Government Contracting Database

In an effort to protect persons furnishing labor and materials on federal contracts, Congress enacted the Miller Act (40 USC 3131-34). On any contract exceeding $25,000, the prime contractor must furnish the government a performance and a payment bond. The FAR, at 28.102-2, requires that the performance bond must be for the full amount of the contract, and the payment bond must also be for the full amount.

These performance and payment bonds are to be obtained from a surety or sureties acceptable to the government and are to be furnished by the contractor prior to Notice to Proceed with the contract work. The performance bond is for the sole protection of the government to ensure completion of the project.

The Act permits every person who has furnished labor or material and who has not been paid in full before the expiration of ninety days after the last material or labor was furnished to sue on the payment bond. A first-tier subcontractor is fully protected by the payment bond as long as he institutes suit within one year of the date the last furnished labor or material. A laborer or materialman who has a direct contractual relationship with a first-tier subcontractor must give written notice to the contractor within 90 days of the date the last furnished labor or materials in order to be protected by the Act. He also must file suit within the one-year requirement described above in order to protect his rights under the payment bond. In furnishing these notices it is advisable to send a copy to the prime contractor’s bonding company.

One of the effects of the Miller Act is to remove the common-law remedy of filing a mechanic’s lien. Mechanic’s liens are unacceptable and improper on federal projects. Contractors must rely upon the remedies provided by the Miller Act. It is imperative if you are a subcontractor on a federal project to be aware of your rights and duties under the Miller Act in order to protect yourself if a non-payment occurs.

(Also See Subcontractor Bond Coverage on Public Contracts)

Updated: August 9, 2018