The Miller Act, 40 U.S.C. §§ 3131-3134, governs performance and payment bond acquisition and claims on federal projects (that is, projects being constructed on US Government property, or for the US Government or any agency of the US Government). Unlike the many tricky provisions hidden in the Texas Mechanics’ Lien statute, the Miller Act is relatively simple to maneuver, but not without pitfalls for the unwary.  Under the Miller Act, contractors on federal projects must post two bonds: A performance bond and a labor and material payment bond. A corporate surety company issuing these bonds must be listed as a qualified surety on the treasury list which the U.S. Department of the Treasury issues each year. Below are the major components of a Miller Act claim.

Original Contractors Cannot Make a Miller Act Claim

Original Contractors, who have a direct contractual relationship with the US Government entity, do not have a remedy under the Miller Act, but rather must pursue their contractual remedies against the US Government entity. Claims against the Federal Government have their own nuances, procedures, deadlines, and regulations that must be strictly adhered to.

In contrast, subcontractors to original contractors and sub-subcontractors are protected by and  can make a claim against the payment bond that is required to be provided by the original contractor on the project.

Types of Bonds

A payment bond and performance bond are required for any contract of more than $100,000 for the construction, alteration, or repair of any public building or public work of the Federal Government. The payment bond has to be in the amount of the prime contract unless the contracting officer makes a written determination supported by specific findings that such a bond is impractical. In any case, a payment bond can never be less than the amount of the performance bond.

Obtaining Information

Before pursuing a Miller Act claim, the department secretary or agency head of the contracting agency for the project must furnish a certified copy of a payment bond and the contract for which it was given to any person applying for a copy.  The applicant must submit an affidavit that the person has supplied labor or material for work described in the contract and payment for the work has not been made or that the person is being sued on the bond. The copy is prima facie evidence of the contents, execution, and delivery of the original. The applicant must pay any reasonable costs for obtaining the copy.

Civil Action

1.    Subcontractor in Direct Privity with Original Contractor – No Notice

If a subcontractor to an original contractor has not been paid in full within 90 days after the day on which the subcontractor last performed labor or furnished or supplied material made the subject of the claim, the subcontractor may bring a civil action on the payment bond for the unpaid amount.

2.    Sub-Subcontractor not in Direct Privity with the Original Contractor – Notice

A sub-subcontractor, that is, a subcontractor to a subcontractor with a direct contractual relationship to the original contractor, may bring a civil action on the payment bond, but must first give written notice.  The notice must be provided to the original contractor within 90 days from the date on which the sub-subcontractor performed the last of the labor or furnished or supplied the last of the material made the subject of the claim. The action must 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. The notice also must be served in accordance with the Miller Act.

Note: Delay costs are recoverable from a surety under the Miller Act, but only after a Court determines the delay is not the fault of the subcontractor or sub-subcontractor.  Recovery is limited to the costs actually spend towards furnishing labor or materials in the work of the project.

Miscellaneous

• • Suit must be brough in the name of the United States for the use and benefit of the subcontractor or sub-subcontractor suing and it must be brought in a United States District Court for any district in which the contract was to be performed and executed.
  • The statute of limitations for a Miller Act claim is not more than one year after the date on which the last of the labor or material was provided.
  • A Miller Act claimant cannot recover attorneys’ fees from the surety without a showing the original contractor acted in bad faith, vexatiously, wantonly, or for oppressive reasons.
  • A payment bond claim cannot be waived except in writing signed by the waiving party after that party first furnished labor or supplies materials.

The attorneys in our Austin and Dallas offices are experienced in evaluating and asserting Miller Act claims.  If you should have any questions, please contact us at info@gstexlaw.com.

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