November 15, 2013

The Miller Act is a federal law passed in 1935 that regulates public projects that have ties to federal funds. It is named after former Arkansas Senator, Representative, and Judge John Miller, who sponsored the legislation.

A. Section 3131

Section 3131 of the Miller Act requires both performance and payment bonds before “any contract of more than $100,000 is awarded for the construction, alteration, or repair of a public building or public work of the Federal Government....” The bonds must also cover the payment of employee wage taxes.

It should be noted that nowhere in Section 3131, nor in the rest of the Miller Act, is the word “demolition.” Courts have held that contracts calling solely for demolition work (and no further construction) are not covered by the Miller Act.

Rather than using the term “public improvement” like Iowa Code Chapter 573, the Miller Act references the terms “public building” and “public work.” “Public work” under the Miller Act has been defined as “any projects of the character heretofore constructed or carried on either directly by a public authority or with public aid to serve the interests of the general public.”97

An often contested issue of the Miller Act is whether or not the Federal Government must own the project (or be a contracting party) before the Miller Act applies or whether the Miller Act applies to all projects that are funded by Federal dollars. Some courts have held that use of federal funds alone is not enough, and that the Federal Government must be one of the following: an owner, an intended owner, or a contracting party.98

B. Section 3132

Section 3132 of the Miller Act simply states that Federal Acquisition Regulation shall provide alternatives to payment bonds for contracts between $25,000 and $100,000. The contracting officer is charged with selecting and specifying the alternative.

C. Section 3133

Section 3133 provides subcontractors, and those who contract with them who have not been paid, with the right to obtain copies of both the payment bond and the general contract with the Federal Government. It also provides subcontractors, and those who contract with them, the right to file lawsuits against the bond but not the retainage. Chapter 573 does not provide a subcontractor with the right to obtain a copy of the payment bond and the general contract. Because under the Miller Act a claim may only be filed against the payment bond, if the prime contractor fails to secure said bond then there is no cause of action under the Miller Act.99

Also, under the Miller Act, a lawsuit cannot be filed until “ninety days after the day on which the person did or performed the last of the labor or furnished or supplied the material for which the claim is made…”100 Under Iowa Code §573.16 a lawsuit may be filed only after the expiration of thirty days after completion and final acceptance of the project. Under the Miller Act, a lawsuit must be brought “no later than one year after the day on which the last of the labor was performed or material was supplied by the person bringing the action.” Conversely, Chapter 573 requires that a lawsuit be brought no later than sixty days following completion and final acceptance of the project.

Unlike Chapter 573, the Miller Act also requires that the lawsuit be brought in the name of the United States “for use of” the person bringing the action. Further, the lawsuit must also be brought in a federal court in any district where the contract was to be performed and executed. There is also no language in the Miller Act that would permit an award of attorney fees to anyone.101

Waivers are also treated differently under the Miller Act. Waivers are void under the Miller Act unless the waiver is in writing, signed by the person whose right is waived, and executed after the person whose right is waived has furnished labor or material for use in performance of the contract. There are no special waiver requirements under Chapter 573.

The Miller Act also only protects subcontractors and those who contract directly with subcontractors.102 One is considered a subcontractor if: 1) it has contracted to supply labor or material to the prime contractor; and 2) it plays a sufficiently substantial role in the construction project that the general contractor could have negotiated to have the subcontract assume the risk of the subcontractor’s default.”103 The Miller Act does not protect those who contract with materialmen or suppliers. This is different from Chapter 573 which permits one who contracts with a supplier to pursue a claim if they are a sub-subcontractor.105

Similar to Chapter 573, the Miller Act requires those who have contracts with a subcontractor (referred to by some as sub-subcontractors) to provide notice of their claims to the prime contractor. The notice must be provided “within ninety days from the date on which the person did or performed the last of the labor or furnished or supplied the last of the material for which the claim is made.” Unlike Chapter 573 that notice must be in writing and, prior to 2002, needed to “state the substantial accuracy the amount claimed and the name of the party to whom the material was furnished or supplied or for whom the labor was done or performed.”

Prior to 2002, the three requirements for notices by sub-subcontractors were: 1) it must be given within ninety days of the sub-subcontractor’s last work; 2) it must state with substantial accuracy the amount claimed; and 3) it must include the name of the party to whom the material was furnished or supplied or for whom the labor was done or performed.106 Some courts even required that such notices meet a fourth criteria, i.e., such notice needs to explicitly or implicitly inform the prime contractor that the claimant wants the prime contractor to pay the bill.107 Other courts had ruled that the fourth criteria was not necessary.108

In 2002, Congress amended the notice provision and changed the “substantial accuracy” requirement from a notice requirement to a pleading requirement. Now the notice does not have specific content requirements but only must give the general contractor notice of nonpayment and that the claimant is looking to the general contractor for payment.

D. Section 3134

This section provides that “the Secretary of the Army, the Secretary of the Navy, the Secretary of the Air Force, or the Secretary of Transportation” may waive the requirements of the Miller Act when it comes to projects involving “vessels, aircraft, munitions, material, or supplies for the Army, Navy, Air Force, or Coast Guard.” Similar discretion is given to the Secretary of Transportation for projects involving “vessels” and the “Merchant Ship Sales Act.”

Author: Material originally presented by Jeffrey D. Stone, Stephen D. Marso, Stephen W. Tyler during the Iowa Construction Liens seminar held in Des Moines, IA on 10/23/13.

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