Miller Act

The Miller Act (40 U.S.C. §§ 3131-3134) is the federal statute enacted in 1935 that requires prime contractors on federal construction contracts exceeding $150,000 to furnish both a performance bond and a payment bond, protecting the government's interest in project completion and protecting subcontractors and suppliers who cannot file mechanic's liens on federal property.

What is the Miller Act?

The Miller Act was enacted to solve two distinct problems. First, the federal government needed assurance that construction contractors would complete their projects, a problem addressed by the performance bond requirement. Second, because government property is immune from mechanic's liens (the primary private-sector remedy for unpaid construction labor and materials), subcontractors and suppliers had no payment recourse if a prime contractor failed. The payment bond requirement solved this by creating a surety-backed guarantee that the entire supply chain would be paid.

The Miller Act sets the following primary requirements: For contracts exceeding $150,000, the prime contractor must furnish a performance bond equal to 100% of the contract price within 10 days of contract award, and a payment bond equal to 100% of the contract price within the same timeframe. Both bonds must be issued by sureties listed in the U.S. Treasury's Circular 570 publication of approved companies.

For contracts between $30,000 and $150,000, contracting officers have discretion to require alternative payment protections such as escrow accounts, irrevocable letters of credit, or tripartite escrowed funds. Contracts below $30,000 have no bonding requirement.

The Miller Act also establishes the legal framework for bond claims by subcontractors: they must provide written notice to the prime contractor within 90 days of last furnishing labor or materials (for those without a direct contract with the prime), and must file suit on the bond within one year of last furnishing. Claims are filed in the federal district court where the contract was performed.

Little Miller Acts, state-level analogues, govern public construction contracts at the state level, with varying thresholds and procedures.

Why the Miller Act matters for government contractors

Miller Act compliance is non-negotiable for federal construction. Failure to furnish required bonds within the 10-day window can result in contract termination. Understanding bond claim procedures protects subcontractors who might otherwise be left unpaid when a prime fails.

Example

A prime contractor wins a $3.5M VA hospital renovation contract. Within 10 days of award, it furnishes a $3.5M performance bond and a $3.5M payment bond from its approved surety. During performance, a concrete subcontractor is not paid $120,000 for its last month of work. After 90 days from its last day on site, the sub sends written notice to the prime and simultaneously files a claim with the surety. The surety pays the claim within 30 days.

Frequently Asked Questions

Does the Miller Act apply to design-build contracts?

Yes. Design-build contracts are construction contracts and are subject to the Miller Act bonding requirements when they exceed $150,000. The design-builder furnishes bonds covering both design and construction phases under the single contract.

What if a surety is not listed in Treasury Circular 570?

Bonds issued by non-approved sureties are not acceptable under the Miller Act. The contracting officer must reject them and give the contractor an opportunity to substitute a bond from an approved surety. Using an unapproved surety is a material contract deficiency.

Can a Miller Act bond claim be assigned to someone else?

Miller Act claims have specific procedural requirements that generally cannot be waived or assigned before the claim matures. Bond rights are personal to the unpaid claimant. Consulting a construction attorney before attempting to transfer or settle a Miller Act claim is strongly advised.

Does the Miller Act cover all costs a subcontractor incurs?

The Miller Act covers labor performed and materials furnished that are incorporated into the work. It generally does not cover lost profits, consequential damages, or equipment rental (as opposed to equipment consumed in the work). The scope of recoverable costs under a bond claim is interpreted narrowly by courts.