When there is a payment issue on a construction project, the project type is usually the determining factor that dictates how the affected party should proceed.
If it’s a private construction project, then the remedy is typically a mechanics lien. And if the payment issue happens on a public project, then the remedy is usually placing a claim against a payment bond.
Digger a little bit deeper into the public project classification, if the project is federal, then the normally-required payment bond will be present due to the bonding requirement from the Miller Act. And a public project that occurs at the state/county level will be regulated by that state’s particular Little Miller Act.
But here’s a fundamental question — if a public project can be classified as either federal or state, how do you know which it is? What does it mean to be a federal job?
The Presence of Federal Funds Doesn’t Automatically Trigger the Miller Act
Getting to the bottom of a project type is a pain in the neck, and often, it can still be unclear as to what’s necessary. When federal funds are present, it can lead parties to believe the project must be a Miller Act job. That’s not necessarily the case! By itself, federal funding will not turn a job into a Miller Act job.
For example, take highway construction. Federal funds are almost always a portion of the funding used in the construction of highways, yet most of these projects are under the auspices of a state level agency or contracting authority.
Here Are 2 Questions to Help Decide if the Miller Act Will Apply:
1. Is the federal government, or one of its agencies, one of the contracting parties?
Is the federal government at all involved in the prime contract for this project? Certainly, a contract between a claimant and the government isn’t required (not to mention – prime contractors aren’t protected by the Miller Act). But how involved is the federal government in the project? If the answer is “not very,” then a Miller Act claim might not be appropriate. A prime contract that is made between private parties, or even a private party and a state (or state agency) will likely not invoke the Miller Act. And, as the title suggests, the mere presence of federal funding won’t create Miller Act rights, either.
2. Is the project property federally owned?
When the underlying property is owned by the federal government or a federal agency, it’s a good indicator that the Miller Act could be in play. The Miller Act was created because the protection of mechanics liens is unavailable when land is federally owned.
Think of it this way: you can file a lien on Grandma’s House, but you can’t file a lien on the White House.
We’ve got a few really helpful articles to read that deal with the issues of project type, federal projects, and the Miller Act:
Levelset’s Construction Legal Center
Last but not least, Levelset has licensed construction attorneys that are available to answer your construction payments questions, for free. We call it our Construction Legal Center, and you can ask your question(s) by following the link on the banner below.
We post all of the questions and answers we receive (over 400 so far, and counting!), and you can search and read through all of them. Chances are, we’ve already answered a question that’s very similar to yours!