Construction law is a highly nuanced and complicated branch of our justice system. The average construction project can involve several different parties at once–for example, a general contractor may have subcontractors with many vendors at once. Additionally, the same general contractor has a contract with the entity commissioning a final project.
A construction project can be like an old analog clock. When one cog on a wheel stops turning, the entire operation comes to a crashing halt. Your cash supply dries up, workers stop showing up because of non-payment, and you risk not getting paid for your own work.
State and federal legislators have worked to mitigate some of these risks and make construction projects run more smoothly. One thing that may work in their favor is the Miller Act.
What Is the Miller Act?
The Miller Act was passed in 1935. The Miller Act applies to Federal Projects, which are projects where the land or improvement is owned by the federal government.
It seeks to protect subcontractors and material suppliers working on governmental contractors. It requires general contractors to post bonds that guarantee the performance of their duties and the payment of subcontractors and other vendors.
The Act addresses two main aspects:
- Performance bonds. If contractors abandon their work or perform poorly, a job may face critical delays and additional expense. Adding a performance bond helps weed out potentially irresponsible contractors and protects the government against project stalling.
- Payment Bonds. Sovereign immunity keeps subcontractors from filing a construction lien against a government entity. This means that you cannot sell the land to get paid like a normal lien, because the government owns the land. Therefore the bond is required as security. Without the Miller Act, subcontractors would be otherwise reluctant to sign onto government projects without assurance of payment.
These bonds apply to certain federal government projects in excess of $100,000. As a general contractor, it’s your responsibility to avoid claims on these bonds.
If you’re a subcontractor on a federal government project, the Miller Act only applies when you don’t get paid for your work on a project. If this happens, you’ll have to file a bond claim against the federal contractor.
Unlike many other municipal laws, the Miller Act does not have complicated recordation and notice requirements. While the Louisiana Public Works Act has several complicated hoops to jump through, for instance, the Miller Act requires that you just answer a simple question: did you provide any labor or materials within the past 90 days? If the answer is yes, and you haven’t been paid, you can file a claim on the general contractor’s surety bond.
How Do I File a Claim on a Miller Act Project?
A Miller Act claim is different from a construction lien. If you don’t get paid for work on someone’s house, you can file a construction lien on that person’s house for payment. You can’t, however, file a lien on the White House. Why not? Because it belongs to the people. Instead of filing a lien on government property, you must file a claim under the Miller Act. Here are the general steps involved:
- Deliver the claim to the general contractor.
- Follow up with the general contractor and try contacting the surety company.
- Provide documentation to the surety company and follow their requests for more information.
- Collect your payment or begin litigation.
On paper, it sounds simple. Like all construction legal matters, however, the Miller Act is highly nuanced and complicated. If you’ve reached a sticking point in negotiations with the insurance company or face a claim denial, you in general have a couple of options:
- Let your in-house counsel handle it. Your in-house counsel may be able to handle straightforward claims and begin the litigation paperwork in light of a denial.
- If your in-house counsel is overwhelmed with projects, consider hiring outside counsel to handle your construction litigation and claims. This frees up your general counsel to pursue other contracts and protects your business, keeping it running smoothly.
The Miller Act is a complicated piece of legislation. If you would like more information or would like to schedule a free initial consultation with our experienced Louisiana construction attorneys, please contact us.