As I sit down to write my annual list of resolutions for contractors, I am amazed at how much things changed in 2020. Construction was going well and then, in March 2020, COVID-19 hit. At first, we thought it was going to be a disaster for the construction industry. States, cities and towns shut down projects and many applied for PPP loans. Then, something amazing happened. Construction was considered an essential service and everyone was back to work.  That said, the work world changed: companies were donating their PPE to frontline workers, COVID-19 protocols had to be followed and paperwork had to be filed. Everyone was scrambling to figure out how to comply and keep their businesses going. So, you may or may not ask, what was I, as a construction lawyer doing? I spent March and April thinking about the new risks contractors/construction companies were facing and developing contract clauses to protect the industry. I wrote a number of blog posts with clauses to add to your contra

On a Federal Construction Project? Remember the Miller Act

A New Guest Post from Christopher Hill

Chris Hill is a construction lawyer at DurretteBradshaw, PLC in Richmond, Virginia, LEED AP, author of the Construction Law Musings Blog and member of Virginia's Legal Elite in Construction Law. He specializes in mechanic's liens, occupational safety issues, contract consulting and review and general risk management for all levels of construction professionals from contractors to subcontractors to material men.

Federal and State government work are a growth area in construction these days. With the economy in a downturn (though possibly turning around according to ENR), government projects are even more desirable for commercial contractors.

With this trend toward government contracting, becoming the lowest bidder and squeezing your margins is a big temptation, or even necessity. Along with this lower margin comes higher risk.

However, one saving grace for contractors on Federal projects is the Miller Act. Essentially, the Miller Act was created because contractors cannot put a mechanic’s lien on federal government property. It requires that all projects with a contract value over $100,000.00 have a payment and performance bond, provided by the general contractor.

The payment bond is what I will discuss here as it is the most utilized of the two. As its name implies, this bond is there to assure that subcontractors and suppliers who provide work to the project are paid. With the proper notice, and when meeting the filing requirements, the question then becomes the value of what was provided, and not whether payment will occur.

The Miller Act requires that a subcontractor or party, contracting with a subcontractor, but not in a direct contractual relationship with the general contractor, provide a notice to the general contractor (or principal on the bond if the principal and GC are different) within 90 days of the last work performed or material supplied for which it claims payment. Then, if no payment is forthcoming within 90 days of the date payment is due, suit must be filed within one year of this last work. If this procedure is filed, in my experience a settlement will be forthcoming.

One caveat, the protection of a Miller Act bond extends down only as far as the “second tier” level. In short, a supplier to a second tier subcontractor is not covered. Make sure you keep this in mind when you consider your (or your client’s) claim.

The federal Miller Act has cousins (or “Little Miller Acts”) in most every state that relate to state government projects, so I encourage you to check these out and call an attorney (in MA, Andrea is a good one) to discuss your options with these projects.

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