Georgia Construction, Bond & Lien Law Blog


Miller Act Claims Explained

Posted in Little Miller Act,Miller Act by Blue Blog on the November 12th, 2018

When it comes to Federal construction contracts and Federal construction law, there aren’t too many pieces of legislation that are more impactful than the Miller Act.  The Miller Act is a law that applies to every construction project that is headed by the federal government (or with some minor alterations state projects under their own version of the Miller Act) any government agency with a general contract that exceeds $100,000, and it acts as a lien-like remedy for private contractors, material suppliers and all types of service providers who work on federal construction projects.

There really are a number of circumstances that would force a construction project to undergo a Miller Act claim. This article aims to not only go into the details of what the Miller Act is and who and what is protected under the law code, but also how to file Miller Act claims and the details of the Little Miller Act as it pertains to the state of Georgia.

By going in depth through all of these aspects of the Miller Act and the Little Miller Act, you will be well prepared to make urgent business decisions and be better informed to discuss with your attorney just about any circumstance in one of construction law’s more complex contractual requirements.

What is the Miller Act?

The Miller Act was created in 1935 and superseded the Heard Act of 1894, which, in the beginning, protected unpaid subcontractors and material providers, yet it was tainted with several procedural limitations that the Miller Act sought to resolve.  Essentially, the Miller Act requires any general contractor working with the federal government on a construction project for any public building or public work to obtain both a payment bond and a performance bond from a surety that is acceptable to the federal officer who is awarding the construction contract.

The main purpose of the performance bonds are to make sure that a contractor’s abandonment or nonperformance on a government job doesn’t create delays that would add more expenses through the governmental procurement process. What performance bonds do is help the government weed-out contracting companies that work irresponsibly, and also settle government costs for substitute contracting work. When a contractor does give the government a performance bond, it must be deemed an adequate amount by the contracting officer, which in effect protects the government.

Payment bonds help tremendously when it comes to subcontractors and material suppliers for federal government construction projects, and that’s because many of these types of workers would be reluctant to work on governmental projects because they know that the government’s sovereign immunity prevents the establishment of a mechanic’s lien or a materialmen’s lien. The payment bonds help to foster competition on government projects and ultimately lower construction costs. Payment bonds essentially protect the rights of all the workers supplying the labor and material within the construction project, and the total amount of a payment bond will typically be equal to the total amount payable in the contract’s terms.

Enforcing Payment Bonds

A subcontractor or material supplier who doesn’t get paid within 90 days of their last day of labor or furnishing of materials on a government construction project has the right to conduct civil action on the payment bond for the amount that was unpaid at the exact time the lawsuit is brought to litigation.  The statute of limitations to invoke this kind of lawsuit is, typically, one year after the last day of labor was performed or the materials were supplied to the construction project.  The civil action must include a written statement of substantial accuracy claiming the name of the party to whom the materials were supplied to or whom the labor was performed for, which in Miller Act cases, would be the federal government contracting officer.

What is the Little Miller Act?

The Little Miller Act is very similar to the Miller Act, except that it deals with state legislatures and construction projects; in Georgia, it also involves local municipalities such as county governments and cities. It’s similar to the federal Miller Act in that it also requires the prime contractors on state construction projects to post performance and payment bonds.

The performance bonds with the Little Miller Act serve the same purpose in state construction projects as in federal projects in that it covers any costs the government would incur for substitute work in the case that the prime contractor doesn’t fully perform their contractual duties. The payment bond is also similar to the federal Miller Act in that it provides a substitute source of payment to material suppliers and subcontractors who performed throughout the entirety of the project.

The Little Miller Act is different from state to state in terms of requirements and regulations, and in the state of Georgia the Little Miller Act states that both performance and payment bonds are required for all construction contracts greater than $100,000. The Georgia Little Miller Act also has the same limitations as the federal Miller Act in that civil action must be enacted within one year of the completion of the contract and the acceptance of the work by the government entity.

Who is protected?

 Even though a payment bond is ultimately intended to protect “All persons supplying labor and material in carrying out the work provided for in the contract”, there are some limitations as to whom can take civil action, which include the following:

  • First-tier subcontractors
  • Second-tier subcontractors
  • First-tier material suppliers
  • Second-tier material suppliers who contracted with a first-tier subcontractor

 

Third-tier and even more distant subcontractors and material suppliers are not able to recover against the Miller Act payment bond, and that also includes second-tier material suppliers who supply first-tier material suppliers and not first-tier subcontractors (however on State of Georgia public works projects, there may be an opportunity to make these claims).  Other professionals who are protected against the Miller Act payment bond include architects, surveyors, engineers and other people who provide professional services for the overall benefit and completion of the project.

