When it comes to federal construction projects, one of the most critical—but often misunderstood—legal requirements is the Miller Act. Enacted to protect subcontractors, suppliers, and the government itself, the Miller Act sets the foundation for bonding requirements on federally funded public works. If you’re a contractor bidding on federal jobs, understanding this law and the bonds it mandates isn’t just helpful—it’s essential.
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What is the Miller Act?
The Miller Act (40 U.S.C. §§ 3131–3134), passed in 1935, mandates that contractors on federal construction projects valued at more than $150,000 must post both a performance bond and a payment bond. These surety bonds provide financial protection to the government and ensure that subcontractors and suppliers are paid. The law addresses the unique situation in which public property cannot be subjected to mechanic’s liens, giving unpaid workers and suppliers another form of legal remedy.
Why the Miller Act was Necessary
Before the Miller Act, federal construction workers and suppliers had few remedies if they weren’t paid. The previous Heard Act of 1894 offered some protection, but it was limited in scope and difficult to enforce. The Miller Act replaced the Heard Act to ensure a more efficient and enforceable way to secure payment for work performed on public projects. By requiring surety bonds, the Act shifts the financial burden away from taxpayers and offers confidence to those who provide labor and materials.
Who Must Comply with the Miller Act?
Any prime contractor awarded a federal contract over $150,000 is required to obtain Miller Act bonds. In cases where contracts fall between $35,000 and $150,000, bonding may still be required at the discretion of the federal agency involved. Subcontractors, vendors, and suppliers should always confirm that the appropriate bonds are in place before starting work or delivering materials.
The Two Required Bonds Explained
The Miller Act specifies two bonds:
• Performance Bond: This ensures the contractor completes the job according to the terms, specifications, and timeframe outlined in the contract. If the contractor defaults, the surety steps in to finish the job or pay damages up to the bonded amount.
• Payment Bond: This protects subcontractors and suppliers by guaranteeing they’ll be paid for their work. It provides a vital safeguard in lieu of a lien, which is not available on federal property.
Filing a Claim Under the Miller Act
If a subcontractor or supplier goes unpaid, they can file a claim against the payment bond. The rules are strict:
• First-tier subcontractors (those directly hired by the prime) may sue without prior notice.
• Second-tier subcontractors and suppliers must notify the prime contractor in writing within 90 days of the last day they furnished labor or materials.
• All claimants must file a lawsuit within one year of the final furnishing date.
Bond claims are typically filed in U.S. District Court where the project occurred. Keeping documentation of invoices, contracts, and delivery dates is critical.
Benefits of Miller Act Bonds
These bonds provide essential protections across the construction chain:
• Government agencies are protected against incomplete or subpar work.
• Subcontractors and suppliers gain payment assurance.
• Contractors demonstrate financial strength and reliability.
For taxpayers, it ensures their funds are spent wisely and projects are delivered as promised.
How Surety Companies Underwrite Miller Act Bonds
Surety companies act as a financial backstop. To issue a bond, the surety underwrites the contractor, reviewing:
• Financial statements and credit history
• Project experience and backlog
• Business reputation and references
Unlike insurance, the bonded contractor is financially liable to the surety for any losses paid out. This motivates contractors to perform responsibly and resolve issues proactively.
Real-World Example: Miller Act in Action
Suppose a federal agency hires a contractor to build a new VA hospital. The contractor posts the required performance and payment bonds. Midway through the project, the contractor goes bankrupt. The performance bond ensures the project is completed—either by the surety hiring another firm or reimbursing the agency. Meanwhile, the payment bond protects electricians, plumbers, and material suppliers from financial loss.
Without these bonds, the entire project—and many small businesses—would be at risk.
Little Miller Acts: State-Level Equivalents
Most states have adopted their own version of the Miller Act, commonly referred to as ‘Little Miller Acts.’ These apply to state-funded public works and often mirror federal thresholds and bond types. However, each state has its own procedural requirements for filing claims. Contractors and suppliers must be familiar with local laws in addition to federal statutes.
Common Misunderstandings
- Myth: Only large contractors need bonds. Truth: Even midsize projects may require them.
• Myth: Bonds are optional on public jobs. Truth: They are mandated by law for qualifying contracts.
• Myth: Surety companies act like insurers. Truth: Sureties expect reimbursement from the contractor if they pay a claim.
How to Get Miller Act Bonds
To obtain Miller Act bonds, contractors must apply through a licensed surety agency. The process involves:
1. Submitting financial and personal information
2. Undergoing credit and background checks
3. Paying a premium (typically 1–3% of bond value)
Working with an experienced surety provider ensures faster approvals and support for future bids.
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