notice must include the name of the party to whom the material or labor was supplied or performed, specifically demand payment from the general contractor, and must include the amount claimed to be unpaid “with substantial accuracy.” The notice must be received by the general contractor within the 90 day wait period required before filing a claim. Claims must be delivered in a way that provides verification of delivery, such as certified or registered mail, or be served by a U.S. Marshall. If not in compliance with these notice requirements, a subcontractor will be barred from raising a recoverable bond claim.
Where and when should you file?
Claims must be filed in the federal court in the district where the project is located. Claims must be filed within one year after the day their work on the project is completed, and failure to file within one year results in an absolute bar against the subcontractor or supplier’s claim.
Conclusion
Under the Miller Act, subcontractors and suppliers who would normally utilize liens may recover unpaid sums by filing a claim against the general contractor and surety under a payment or performance bond. The requirements for these claims may differ depending on how far the party is removed from the general contractor, but all claims must be made at least 90 days after the last date where labor or material was provided by the claimant. A party has one year following the day their work is completed to file a claim, and any claims made after one year are barred from recovery. More information about the Miller Act, and it’s deadlines and requirements can be found in the Miller Act FAQs and, in numerous other blog articles.