What is covered?

 The rule of thumb when it comes to deciphering what is covered under the Miller and Little Miller Acts are that the claimant must provide proof that the labor or materials for which they are seeking recovery compensation for were in fact furnished as stated in the prime contract, and that the subcontractor was not paid for those labor or materials.  Then the federal or state courts will decide whether or not the material or labor furnished qualifies for recovery by looking into the local state lien statutes.  In these instances, a material supplier would only need to demonstrate that they in good faith believed that the materials were intended for the government project.

The overall extensiveness of material, equipment and labor that are covered under the Miller Act payment bond is significant, and there are several items besides labor provided by subcontractors and materials provided by material suppliers that are compensable under the Miller Act payment bond, including the following:

  • Oil and gas used in the trucks for the project
  • Tires, tire repairs, tubes and other materials that were provided with the understanding that they would be substantially used for the project
  • Hardware, lumber and tools that were indispensable for the execution of the work, even if the materials were reusable
  • Any kind of rental equipment
  • Groceries and provisions used in a boarding home that was required to be maintained by the general contractor for the laborers as part of the public project
  • Delay costs that the claimant did not create

How to file

 The Miller Act Bond’s purpose is to stand in the place of the federal property in the circumstance that anyone furnishing to the project doesn’t get paid. They then can make a claim directly against the bond and be compensated from the bond company.  The claim process typically entails an unpaid laborer or material provider making a claim against the payment bond and then the bond company investigating the claim. Then the prime contractor or the bond company pays the claim.

The following are the steps you need to take to file a Miller Act Claim:

#1: Deliver Miller Act Notice to Prime Contractor

 It’s best to do this within 90 days from the last furnishing of any labor or materials to the project; otherwise, your claim may be invalid. The notice also must be served “by any means that provides written, third-party verification of delivery”, which typically means certified mail and a return receipt requested. The notice also must state “with substantial accuracy” the amount claimed and the name of the party that the material or labor was provided/performed for.

#2: Follow up for a Response From the Surety

 You don’t have to notify the government agency when filing a Miller Act Claim, and it’s the responsibility of the prime contractor to notify the bonding company of the claim. You must make sure that the Surety or Bond Company does in fact have a copy of your notice because you must eventually provide them with a sworn claim form and a claim backup to help the claim be processed more efficiently.

In many cases it’s a good idea to send your Miller Act claim to both the surety company and the prime contractor at the same time to maximize the attention to your claim.

If you don’t know who the bonding company is you are authorized by the Miller Act to receive this information from the prime contractor.

#3: Provide Backup and Sworn Claim Form to Surety/Bond Company

 The surety company will provide you a ‘Claim Form’, which can entail a request for any kind of backup information about the claim that includes things like copies of your contract, invoices, emails, communications, purchase orders, shipping confirmations, etc. What you’ll have to do in this step of the claim filing process is gather all this information and send it back to the surety so that they can ultimately review your claim. Usually these forms require a notarized signature as well.

After your do this part of the process you’ll more than likely have a 30-45 day waiting period in which the surety will review your claim and make their decision.

#4: Get Compensated or Move Forward to Enforce Your Miller Act Claim

After the waiting period is up and the surety has reviewed your claim and backup information they will either pay the claim or reject it.

If the surety decides to pay your claim you will have to provide a lien release waver to exchange for the payment, and they also may ask you to formally cancel your Miller Act Claim.

If the surety rejects your claim then the next step is to file your lawsuit in the federal district court where the project occurred, and it must include the United States of America as a party.

What Legal Statutes are Involved?

 The Miller Act’s law code is Chapter 642, Section 1-3, 49 stat. 793,794, and codified as amended in Title 40 of the United States Code.

In the state of Georgia the Little Miller Act’s code is Title 13, Contracts, Chapter 10, Contracts for Public Works, Sections 13-10-1 — 13-10-2 — 13-10-40 through 13-10-65. Also Title 36, Local Government Provisions Applicable to Counties, Municipal Corporations, and Other Government Entities, Chapter 91, Public Works Bidding Sections 36-91-1 — 36-91-2, 36-91-40 and 36-91-70 through 36-91-95.

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