Before the turn of the 20th century in the United States, builders determined nearly every detail of their projects. Vague construction plans included only sketchy details on materials and dimensions, and clients often were left wondering what to expect.
With industrialization came a separation of labor between builders and architects, along with increasingly complex documents to manage the relationships and expectations of each party, the Houston Chronicle notes. In the late 1800s, Congress approved the Heard Act, which required construction projects with federal funding to include a surety bond, a type of contract that guarantees the completion of a project. The Miller Act, passed in 1935, added to the Heard Act by requiring performance bonds for public works contracts valued at $100,000, along with payment protection for contracts valued at $25,000 or more.
Completing jobs, protecting suppliers:
The purpose of the Miller Act, and its prior incarnation as the Heard Act, was to ensure that contractors completed federal jobs and paid their subcontractors, suppliers and laborers money owed to them. Performance bonds protect against a contractor’s inability or unwillingness to finish a job, while payment bonds protect those to whom a contractor owes payment.
A contractor’s abandonment or failure to complete a government job might cause costly delays; requirements for bonding served the purpose of discouraging irresponsible contractors, and the bond helped cover the cost of completing an abandoned project. Without bonds guaranteeing payment, suppliers and subcontractors might hesitate to work on projects, which would drive up construction costs.
Application to federal projects:
Federal government contracts for repair, construction or alteration of public buildings or public property are subject to the Miller Act. The act itself applies to contracts for more than $100,000, the federal acquisition rules require bonds on contracts that exceed $150,000. The Miller Act typically does not apply to small renovation and repair work valued at less than $100,000.
The Miller Act only applies in federal construction contracts and is not applicable to vendors who simply furnish labor or supplies for any type of federal project.
Miller Act exemptions:
Certain types of federal construction projects are exempt from the Miller Act. Specifically, some projects related to transportation or the military may be subject to statutory exemption only when an appropriate government officer officially notes that the act does not apply.
Subcontractors, suppliers and laborers may have a difficult time finding out if a particular project has been deemed exempt from the Miller Act. In such a case, a party’s best course of action may be to file a claim under the Miller Act, with the possibility of being notified of an exemption.
Making claims under the Miller Act:
Subcontractors and others who are not paid for materials or labor provided for a federal construction project may have the right to file a claim to receive payment. The U.S. General Services Administration provides additional information about the act and how to file claims.
Even as the construction industry has grown increasingly complex, the legal concepts represented in the Miller Act — protection against contractors who would abandon projects and fail to pay workers and suppliers — have stood firm for more than a century.