What exactly is the Miller Act, and how does it apply to you and your state? While most contractors have heard of the Miller Act, we at NSSI find they may not know its particulars. It is vital, however, to know how the Miller Act applies to you, your state and your company’s projects and policies. If you have not yet familiarized yourself with the Miller Act, NSSI is here to help you.
What is the Little Miller Act?
Do not confuse the Miller Act statute with the Little Miller Act statute, which applies to some states such as Colorado. The Little Miller Act of Colorado refers to state construction projects on which you file a lien against a project pursuant to the Little Miller Act of Colorado. The claim is not against state property but against a particular posted bond. It is based on the Miller Act, which requires contractors working on state projects to post surety bonds. The client can enact a lien on a posted bond if the contractor does not deliver what the surety bond promises, or if the client is unsatisfied with the contractor’s work.
What Type of Surety Bonds Do I Need?
Depending on your state, you will need a performance bond, payment bond or both to begin work on a state or government project. According to the Colorado State Land Board, performance, payments and other bonds are specified in project contracts.
Performance bonds ensure that the contractor completes performance on any project to which he or she is committed. If a contractor does not abide by performance bond terms, state projects can be delayed for weeks, months and potentially years. In these cases, the state ends up paying for new contractors and may find itself paying much more than anticipated for a project.
Performance bonds also protect the contractor, however. With a performance bond, you can clearly delineate what your work on the project will entail. If the state then asks you to do something not within your contract, changes the project at the last minute or changes project pricing, you can refer the appropriate figures back to your surety bond. The state government cannot accuse you of defaulting or performing unsatisfactory work if the work was not delineated in your bond or contract.
In addition to a performance bond, you will also need a payment bond. A payment bond guarantees any subcontractors and material suppliers on your project will be paid. In the case of the Little Miller Act, payment bonds provide an alternative payment source to workers who did not have a direct contract with the original contractor.
State governments require payment bonds because they want to avoid leaving workers shortchanged. The absence of payment bonds leaves both the contractor and government workers vulnerable to litigation. In most cases, performance and payment bonds are required for all public works projects.
Little Miller Act Provisions
If a subcontractor or materials provider was not paid under the terms of a payment bond, or if performance bond terms were not met, the claimant must make a claim against the bond within a specified time frame. This is usually when the lien against a project goes into effect. This provision gives the original contractor time to work with the top-tier subcontractor on a resolution.
The Miller Act and corresponding Little Miller Acts are vital knowledge if you are a contractor or working in construction. They are designed to protect you and those working under you while you complete state-level projects.