260-424-2790 260-424-2790

The Miller Act’s Purpose and Required Procedures

by David M. Mustard

The purpose of
this post is to provide a brief synopsis of the Miller Act’s purpose and
required procedures. Under the Miller Act, the prime contractor awarded a
government contract is required to post a payment bond, generally in the amount
of its total contract price. See 40
U.S.C. § 3131(b)(2). If a subcontractor is not paid for its completed work, it
may request a copy of the prime contractor’s payment bond from the project’s
contracting officer. The subcontractor must then demand payment from the prime
contractor and surety.

I.    REQUEST
FOR PAYMENT BOND

To obtain a copy
of the payment bond, a subcontractor must submit an affidavit to the project’s
contracting officer stating that (1) it supplied labor or material for work
described in the contract and (2) it has not been paid for that work. See 40 U.S.C. § 3133(a). A subcontractor
may also obtain a copy of the payment bond by submitting an affidavit stating that
it is being sued on the bond. See id.
Before providing a copy of the payment bond, the contracting officer may
request a copy of the subcontractor or sub-subcontractor’s contract relating to
the project.

II.    RIGHT
TO FILE CIVIL ACTION ON THE PAYMENT BOND

Two “tiers” of
subcontractors may file lawsuits against a prime contractor’s payment bond: a
subcontractor (first tier) and a sub-subcontractor (second tier).

    A.    First Tier: Subcontractor

A subcontractor
that has not been paid in full within 90 days after completing its work may
file a lawsuit for payment on the prime contractor’s payment bond. 40 U.S.C. §
3133(b)(1). The Miller Act defines a subcontractor as one who has a direct
contractual relationship with the prime contractor. See id. The United States Supreme Court has further defined a
“subcontractor” as “one  who  performs
for  and  takes
from  the prime  contractor
a  specific  part
of  the  labor
or  material requirements of the
original contract” which excludes “ordinary laborers and materialmen.” Clifford F. MacEvoy Co. v. U.S. for the Use
and Benefit of Calvin Tompkins Co.
, 322 U.S. 102, 107 (1944).

Because the
subcontractor has a direct contractual relationship with the prime contractor,
the Miller Act does not require the subcontractor to provide the prime contractor
with notice that it has not been paid. However, it is recommended that a
subcontractor send a notice similar to the one described below that a
sub-subcontractor would provide to the prime contractor.

    B.    Second Tier: Sub-Subcontractor

A
sub-subcontractor may file a lawsuit against the payment bond only if it
provides a written notice to the prime contractor within 90 days after
completing its work. 40 U.S.C. § 3133(b)(2). The Miller Act defines a
sub-subcontractor as one who has a
direct contractual relationship with a subcontractor
. Id. If a sub-subcontractor does not have contract with a
“subcontractor” as defined above, it may not bring an action against the
payment bond.

        i.    Notice
to prime that sub-subcontractor’s work has not been paid

The Miller Act requires that a sub-subcontractor’s notice
to the prime contractor meet three conditions: (1) notice must be given within 90 days of the
sub-subcontractor’s last work; (2) the notice must “stat[e] with substantial
accuracy the amount claimed”;
and  (3)
the  notice  must
include  “the  name
of  the  party
to whom the material was furnished or supplied or for whom the labor was
done or performed” (i.e. the name of the subcontractor). 40 U.S.C. § 3133(b)(2)
(emphasis added).  In Indiana, the notice
does not require an explicit demand for payment (i.e. a statement notifying the
prime that the sub-subcontractor wants payment for its completed work). SeeU.S.
ex rel S And G Excavating Inc. v. Seaboard Sur. Co.
, 236 F.3d 833, 885
(2001). However, other states may require an explicit demand.  As such, it is recommended that an explicit
demand for payment from the prime contractor be included in the notice.

        ii.    Method
of sending notice to prime

The Miller Act
states that the sub-subcontractor’s notice to the prime contractor must be sent
“by any means that provides written, third-party verification of delivery to
the [prime] contractor” (i.e. certified mail or other similar means) and can be
sent to the prime contractor’s office, to the location where it conducts
business or to its residence. Because the Miller Act is meant to be construed
most favorably to those who performed work on a project and have not been paid
(see id.), courts may be lenient
about the method used to serve the notice, but the recommended practice is certified
mail with a request for a return-receipt.

III.    NOTICE
TO SURETY

The
Miller Act does not require that any notice be sent to the surety that posted
the prime contractor’s payment bond. See 40
U.S.C. § 3131 et seq. However, because
an unpaid subcontractor or sub-subcontractor may be paid by the surety without
having to file a lawsuit, it is recommended. A notice to the surety may also
let the prime contractor know that the subcontractor is serious about its
request for payment. A notice should be sent to the surety concurrently with
the notice sent to the prime contractor seeking payment from the bond.  The surety will likely require that the
subcontractor provide copies of its contract, invoices, change orders, etc. The
subcontractor should compile the requested documents and return them to the
surety. If the surety does not pay the claim, a lawsuit may be required.

IV.    FILING
A CIVIL ACTION

Lawsuits
against payment bonds must be filed in a federal court in the district where
the project was located and in the name of the United States for the use of the
unpaid subcontractor or sub-subcontractor. 40 U.S.C. §§ 3133(b)(3)(A) and
(b)(3)(B). A lawsuit filed against the bond may only seek the unpaid amount as
of the date the lawsuit is filed. 40 U.S.C. §§ 3133(b)(1) and (b)(2). A lawsuit
by a subcontractor against the prime must be filed within one year from the
date the subcontractor’s work is completed. 40 U.S.C. § 3133(b)(4). Furthermore,
the Miller Act does not provide an award of attorney’s fees to the prevailing
party in a civil lawsuit. See 40
U.S.C. § 3131 et seq. However, the
Miller Act does not prohibit recovery of attorney’s fees; there must be some
other basis (either contractual or statutory) for recovery of attorney’s fees. See F. D. Rich Co., Inc. v. U. S. for Use of
Indus. Lumber Co., Inc.
, 417 U.S. 116, 131 (1974).