Miller Act and Little Miller Act
Are you a contractor that has bid on or is currently working on or providing materials to a Public Works contract for the United States Government, State of Nevada or the County or City? If so, are you familiar with the “Miller” and “Little Miller” Acts? How will you ensure that you get paid on your project?
Under both the Federal Miller Act and the State Little Miller Act, before any contract of more than $100,000 for the construction, alteration, or repair of any public building or public work is awarded to any person, such person is required to furnish both a performance bond and a payment bond issued by a surety satisfactory to the government officer issuing the contract, and with respect to the performance bond, in an amount the officer considers adequate for the protection of the government. With respect to the payment bond, it must be in an amount satisfactory to provide protection of all persons supplying labor and material in carrying out the work provided for in the contract. Both bonds become binding on the award of the contract.
On public projects with the State of Nevada, Counties or Cities, (the “Little Miller Act”) the amount of the bonds cannot be less than 50% of the contract amount. In addition, on State of Nevada projects issued by the State Public Works Division of the Department of Administration, each of the subcontractors who will perform work that exceeds $50,000 or 1 percent of the proposed project, whichever is greater, shall furnish a bond to the Public Works Division in an amount fixed by the Division.
The purpose of the Miller Act payment bond provisions is to protect persons supplying labor and material for the construction of public projects that would otherwise be unprotected since the mechanic’s lien remedy generally available under state law for private construction projects is not available for the construction of public property. It provides that every person who has furnished labor or material in the prosecution of the work provided for in a contract for the construction or repair of public buildings or public works and who is not paid in full within a prescribed time period has a right to sue on the payment bond furnished by the prime contractor for the project for the sums due. Important aspects of the payment bond are:
- It covers labor or materials supplied or furnished in the prosecution of the work provided for in the contract.
- It does not require that the materials furnished have actually been used or incorporated into the contract work, or that the materials were even delivered to the jobsite.
- It generally does not cover equipment and tools used to perform the work unless they were necessary and wholly consumed by the performance of the work.
- Claims for rental of equipment are covered, even though the equipment may be idle at times during the lease period.
- It does not cover injuries to workers and is not liable for worker’s compensation insurance premiums that the contractor fails to pay.
- It does not cover the cost of correcting work already performed.
An attorney with extensive experience prosecuting or defending Miller Act claims should be consulted to determine whether or not you have a claim against a payment bond.
Who is Obligated Under the Bond?
The General Contractor or Prime Contractor is the party responsible for providing the bonds. But it is the issuing surety that is responsible for payment on the bonds should the prime contractor fail to satisfactorily perform under the contract or fail to pay its subcontractors or material suppliers.
The obligation of the surety of the performance bond is to assure that the prime contractor completes the contract according to its specifications, including any unpaid taxes collected, deducted or withheld from wages paid by the contractor in carrying out the project.
Should the surety be required to make payments under either bond, the surety is certain to bring a claim against the prime contractor for whatever amounts the surety is required to pay, as well as any attorney’s fees and related costs the surety may incur.
Who is A Subcontractor?
Under the Miller Act, the United States Supreme Court has limited the term “subcontractor” to one having a direct contractual relationship with the prime contractor. A subcontractor is one who performs for and takes from the prime contractor a specific part of the labor or material requirements of the original contract. A contract with the prime contractor is a prerequisite to being a subcontractor.
A sub-subcontractor is not a subcontractor of the prime contractor regardless of the substantiality and importance of the relationship between the sub-subcontractor and the prime contractor. However, a sub-subcontractor may still have a right to bring a claim against the payment bond if they have given notice to the prime contractor in accordance with the statutory requirements of the Miller Act. Therefore, it is very important that you confer with an attorney that has extensive experience dealing with government construction contracts.
Notices and Brininging Suit Against a Bond
There are certain notice requirements that are required before bringing suit against a bond under the Miller Act. You may be required to file a written notice of claim with the government prior to bringing a claim against the surety bond. Depending on your status as a subcontractor or material supplier, you may also be required to give notice of unpaid claims to the prime contractor within a certain time period from the date the last of the labor or materials for which the claim is made were furnished or supplied.
The notice required to be given to the prime contractor must state with substantial accuracy the amount claimed and the name of the party to whom the material is furnished or supplied or for whom the labor was done or performed. The notice must be given within 90 days from the date on which the supplier did or performed the last of the labor or furnished or supplied the last of the material for which the claim is made and must be sent by registered or certified mail addressed to the prime contractor.
A suit against a payment bond must be commenced within one year from the date on which the claimant performed the last of the labor or furnished the last of the materials for the payment of which the action is brought.
Due to the extremely complicated relationships between the government entities, the surety, the prime contractor and the subcontractors and material suppliers on government construction projects, it is highly recommended that you consult an attorney with experience handling Miller Act proceedings. The Wright Law Group, P.C. has more than 20 years experience prosecuting and defending Miller Act claims and is well equipped to assist you in handling your case. Please call us at 702-405-0001 to schedule a consultation.