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Presenting payment claims on Federal projects in Ohio (The Miller Act)

posted by Michael Fortney  |  Jan 15, 2013 3:20 PM in Construction Law

Presenting payment claims on Federal projects in Ohio (The Miller Act). 

What remedy does a subcontractor or supplier have for payment on a federal project in Ohio?  Federally owned property and projects cannot be the subject of a mechanic's lien.  However, federal law requires the principal contractor of any federal construction project over $100,000 to obtain a Miller Act Payment Bond for the protection of those supplying labor and materials to the project.*  The bond is so named based on the federal law known as the Miller Act, 40 U.S.C. §3131 et seq.    

The payment bond exists to secure payment to first and second tier subcontractors and suppliers on a federal project.  The protection does not extend to the benefit of third tier subcontractors.  Consequently, subcontractors and material suppliers to a subcontractor on a federal project are not protected by the payment bond. 

If you are a first or second tier subcontractor and supplier on a federal project and you have not been paid, you should file a claim on the project's payment bond.  In order to do so, you should obtain a copy of the bond, give the principle contractor, the surety and the federal contracting officer notice of your claim, and, if necessary, file a claim or lawsuit on the bond.

Where to get a copy of the Miller Act Bond 

A copy of the bond and the prime contractor's contract can be obtained from the General Service Administration contracting agency that issued the contract or from the contracting officer assigned to the contract for which the unpaid work was performed.  An affidavit that labor or materials have been supplied for which payment remains outstanding may be required to obtain a copy of the bond and contract.

Pre-bond claim notices

Whereas on state and local public projects in Ohio there is generally a requirement that a bond claimant timely serve a notice of furnishing as a condition to making a claim against the project bonds, no such requirement exists on a federal project.  Those with a contract directly with the principal do not have to provide any notice at all.  All they have to do is wait 90 days from the last day of work and file suit against the bond. 

Those with a contract with a subcontractor to the principal do have a notice requirement (but not in advance of work or material supply).  Second tier subcontractors must furnish a notice of non-payment and notice of bond claim within 90-days of last work. 

Contents of payment claim

The Miller Act provides the that the payment notice “must state with 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.”  The statute does not give any other details about what should be in the Miller Act claim notice, nor does it provide a statutory form.  In practice though, as much detailed information should be provided as possible so that the payment claim can be properly reviewed for payment.  This information may include, the parties' contract or purchase order, copies of unpaid invoices, and an account statement of invoices issues and payments received.

Service of payment claim

The Miller Act does not require a claimant to notify the governmental organization commissioning the work at the project or the bond surety.  Instead, claimants are simply required to notify the prime contractor of the claim in writing.  Voluntary payment though is promoted by also serving a copy of the payment claim to the contracting agency and the surety.  Service upon the prime contractor via certified mail with return receipt requested will satisfy the statutory service requirements

Enforcement of payment claim

If the surety and/or prime contractor refuse payment, the claimant's next step is to file a lawsuit to enforce the Miller Act Claim in the federal district court where the project is located.   A lawsuit to enforce bond claim rights may be filed 90 days after, but no later than one year after the last furnishing of labor or materials to the project.


* For projects between $25,000 and $100,000, the Miller Act requires the contracting officer to provide alternatives to payment bonds as payment protection.  This Article focuses on federal projects which require the positing of a payment bond.

 


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