The Miller Act (the “Act”), which requires the prime contractor to furnish a performance bond and a payment bond to the government, protects “all persons supplying labor and materials carrying out the work provided for in the contract.” Despite its broad language, courts have limited the parties who may actually assert a claim under the Act. This article introduces general background of the Act, identifies subcontractors who may qualify for protections under the Act, and suggests ways to preserve the rights as prime contractors.
Brief Background of the Miller Act
Under the Miller Act, there are two types of bonds the prime contractor furnishes to the government in a federal construction contract of more than $100,000
1. Performance Bond
A performance bond protects the United States and guarantees the completion of the project in accordance with the contract’s terms and conditions. This bond must be with a surety that is satisfactory to the officer awarding the contract and in the amount the officer considers adequate for government protection. If a contractor abandons a project or fails to perform, the bond itself will cover the government’s cost of substitute performance. Thus, the performance bond disincentivizes contractors from abandoning projects and provides the government with reassurance that an abandonment will not create delays or additional expenses.