How the Little Miller Act Protects Construction Parties at the State Level | Handle

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How the Little Miller Act Protects Construction Parties at the State Level

How the Little Miller Act Protects Construction Parties at the State Level

October 5, 2019

The Miller Act is one of the most important construction laws that you should know about, especially if you are a construction professional who works or who wishes to work on a government contract.

You probably already know that a mechanics lien covers only the construction and improvement of private properties. If you are working on a state-funded project, your best course of action to recover payment is to file a bond claim.

The Miller Act requires general contractors to furnish two surety bonds to the government, and these bonds may be claimed by subcontractors and material suppliers if they do not get paid. Before the Miller Act was passed, lower-tier construction parties who worked on government projects had no security of recovering outstanding debts.

Not long after the Miller Act was passed, in 1935, each state started adapting the federal Miller Act and making their own tweaks and modifications. These state-specific Miller Acts are now commonly known as Little Miller Acts.

What is a Little Miller Act?

A Little Miller Act is a state-specific version of the federal Miller Act. Its main purpose is to protect subcontractors and material suppliers in government projects by requiring general contractors to furnish surety bonds to the government. Instead of a mechanics lien, a bond claim may be filed by construction parties who wish to recover payment from a delinquent prime contractor.

Because a Little Miller Act is state-specific, each state has its own rules and regulations on how this act must be implemented. Some states have relatively few additions to the federal Miller Act, while others have done major revisions to tailor to the nature of government contracts in their jurisdictions.

General requirements under the Little Miller Act

In general, every state’s Little Miller Act requires a general contractor to furnish two types of surety bonds: a performance bond and a payment bond. These bonds not only protect subcontractors and material suppliers from not getting paid, but they also protect the government from construction delays and poor quality of work.

Surety bonds and how they work

A surety bond is essentially a guarantee that certain terms will be fulfilled in the event that one party fails to deliver what they initially promised to fulfill. In the context of a Little Miller Act, a surety bond must be furnished by a general contractor to the government in order to protect the project stakeholders in the event that the general contractor fails to deliver the terms of contract.

There are generally three parties involved when a surety bond is in the picture: the bond provider, the principal, and the obligee. In a federal construction project, the bond provider is the insurance company, the principal is the general contractor, and the obligee is the government entity that hired the general contractor.

Two types of bonds

If the contractor fails to perform their job as agreed upon in the contract, the bond provider will take over and make sure that payments and other unfulfilled obligations get compensated. General contractors in the US are typically required by the Little Miller Act to provide the government one performance bond and one payment bond.

What is a performance bond?

A performance bond is a surety bond that guarantees the government client of good quality of work, including timely delivery of the agreed deliverables and staying within the budget. General contractors are expected to follow a construction schedule and not incur any additional expenses that may cause the government to shell out more money than needed.

If a general contractor fails to follow the terms agreed in the contract, the government client can recover compensation from the performance bond provider.

What is a payment bond?

A payment bond, on the other hand, protects the subcontractors and material suppliers working under the general contractor. This bond specifically addresses possible payment delays and disputes that may occur in the course of a federal project.

If a general contractor defaults, or if they fail to distribute payments to subcontractors, material suppliers, and other lower-tier parties working for them, these parties may tap the payment bond and recover payment by making a bond claim.

Little Miller Acts: Differences and similarities

Every state has different requirements and rules regarding their respective Miller Acts. If you are working on a federal project, you must familiarize yourself with the Little Miller requirements that may apply to you.

These are some of the ways the Little Miller Acts in the various states differ:

1. Contract amount requirements

In some states, a Little Miller Act applies only if a government contract is over a certain value. The California Little Miller Act, for example, requires all general contractors for public projects worth $25,000 or higher to furnish a performance and a payment bond. Colorado has a higher amount threshold – a contract must be over $150,000 before the bond requirements apply.

There are also states that require all general contractors to provide the surety bonds regardless of the contract amount. The Arizona Little Miller Act and the Idaho Little Miller Act are two examples, because they both require all prime contractors to furnish the bonds for all public works project.

2. Performance and payment bond amounts

Another variation in these Little Miller Acts concerns the bond amount that is required for every project. Some states like Nevada require a performance bond to be at least 50% of the total contract amount, while most states require the performance bond amount to be equal to the contract value. New York, New Hampshire, and Delaware all require the performance bond to be equal to 100% of the contract.
Payment bond requirements also differ in each state. Indiana requires the payment bond to be 100% of the contract value, while California only asks for 50% of the total contract amount.

3. Bond claim filing deadlines

Much like a mechanics lien, a bond claim must also be filed by a qualified party who seeks to recover payment through a payment bond. The Little Miller Act in each state regulates the deadlines for when a valid bond claim may be filed.

Florida, for example, requires a bond claim to be filed between 45 days after the beginning of a contract and 90 days after your last day of work. If a contractor officially stops working on a project, the deadline is shortened to 90 days after your final day of work (see Florida Little Miller Act Section 255.05[2a]).

Idaho, on the other hand, has a 90-day waiting period after your last day of work before you may file a bond claim. You must, however, file a Notice of Intent to Claim within that 90-day window, according to Idaho Code Section 54-1927. The same 90-day rule applies in Rhode Island, according to the Rhode Island General Laws Section 37-12-2.

4. Bond claim statute of limitations

A payment bond is not claimable for an infinite period of time. These bonds also have so-called expiration dates, so if you fail to recover payment before the bond claim expires, you may file a lawsuit to enforce the bond claim.

Delaware Little Miller Act Section 6962 allows qualified parties to file a lawsuit o enforcement within three years of the last date of working on a project. Jurisdictions such as District of Columbia, Maine, and New Jersey only have a one-year time limit from the last day of work.

Frequently Asked Questions

Do all subcontractors and material suppliers have a right to file bond claims?

No, not all subcontractors and material suppliers may file a bond claim to recover payment. Most states only extend this right to first- and second-tier construction parties, which means that parties on the lower-end of the contracting chain are not allowed to file a bond claim.

Suppliers to suppliers, for example, are not allowed to file a bond claim in both California and Colorado. Idaho, however, is more likely to allow lower-tier suppliers to have bond claim rights.

Is it okay to sign bond claim waivers?

You are discouraged from signing bond claim waivers, especially if you are working on a project that is covered by the state’s Little Miller Act.

Bond claim waivers may prohibit you from recovering payment from a delinquent general contractor. Since mechanics liens do not apply to public works projects, you will be left with no other payment recovery option once you sign a bond claim waiver.

Bond claim waiver

What are the general pieces of information that must be included in a bond claim?

  • Your bond claim must include the following information:
  • Amount of the claim
  • Name of the general contractor, if hired by a lower-tier party
  • Name of the party who hired you, if different from the general contractor
  • General description of the labor or materials that you furnished to the project
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