As the United States economy continues to grapple with the unprecedented impact of the coronavirus pandemic, many contractors are concerned about making and receiving payment for work. The Miller Act provides the process for subcontractors to ensure they are paid for their work on federal construction projects, but they must be familiar with its requirements and deadlines to seek payment. This guide outlines five steps subcontractors and material suppliers should take to ensure they preserve their right to recover payment under the Miller Act.
If you typically perform construction services in the private sector, you are likely familiar with the procedures for perfecting a mechanics and materialsman’s lien. In the private sector, construction work is associated with real property that can secure a lien. In the government context, the corresponding real property cannot be subject to lien. That’s where the Miller Act steps in: it requires a bond to stand in the place of the lien right available on private construction projects.
Like a mechanics and materialsman’s lien, the Miller Act imposes strict deadlines that must be satisfied to perfect the claim, or a subcontractor will waive its right to recover under the bond. Also similar to mechanics and materialsman’s lien, the notices and preparation required of a subcontractor depends on the “tier” at which they contracted. Notably, only the following tiers of subcontractors and material supplies are protected under the Miller Act: first-tier subcontractors (i.e., subcontractors that contract directly with the general contractor); second-tier subcontractors (i.e., subcontractors that contract with a first-tier subcontractor); first-tier material suppliers (i.e., material supplies that contract directly with the general contractor); and second-tier material suppliers that contract with a first-tier subcontractor but not a first-tier material supplier (i.e., material supplies that contract with a first-tier subcontractor). More remote subcontractors and material suppliers cannot recover against a Miller Act bond.
A subcontractor must meet each requirement of the Miller Act to perfect its claim. Therefore, it is important to be aware of these requirements from the start of your work, and it is imperative to begin preparing a Miller Act claim as soon as you fail to receive timely payment. Failure to do so may bar your right to recover payment for the work you performed. Below are steps subcontractors should take to ensure they preserve their right to recover payment.
Step 1: Calendar Miller Act Deadlines
All subcontractors should take note of the following dates and deadlines. First, a subcontractor must wait ninety days (90) after they last furnished labor or material to the project before they pursue a civil action against the Miller Act payment bond. Second, a subcontractor must file suit “no later than one year after the day on which the last of the labor was performed or material was supplied” by the subcontractor. Subcontractors should note that repair or warranty work will not extend this one-year deadline. Failure to file suit within the one-year period absolutely bars the Miller Act claim. In other words, subcontractors have a nine-month window after they complete the project work to file a Miller Act claim.
Under the Miller Act, only second-tier subcontractors and material suppliers are required to provide pre-suit notice to the general contractor. However, it is good practice for first-tier subcontractors to also provide pre-suit notice. First, providing notice allows an opportunity for the subcontractor, general contractor, and/or surety to resolve the claim without the expense of litigation. Second, even if the parties are unable to resolve the claim, it allows the subcontractor to show the court its good-faith effort to resolve its claim. For these reasons, all subcontractors should note that pre-suit notice must be given to the general contractor within ninety (90) of the subcontractor’s last furnishing of labor or materials to the project. For second-tier subcontractors and materials suppliers, pre-suit notice is mandatory; failure to provide pre-suit notice will bar their claim against the bond.
In sum, there are three critical dates and deadlines related to a Miller Act claim that every subcontractor should calendar:
Step 2: Review the Payment Bond
The payment bond is the agreement by which the surety assures the United States that the general contractor will pay all subcontractors and materials suppliers on the project. A payment bond’s terms may present additional requirement for perfecting a claim against it. Therefore, it is important to review the payment bond within 90 days after last providing services or materials.
Step 3: Gather Relevant Evidence
The evidence necessary to prove a Miller Act claim should be maintained from the start of a project. Such evidence includes:
These records are beneficial to maintain in any event, but they become necessary if a Miller Act claim arises. As soon as you fail to receive timely payment from a general contractor or subcontractor, you should begin to gather these records.
Step 4: Prepare Your Pre-Suit Notice
The Miller Act states four requirements for valid pre-suit notice:
In the interest of resolving your claim without the need for filing a lawsuit, you should also consider providing the type of evidence you would rely upon to prove your claim in your pre-suit notice.
Again, although pre-suit notice is only mandatory for second-tier contractors and materials suppliers, it is advisable that all subcontractors, including first-tier subcontractors, submit pre-suit notice. Keep in mind that the pre-suit notice must be delivered within 90 days of last providing labor or services, or you may waive your right to bring a claim.
Step 5: Determine Jurisdiction for Suit
If you are unable to resolve your claim and must bring a suit under the Miller Act, it is critical that you file your suit in the proper jurisdiction. A claim under the Miller Act must be filed in the United States district court for any district in which the contract was performed. Unlike other contractual obligations, the parties may not waive this jurisdictional requirement.
These are only a few requirements and the earliest steps necessary to pursue a Miller Act claim.