Payment issues are an unfortunate reality in the construction industry. But these problems are not limited to smaller, private projects – they can (and do) happen on all kinds of construction projects, even on some public projects including the typically larger federal construction projects.
As industry veterans and readers of the Construction Payment Blog will surely know, the remedy for a payment issue on a public construction project is to file a bond claim. And on federal projects, the right to file a bond claim is regulated by the Miller Act. It allows claimants to make a claim for payment directly to the surety company that bonded the project.
While the Miller Act applies to the vast majority of federal construction projects, a project must still qualify in order to fall under the Miller Act protections. Read on for three essential things you must know about the Miller Act in order to effectively leverage your right to get paid the money you earned on a federal construction project.
3 Things You Must Know to Get Paid
1. Contract Must Be Greater than $100,000
This is probably the most straightforward Miller Act requirement. In order for a payment bond to be required, the contract value has to be for “more than $100,000.”
Federal construction and public works projects tend to be much larger than $100,000, but it’s possible that a small renovation or repair job on a federal building could conceivably have a sub-$100,000 price tag. And if that’s the case, then the Miller Act will not apply.
However, it’s important to note that the $100,000 figure is not about the value of your specific work. The $100k figure takes into account the value of the entire project, or more exactly, the value of the contract between the federal government department and the selected prime contractor. If that amount is over $100,000, the Miller Act will apply and will require a bond, even if your portion of the work is worth less than $100,000.
2. It Has to Be a Federal Construction Contract
This might seem obvious, but federal law is very specific as to the kind of work that qualifies as construction. In order to qualify for Miller Act protections, the federal construction contract must be “awarded for the construction, alteration, or repair of any public building or public work of the Federal Government.”
And so, it’s not enough to just have a federal contract…it has to be a federal construction contract in order to qualify.
3. Some Projects May Be Exempt
Exceptions and exemptions abound in the world of mechanics lien and bond rights, and this goes for federal construction projects as well. But this is a tough category to keep straight because this type of special circumstance can be pretty rare and unique.
For example, certain Military and Transportation projects – but not all – may be exempt from the Miller Act, but only in very special circumstances.
So, what should you do if your working on a federal project that is qualified for an exemption from the Miller Act? Unfortunately, it’s going to be difficult for subcontractors, suppliers and other lower tiered project participants to know whether the department waived the Act’s applicability or not.
The best thing you can do is to file your Miller Act claim anyway. The worst that can happen is that they get notified of the Miller Act exemption. But, at least the claim is filed in case the project is not exempt which is far more likely.