Getting Familiar With the Miller Act
As a contractor or subcontractor working on a federal construction project, you might have come across the Miller Act. But what exactly is it, and how does it affect your work?
In this blog, we will take a closer look at the Miller Act, its requirements, and how it affects you as a contractor or subcontractor working on a federal project. Understanding the Miller Act is crucial if you are new to federal construction or have been working on federal projects for years.
What Is the Miller Act?
The Miller Act, codified at 40 U.S.C. Section 3131 et. seq., is a Federal statute designed to ensure that government contractors perform according to the terms of their contracts and that primary or general contractors on government contractors pay their suppliers and sub-contractors in a timely fashion. Also, the Miller Act is designed to replace the use of mechanic or materialmen’s liens, ordinarily found in the private sector. The Miller Act applies to all contracts over $100,000 involving “the construction, alteration, or repair of any public building or public work” owned by the Federal government.
Over time, it evolved into a formal occurrence to individual states for similar protections needed at the state level. Illinois has its own version of the Miller Act, sometimes referred to as the “Illinois Mini-Miller Act” (30 ILCS Sections 550).
Bonds Under the Miller Act
The successful bidder for a government construction contract must, under the terms of the Miller Act, post two surety bonds.
The first of these bonds, known as the performance bond, is conditioned upon the successful completion of the work. In other words, if the general contractor does not successfully fulfill the terms of the contract, the bond is forfeited.
The second of these bonds, known as the payment bond, is conditioned upon the payment by the general contractor of the claims and bills presented by subcontractors, material suppliers, and others who might otherwise file a mechanics’ or materialmen’s lien against the property. In other words, if the general contractor does not pay his vendors, suppliers, and subcontractors in a prompt fashion, the bond becomes available as a source of payment for claimants.
Claims Against a Miller Act Bond
The payment provisions of the Miller Act protect four specific groups:
- First-tier subcontractors who have agreements directly with the prime or general contractor;
- First-tier material suppliers who supplied materials directly to the prime or general contractor;
- Second-tier subcontractors who have agreements directly with a first-tier subcontractor;
- Second-tier material suppliers who supplied materials directly to a first-tier subcontractor.
The provisions of the Miller Act are specifically aimed to encompass these four groups. Subcontractors and suppliers further down the chain are not covered and may not be eligible to file a claim.
In addition, the act requires that the covered entity must have provided “labor” upon the project. Courts have interpreted this term to mean that the party furnished some work of value and involved some sort of “toil” or physical effort. Thus, design professionals do not qualify for filing a claim under the Miller Act, even though they supplied value to an entity covered under the act.
How Can a Claim Be Made Against a Miller Act Bond?
Like many Federal statutes, the Miller Act has precise notice and filing requirements before a suit can be brought or a claim made against the bond.
A first-tier sub-contractor or supplier who has a direct relationship with the prime or general contractor has no advance notice requirements. Although no advance notice is required before filing a claim, the prudent course is to provide at least some written notice to the contractor and the surety company as it may avoid litigation.
A second-tier sub-contractor or supplier must give the prime contractor a notice within 90 days of the last provision of labor or material under the contract before filing suit under the Miller Act. This notice is “jurisdictional,” which is to say that it is mandatory, and a failure to give the notice will defeat any lawsuit. The best practice is to give the surety company that underwrote the bond a written notice simultaneously.
In addition, a lawsuit to recover payment for the labor or material cannot be filed until 90 days have elapsed from the last provision of labor or material under the contract. The statute of limitations requires that any suit be filed within one year of the provision of labor or material. This lawsuit must be filed in the United States District Court where the project is located and include the relevant contractor and the United States as a party.
The notice requirements of the Miller Act are quite precise, and consultation with a Chicago construction attorney may be useful in determining the validity and timing of a claim.
Seek Legal Help From Chicago Construction Attorneys
Grzymala Law Offices, P.C. provides one of the most experienced and knowledgeable Chicago construction attorneys who have represented many contractors and subcontractors in all areas of public contract law. If you are a prime contractor or a subcontractor experiencing difficulty in a contract with the Federal Government, the Government of Illinois, or any of its subdivisions, we stand prepared to assist you in resolving your problems. We have helped many businesses and individuals understand the often-complex world of construction law. Call us today for a consultation.