Federal projects, like state public projects, require the general contractor to provide a payment bond to secure payments to subs and suppliers. The governing federal statute is called the Miller Act. While similar in some respects to state law, the Miller Act has some significant differences which affect the scope and availability of bond security on federal projects. (For a description of payment bond protection on Mass. public projects see Construction Law Comments, Winter 1995).
The Miller Act affords bond protection to two categories of claimants. The first is everyone providing labor and/or material under a direct contract with the general contractor. The second category is anyone providing labor and/or material under a contract with a direct subcontractor to the general contractor. The key word here is subcontractor. Anyone providing labor and/or materials to a mere supplier to the general contractor has no bond protection.
Also eliminated from bond protection on federal projects are those subcontractors or suppliers working for sub-subcontractors. None are covered under the Miller Act bond. This lack of bond protection for lower tier subs and suppliers stands in sharp contrast to the Massachusetts public bond statute which secures anyone furnishing labor or material to any sub-subcontractor no matter how far down the ladder
To recover against the Miller Act payment bond, a claimant having a direct contract with the general contractor need only file suit on the bond within one year after completing its contract work. A claimant having a contract with a subcontractor must provide certified mail notice of its claim to the general contractor within 90 days of completion by the subcontractor and also file suit within one year.
Completion under the Miller Act means initial completion before receipt of punchlists. The federal courts do not consider corrective or repair work in determining the allowable period for notice or filing suit under the Miller Act. It is important on federal projects to keep a sharp eye on when your work is billed 100% because such a billing could trigger the notice period even if corrective work is performed later. This is another significant departure from state bond requirements which permit notice based on corrective work performed after initial completion.
Before performing work on a federal project, every bond eligible subcontractor or supplier should verify with the federal agency that the general contractor has provided the payment bond required by the Miller Act. There have been several cases where federal agencies have permitted the general contractor to proceed without providing the Miller Act payment bond. In those instances subcontractors and suppliers have been left without payment security because courts have denied recovery against the federal agency that failed to require the bond. The point is that subs and suppliers on federal jobs only have payment security if the general contractor provides the Miller Act bond. Be sure that bond exists before starting work.
When filing a suit to recover on the Miller Act bond, a sub or supplier must sue in the United States District Court in the district where the contract is performed, and must sue in the name of the United States for the use and benefit of the party suing. This last requirement is a formality and does not require any government consent.
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