When a subcontractor performs quality work or a material supplier provides proper goods to a general contractor, payment is expected. Non-payment threatens your business, and it is vital that you act upon your remedies as soon as possible. Federal law requires that payment bonds are posted for most public works projects owned by the Federal government to ensure payment to subcontractors and suppliers. Similarly, the State of Georgia has a similar requirement on state and local government projects. These requirements provide unpaid subcontractors and suppliers a significant means of recovery. In addition, many privately-owned construction projects include payment bonds which increase the odds of payment for subcontractors and suppliers. The following answers to frequently asked questions may provide you guidance in how to pursue your claims.
What is the “Miller Act”?
The Miller Act is the commonly used name for the Federal statutes which require that (most) Federal public works projects be covered by a payment bond for the benefit of subcontractors and materialmen. Thus, the phrase “Miller Act claim” and “payment bond claim” may be used interchangeably for government projects.
What is the “Little Miller Act?”
Many states, including Georgia, have enacted statutes similar the Miller Act, and these are commonly referred to as Little Miller Acts. Georgia’s Little Miller Act provides protection for those who work on state or local public projects. It is similar to the Miller Act, but has some specific regulations and requirements unique to state projects for the payment to subcontractors and material suppliers. Unlike the Miller Act which only protects first tier subcontractors and material suppliers, the Little Miller Act provides “protection of all subcontractors and all persons supplying labor, materials, machinery, and equipment in the prosecution of work provided in the contract” which provides a broader class of potential claimants.
What is a “private payment bond”?
Increasingly, project owners are protecting themselves by requiring that the general contractor post a payment bond to ensure that lower-tiered subcontractors and suppliers receive payment. Although these are not statutorily required, they operate—and provide subcontractors and suppliers similar benefits—similar to the payment bonds required by the Miller Act and the Little Miller Act. These are often seen on larger private projects, and it is a useful mechanism for owners to limit their risk of exposure.
Who are the parties involved in a payment bond?
The “Obligee” is typically the project owner (e.g, a governmental agency); the “principal” is the purchaser of the policy (which is often the general contractor; increasingly, it can also be a subcontractor); the “surety” is the underwriter (which is usually an insurance company); and the “claimant” is the unpaid subcontractor, sub-subcontractor or material supplier.
Who can bring a claim under a payment bond?
As mentioned above, the Miller Act limits the bond claimants to those who have direct relationship with prime or first-tier subcontractor. In addition to those who have direct contracts with the governmental entity or with the contractor, Georgia’s Little Miller Act allows second and third tier subcontractors to file claims, including anyone who provided labor, materials, machinery or equipment. If, at first review, you are concerned about whether or not you are a potential claimant, you should look deeper. If a general contractor is required to post a payment bond, then, it is likely that he also required the subcontractors to post a bond; thus, for example, a claimant who may not have a claim against the general contractor’s payment bond may, instead, have a claim against the subcontractor’s payment bond.
Are there notice requirements?
Yes and they are different for each tier of claimants. Subcontractors and suppliers who contract directly with the general contractor do not need to provide any preliminary lien notice; instead, they must provide notice only upon nonpayment.
For those who are not in privity of contract with the owner or general contractor, Georgia has a statutory scheme for providing notice to the project owner and the general contractor within the first 30 days of beginning work or supplying to the project. If this scheme applies in your situation (there are several exceptions), then you must meet your obligations to give proper notice in order to, subsequently, make a payment bond claim.
Regardless of the tier, timely notice of the intention to pursue a payment bond claim is required. Frequently, this notice must be made within 90 days of the last day in which the subcontractor worked on the project or a supplier delivered materials or equipment to a project. However, be aware that this deadline may or may not apply in a specific situation. In order to establish the deadline for the notice, review the statutes governing the project and the bond or contact an attorney.
What must be included in the notice requesting payment for work performed?
The bond will likely have specific information which is required to make a claim against a bond; however, in the absence of a copy of the bond, it is generally suggested that the 90-day notice of the bond claim include the following:
- The amount of money owed including a basic accounting of the original contract amount, additions or subtractions pursuant to change orders, and the amount of money received;
- The specific labor, material, service or equipment that was provided but not paid;
- The entity for whom the labor, material, service or equipment was provided;
- The name and location of the project where the labor, service, materials or equipment was used; and
- A specific statement that a claim against the payment bond is being made.
If I make a payment bond claim, can I also file a construction lien?
Federal and state public works projects created the Miller Act and the Little Miller Act to make the payment bond requirement replace the right to file a mechanics or materialmen’s lien; thus, a materialmen’s lien may not be filed against a Federal or State of Georgia project. If, on the other hand, there is a payment bond covering a private project, then, a subcontractor or supplier who has not been paid may simultaneously make a claim against the payment bond(s) and file materialmen’s liens.
Is it possible to collect attorney’s fees?
Georgia’s Little Miller Act specifically allows for the awarding of attorney’s fees to the prevailing party under if certain conditions are met. A party is considered to be the prevailing party if he or she obtains at least half of the amount they were seeking. Attorney’s fees are not automatically awarded, but if the prevailing party can show, for example, that if the losing party had not acted unreasonably, the case could have been settled out of court, the court will likely award attorney’s fees.
Filing payments bond claim under the Miller Act or the Little Miller Act is not easy. There are a number of steps to follow and deadlines which must be met. If a step is omitted or a deadline missed, then the right to pursue the claim may be lost. It does not matter whether your potential claim is under the Miller Act, Georgia’s Little Miller Act or under a private payment bond, the construction law attorneys at the Cobb Law Group can assist you with your claim. We have more than 20 years of experience helping our clients pursue their payment under the Miller Act and the Little Miller Act. We have a track record of success. You can contact us by email or call us at 770-886-5890.