Federal

This is the third installment in our series discussing Louisiana lien rights and notice requirements. This post discusses how contractor and materials supplier rights on federal projects. A federal project is one where the land and improvement is owned by the United States Federal government. In the event the property is owned by the federal government, then the Miller Act comes into play.

The Miller Act, 40 U.S.C. §3131–3134, provides that, before any contract for the construction, alteration, or repair of any public building or public work of the United States of more than $150,000 (increased from $100,000 in 2010 to keep up with inflation) is awarded to any person, that person (usually the general contractor) must furnish:

(1)       A performance bond in an amount the contracting officer considers adequate for the protection of the United States; and

(2)       A payment bond for the protection of subcontractors and suppliers. The penal sum of the payment bond is equal to the total amount of the contract unless the contracting officer determines that amount is impractical, in which case the contracting officer may set the amount not less than the amount of the performance bond.

The Act also lays out who can recover against the payment bond. Miller Act payment bonds cover subcontractors and suppliers who have direct contracts with the general contractor (first-tier claimants) and subcontractors and suppliers who have contracts with a first-tier subcontractor (second-tier claimants). Lower-tier subcontractors and suppliers are not protected. So only first and second tier claimants are protected by the Act.

Further, the Miller Act establishes

  • pre-suit written notice requirements for second-tier claimants (first-tier claimants are excused because of their direct contractual relationships with the general contractor),
  • the proper venue for bringing civil actions on the payment bond, and
  • a one-year deadline for bringing the action after the claimant performs its work. This is completely different than any of the Louisiana laws regarding Public and Private Works.

Time Period To File A Claim On Miller Act

Specifically, an action brought under the Miller Act must be brought no later than one year after the day on which the last of the labor was performed or material was supplied by the person bringing the action. Compliance with this one-year time limit is a condition precedent to the right of those furnishing labor or materials to bring suit. In addition to this one year statute of limitations, a person having a direct contractual relationship with a subcontractor but no contractual relationship with the contractor furnishing the payment bond may bring a civil action on the payment bond on giving written notice to the contractor within 90 days from the date on which the person did or performed the last of the labor or furnished or supplied the last of the material for which the claim is made. 40 U.S.C. § 3133. So, here a second tier contractor or supplier needs to send the written notice within 90 days of last furnishing or performing work. Only then can a suit be brought to enforce the claims under the act. There is no need to “file” anything here, just a need to send the required notice.

The requirement that notice must be given to the principal contractor within the ninety-day period is mandatory and is a strict condition precedent to the existence of any right of action upon the principal contractor’s bond. U. S. for Use of John D. Ahern Co., Inc. v. J. F. White Contracting Co., 649 F.2d 29, 31 (1st Cir. 1981). The purpose of the notice requirement is to establish a time after which the principal contractor can pay its subcontractor, certain that it will not be exposed subsequently to the claims of those who have supplied labor and materials to the subcontractor. Id. This is so logical and well thought out. I think the federal government did a better job than the State of Louisiana here.

Bonds

Absent from the Miller Act are any forms for the required bonds. A number of commonly used forms can be found in Chapter 48 of the Code of Federal Regulations. They are Federal Standard Form 25 Performance Bond, 48 C.F.R. § 53.301–25, and Form 25–A Payment Bond, 48 C.F.R. § 53.301–25–A. There is no specific language in the Miller Act that requires these bond forms. However, it is important that all the Miller Act requirements are met by a custom form. The courts have interpreted the requirements of the Miller Act in a liberal fashion because of the nature of the Act. The Act is the sole remedy for contractors, subcontractors and suppliers, therefore the courts look to the intent of the act rather than a strict interpretation of the act when enforcing its provisions. So unlike Louisiana courts, Federal courts will uphold Miller Act notices, bonds and claims even if they are not exactly on the proper form. The key is to make sure all the provisions of the Act are met. Louisiana construes its Public and Private Works statutes strictly which is the opposite of the federal intent here. There are no form requirements for Louisiana documents either, but the courts are very strict when interpreting rights allowed by our Public and Private Works.

Conclusion

As a matter of regularity, I do not see nearly as many Miller Act claims as I do local private and public claims. Part of the reason for this is that the design of the Miller Act is, in my opinion, better. Further, the contractors, subcontractors and materials suppliers for Federal projects tend to be more well established, which leads to fewer claims. The bonding requirement for Federal jobs helps to lower the amount of claims that make it to court and the magnitude of litigating in Federal court often scares away claimants due to the speed and cost of that forum.

 

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