Payment Bonds and Miller Act Claims on Public Projects

On a private job, an unpaid subcontractor's leverage is the mechanics' lien: a claim against the building itself. On public work that remedy disappears, because government property cannot be liened. Congress replaced it with a bond. Before a covered federal construction contract is awarded, the prime contractor must furnish a payment bond, and those supplying labour or materials claim against the surety instead of the land.

The bond reaches parties who never contracted with the government and is backed by a surety with real money. But it is fenced by two short deadlines and a coverage rule about contractual tiers, and claimants lose on those more often than on the merits.

The federal framework

The requirement sits at 40 U.S.C. § 3131: before a contract above a stated dollar threshold is awarded for the construction, alteration, or repair of a public building or public work of the federal government, the contractor must furnish both a performance bond, protecting the government, and a payment bond, protecting those who supply labour and materials. The statute as enacted sets that threshold at $100,000; federal acquisition regulations layer alternative payment protections onto smaller construction contracts, and the regulatory figures are adjusted periodically. Confirm the current thresholds against the operative regulation rather than relying on a remembered number.

Two features are easy to miss. The payment bond runs to the claimants, not to the government — the suit is brought in the name of the United States for the use of the claimant, but the government is not a party in interest. And a claimant is entitled to obtain a copy of the bond from the contracting agency on request, supported by an affidavit that it supplied labour or materials and has not been paid. That request should be made early, because the bond identifies the surety, the penal sum, and the exact obligee language the claim will be tested against.

The two clocks that decide the case

1. Day 0 — the claimant's last labour or material

   Every federal deadline runs from this date, and it belongs to the claimant, not the project. Substantial completion, final acceptance, and the date of the last unpaid invoice are irrelevant to the calculation. Punch-list work and warranty repairs frequently do not restart it.

2. Within 90 days — written notice, second-tier claimants

   A claimant with no direct contract with the prime must give the prime written notice stating with substantial accuracy the amount claimed and the party to whom the labour or material was furnished. Delivery must be by a method producing written third-party verification, or in the manner a marshal serves a summons. Send it to an office where the prime does business.

3. After 90 days — the earliest filing date

   Suit on the bond may not be commenced until 90 days after the claimant's last labour or material. Filing early is its own defect.

4. Within one year — file suit

   The action must be brought no later than one year after the day the claimant last performed labour or supplied material. This is the deadline that ends most claims, and negotiations with the prime or the surety do not stop it.

5. Where — the district of performance

   Suit is brought in the United States district court for a district in which the contract was to be performed and executed, regardless of the amount in controversy.

Deadline discipline: the one-year period is not tolled by a surety's request for documentation, by a promise to review the claim, or by ongoing settlement talks. Where the deadline is close and the parties genuinely want to negotiate, the correct move is a written tolling agreement signed by the surety, or filing the complaint and holding service.

Protecting the claim before it is filed

• Signed away in a pay application. Waivers appear in routine lien and bond release forms. The federal statute restricts them: a waiver of the right to sue on the payment bond is void unless it is in writing, signed by the claimant, and executed after the claimant has furnished the labour or material. Read every release before signing and reserve pending claims expressly, as discussed in construction change orders.
• Mischaracterised tier. If the party you contracted with is treated as a supplier rather than a subcontractor, you may be a remote claimant outside the bond. Understanding the contracting chain at bid time, not at default, is what allows the risk to be priced or refused.
• Unproved last-furnishing date. Undated delivery tickets, unsigned daily reports, and invoices issued in batches make the single most important date in the case contestable. Sureties routinely attack it, because moving it by weeks can extinguish the claim.
• Change-order work outside the bonded scope. Extra work directed informally, then disputed, may be argued to fall outside the contract the bond secured. The doctrine of constructive change and contemporaneous documentation carry that argument.
• Indemnity running the other way. A general indemnity agreement signed with the surety by the prime and its principals means the surety will pursue them for whatever it pays. The scope of that indemnification and any collateral demand is negotiated when the bond is issued, not when a claim arrives.
• Dispute-resolution mismatch. A subcontract arbitration clause may require the underlying payment dispute to be arbitrated while the bond suit is stayed. An arbitral award in that proceeding will usually drive the bond outcome, so the forum question deserves attention early.
• Settling with the wrong party. A release given to the prime can, depending on its wording, discharge the surety as well. Releases should be drafted to preserve claims against non-settling parties — see settlement agreements and releases.

