Federal Construction Contractors Beware!

Federal Construction Contractors Beware!

construction projectThere are huge differences in bond claim requirements when working on federally financed projects. If you’re a contractor or subcontractor on a federal funded project…do not presume federal law is the same as the state law that you may be accustomed. Most of the bigger differences come from the timing and notice provisions when you have claim for non-payment on a federal project. The timing and notification provisions are spelled out in what is commonly known in the construction industry as the “Miller Act.”

The “Miller Act’ was enacted in 1935 and is named after the Act’s sponsor. What is the Miller Act? To the point, it is the Federal law that requires performance and payment bonds from contractors who contract with the Federal government on projects over $100,000. It’s primary purpose is to eliminate liens against Federal public property. It accomplishes its primary purpose by providing assurance to the subcontractors and suppliers on federal projects that they will be paid.

Most states have enacted their own form of what are commonly known as “little Miller Acts.” Kansas and Missouri are no exception, and in both of those states publicly funded projects over a certain amount must be bonded, and liens cannot attach to publicly owned property.

But the Federal Miller Act has some nuances that make it unique to the state statutes. The following are bullet points of some of the more important “must know” facts about the Miller Act.

 

40 U.S.C. § 3131 et seq., “THE MILLER ACT”

  • Applies to all contracts more than $100,000 for construction, alteration or repair of any public building or public work of the Federal Government.
  • Requires the Contractor (the one with the contract with the Federal Government) to provide a performance bond, in an amount the Government considers “adequate”.
  • Requires the Contractor to provide a payment bond equal to the contract amount, unless the amount of the contract is found to be impractical; the amount of the payment bond shall not be less than the performance bond.
  • Bond provided covers, among other things, payroll taxes that are withheld by the Contractor.
  • Bond requirements may be waived for contracts in foreign countries if it is found to be impractical; bond requirements may also be waived by the Army, Navy, Air Force and Transportation Departments on cost-type contracts.
  • The Department of the Secretary or agency head of the contracting Federal agency must furnish a certified copy of the payment bond and the contract for which it applies upon:
  • Submitting an affidavit that states:
  • You are a person who has supplied labor or material for work described in the contract.
  • Payment for the work has not been made or that the person is being sued on the bond.
  • Claimants on the bond may bring a civil action lawsuit on the bond if the claimant has not been paid in full within 90 days of the last day worked or last day material was supplied.
  • Claimants who are sub-subs or suppliers to a sub, MUST GIVE WRITTEN NOTICE TO THE CONTRACTOR WITHIN 90 DAYS from the last day worked or last day material was supplied in order to be able to proceed with a civil action against the bond. The written notice requirements are:
  • The amount claimed must be stated (with “substantial accuracy”).
  • The name of the party to whom the labor or material was provided.
  • The notice must be served by a means that provides written, third party verification of delivery, or by any manner in which the U.S. Marshall of the district in which the project lies may serve a summons.
  • The notice must be sent to the contractor at any place the contractor maintains an office or conducts business or at the contractor’s residence.
  • Venue for the civil action on the bond is in the United States District Court for any district in which the contract was to be performed and executed.
  • The civil action on the bond must be brought within one year after the day on which the last labor or material were provided by the claimant.
  • Waiver of right to civil action is void unless it is in writing, signed by the person whose right is being waived, and executed after the person whose right is being waived has provided labor or material.
  • Suppliers and subcontractors to sub-subcontractors are not protected by the bonds.

Perhaps now, upon reviewing some of the bullet points of the act, you have a better appreciation of the title of this article. Just know that if you’re working on a federal project, that there are specific things that you have to do to preserve your claim against the bond that has been provided for the project. If you don’t follow the prescribed requirements, you’ll not have a claim on the bond. You may still have claims for breach of contract, etc., but the deep pockets of the surety will not be available to pay what you are owed. As always, if you have any questions about any construction or business law matter, seek the counsel of a well-qualified lawyer.