Performance and Payment Bonds for Miller Act
The Miller Act has two concerns in regards to doing Federal government construction projects. That is that they must have payment and performance bond on each contract that is issued by the federal government.
The government has made it mandatory that all jobs have performance bonds because a contractors abandonment or other non-performance of the contract may cause critical delays for the jobs. They fell that this just adds additional cost to to the government contracts that needs to be covered by the contractor or the bonding company. The federal government fells that this weeds out all of the irresponsible contractors and helps defray the additional cost to the project.The Miller Act also allows the bonding company to sue for right of indemnification for non-performance.
If is was not for the Miller Act then subcontractors and material suppliers would not work on federal projects knowing that the sovereign immunity prevents the establishment of a mechanic’s lien. Without this act the this would decrease the competition and drive up the cost of bonding for federal projects.
Contracts to which the Miller Act does apply
The contact is for any federal government job which includes the alteration or repair or any public building or public work that is done by the federal government. The Miller Act requires that each job that is over 100,000 dollars is required to have a bond in force in order to do the job. However, the federal regulation or FAR only required that it be over 150,000 dollars.The act also requires FAR(Federal Acquisition Regulation) to established alternative payment protection for jobs from 30,000 dollars up to 150,000 dollars.That regulation is determined by the project manager of the contract. The Miller Act only applies to federal ,stated and public work throughout the country.
Must post a Performance before the job is awarded
Prior to the awarding of any government project the contractor must furnish a performance bond that is adequate and issued by a company that is acceptable to the contracting officer of the government project.
Must post a Payment Bond Before the Job is awarded
The contractor must also post a payment bond that satisfactory to the project manager for the protection of all supplies and material cost that are associated with the job.
The enforcement of the Miller Act how allowed the subcontractors or material suppliers to file a civil action. The time period is 90 days after they have furnished labor or materials on the job. The civil action must be against the payment and performance bond. The indemnification to the bonding company must come from the contractors assets if necessary. They only have one year to file a civil action claim against the performance and payment bond, after that it is null and void.