If you work in construction, you have probably heard of The Miller Act, especially if you specialize in government contracts. This is your guide to The Miller Act vs. The Little Miller Act, which are state-specific versions that can have a bearing on your work as well. Have additional questions? Don't hesitate to contact our team at Gray Surety to learn more.
What is The Miller Act?
The Miller Act works to protect first and second-tier construction parties by allowing them to recover outstanding debts. It accomplishes this through surety bonds.
Suretyship is defined as a contractual relationship whereby one person, the surety, agrees to be answerable for the debt or default of another, the contractor. Put simply, a surety bond is a credit transaction whereby the contractor remains liable for the bonded contract, and the surety underwrites the risk-based upon the character, cash, and capacity of the bonded contractor. It's typically a requirement of federal or state agencies before large government construction projects commence. It helps them reduce their own risk if a project doesn't succeed. In the context of The Miller Act, general contractors are required to obtain two surety bonds: one performance bond and one payment bond. A performance bond guarantees satisfactory completion of a project according to the agreed-upon contract. Alternatively, a payment bond guarantees the subcontractors and suppliers working under the general contractor will be paid for the labor provided or materials supplied.
The federal Miller Act was passed in 1935, but it wasn’t long before states started to adapt it with changes. As they made their own modifications, these state-specific versions became known as Little Miller Acts. In this article, we’ll discuss what you should know about The Miller Act vs. Little Miller Act, including key differences.
The Miller Act vs. the Little Miller Act
According to The Miller Act, contractors for federal projects must secure a payment bond for contracts in excess of $100,000. Other payment protections may be provided for contracts between $30,000 and $100,000. In general, if a contractor fails to pay subcontractors or suppliers, they have the right to sue the contractor in U.S. District Court.
On the other hand, the Little Miller Act refers to separate statutes that vary by state. These come with their own rules, regulations, and deadlines that must be followed closely. So, which one applies to your specific project when you’re comparing The Miller Act vs. Little Miller Act?
If you are working on a construction project for the federal government, you must follow the guidelines of The Miller Act. When you are working on state-owned projects, follow guidelines set forth in the Little Miller Act of that state.
Little Miller Act differences among states
As previously mentioned, each Little Miller Act can vary greatly from state to state. Before taking on a project with a state government, it’s important to study that state’s specific regulations. How much they can differ may surprise you, and not knowing may have consequences.
These are the key differences among each state’s Little Miller Act. Always work closely with your legal and compliance team to ensure you're meeting the exact state requirements.
Contract amount requirements
The federal Miller Act requires contractors to secure a payment bond for federal contracts in excess of $100,000. This minimum contract amount is different for each state.
For example, in Missouri, your business will need a bond if the project exceeds $25,000. In Tennessee, the amount is much higher at $100,000. States like Arizona and Idaho require all contractors to secure bonds regardless of the contract amount.
Some states have more extensive guidelines, including California. There, contracts with a state entity over $5,000 require a payment bond in the amount of 100% of the contract price. However, contracts with the California Department of Transportation in excess of $250 million only require a payment bond be equal to or not less than 50% of the contract price, or $500 million, whichever is less. On all other public works greater than $25,000, the bond must be equal to the total amount payable under the contract. As you can see, these values change significantly across states.
Bond claim filing/notice requirements
Another variation among the Little Miller Act for each state is the deadline for filing a bond claim.
In Illinois, for example, you must file a notice of the bond claim within 180 days of performance of the last item of work or the furnishing of the last item of materials. In Florida, a claimant that is in direct privity with the contractor does not have to file any type of notice, but a claimant that does not have direct privity with the contractor must file two types of notices. First, the nonprivity claimant must file a preliminary notice to the contractor within 45 days of beginning work or furnishing labor, materials, services, or equipment. Second, the nonprivity claimant must file a notice of its claim within 90 days of the last furnishing of labor, materials, services, and/or equipment.
To demonstrate how different these guidelines can be, Louisiana is a good example. There, you may file a sworn statement of a claim within 45 days after the recordation of acceptance of the work by the governing authority, but recent case law in Louisiana suggests that you can also file your sworn statement before recordation of notice of acceptance and that you may need even need to file a sworn statement to pursue a bond claim.
Bond claim statute of limitations
A statute of limitations refers to the deadline for filing a lawsuit to enforce a bond claim. Depending on the state, you may have to file suit within a specific time period after filing the bond claim. Each Little Miller Act statute of limitations contains a different time requirement.
For example, in New Mexico, the statute of limitations is tied to the completion of the contract. If a claim arises, you must file a suit within one year of the contract settlement. In contrast, in the District of Columbia, you must file a suit within one year after the last day on which labor was performed or materials were supplied.
It’s important to pay attention to these differences among each Little Miller Act. Without adhering to the statutes, you could lose your bond rights if an issue arises.
How to file Little Miller Act bond claims
While there are differences between the Miller Act vs. Little Miller Act in each state, filing is usually straightforward.
First, determine your eligibility for filing a bond claim. Some states only allow first and second-tier construction parties to file a bond claim, while other states do not have a tier system. For example, suppliers to suppliers are not allowed to file a bond claim in California. However, in Idaho, courts have defined a subcontractor as “one who performs for and takes from the prime contractor a specific part of the labor or material requirements of the contract.” There, the court will take into account the “substantiality and importance of the relationship with the prime contractor” when determining whether a claimant qualifies as a subcontractor.
Have additional questions about the process? It is always helpful to hire an attorney with experience in construction-related disputes. This is the best way to ensure a smooth process from start to finish.
Learn more about the Miller Act
At Gray Surety, we offer a wide range of contract and commercial surety bond services for established and emerging contractors. Our team is also here to help you make sense of complex issues, like The Miller Act vs. Little Miller Act and its resulting impacts on your business. We can help you navigate your current contracts within the framework of this guidance.
Have additional questions or concerns? Contact Gray Surety today to learn more.
Note: The foregoing information does not, and is not intended to, constitute legal advice. All information, content, and materials available on this site are for general informational purposes only. For more information, we encourage you to consult with an attorney.