State work: the Little Miller Acts

Every state has enacted a bond statute for public work, and they are collectively called Little Miller Acts because they follow the federal architecture. They do not follow the federal numbers. Thresholds for when a bond is required, whether preliminary notice must be given at the start of work as well as after the last work, the length of the notice period, the length of the limitation period, and the court in which suit must be brought all vary. Some states require notice to the public owner as well as to the prime; some run the suit deadline from project completion or from acceptance rather than from the claimant's own last work; some cover parties the federal act does not.

The practical rule is simple: identify the public owner first — federal agency, state agency, county, city, school district, transit authority, or special district — because that identification selects the statute, and the statute selects every date in the file. Work for a quasi-public authority or on a project funded through a federal housing programme administered by HUD may sit in an awkward middle category where the ownership of the land, rather than the source of the funds, determines whether lien rights exist at all.

On mixed or privately owned but publicly financed projects, lien rights may survive alongside a bond. Where they do, an unreleased mechanics' lien becomes a recorded encumbrance affecting the title — the mechanics of which are covered in title insurance and surveys and in the policy forms published by ALTA.

Questions the desk gets

We are a first-tier subcontractor. Do we still have to send the 90-day notice?

Under the federal act, the written notice requirement applies to claimants without a direct contractual relationship with the prime. A first-tier subcontractor is not in that group. That said, sending a clear written demand costs nothing, removes any argument about tier, and starts the documentary record the surety will eventually review. The one-year filing deadline applies to first-tier claimants exactly as it does to everyone else.

Our subcontract says we get paid only if the owner pays the prime. Does that block the bond claim?

Generally it should not. Courts have been reluctant to treat an ordinary payment-timing clause as extinguishing the statutory bond right, and the federal act's restrictions on waivers limit how far a subcontract can go. But drafting matters, and a clause that expressly and knowingly waives the bond right, signed after the work was furnished, is a different case. Treat the answer as contract-specific rather than settled.

Can we recover delay and disruption costs from the payment bond?

Sometimes, and less predictably than direct labour and material costs. The bond secures sums due for labour and materials furnished in prosecution of the work, and courts differ on how far consequential, delay, and lost-productivity amounts fit that description. Amounts that are clearly attributable to performing the work, and that the subcontract itself makes recoverable, travel better than broad disruption claims built after the fact.

We missed the one-year deadline. Is anything left?

The bond claim is likely gone, but the underlying contract claim against the party that hired you is not necessarily. State limitation periods for breach of contract are far longer, and claims for unjust enrichment or under prompt-payment statutes may also remain. What is lost is the surety's balance sheet, which is usually the reason the claim was worth pursuing. This is why the date is calendared on the day the last work is performed.

Sequencing the work

At bid: confirm whether the project is public and which government owns it, request the bond, identify the surety, and map your position in the contracting chain in writing.

During performance: date and sign every delivery ticket and daily report, invoice on a regular cycle, and reserve disputed amounts on each pay application rather than signing an unqualified release. If work stops, record the actual last day on site — that single date sets both deadlines.

On non-payment: send written notice immediately even if you believe you are first-tier, calendar the one-year date the same day, and demand the bond from the contracting officer. Then decide the forum, taking account of any arbitration clause in the subcontract. Where the project also involves entitlement obligations or public financing conditions, the approval-stage commitments described in development agreements and impact fees may explain who actually controls payment. Related work sits on the property and development desk.