Miller Act

In 1935, Congress passed the Miller Act.  The Miller Act requires performance and payment bonds for any construction contract over $100,000.  Performance bonds ensure that a contractor fufills its obligations after contract award.  Payment bonds protect suppliers of services or material. 

The primary purpose of the Miller Act is to protect subcontractors who supply material and labor to federal public works projects.  The Miller Act does so by providing an alternate remedy to the assertion of mechanics liens.  Under the Miller Act, the principal or general contractor must provide a standard payment bond (sometimes erroneously referred to as a performance bond) on every federal contract. This provides an alternative source of payment for those supplying materials or services to a federal public project.

All federal, state, and municipal construction contracts over a specified dollar amount require posting a payment bond. Posting the bond eliminates the supplier's right to impose a mechanics lien on the job in the event of nonpayment. Payment bonds are governed by federal or state statutes.  With few exceptions, all federal public construction projects are subject to the provisions of the Miller Act. It sets forth in detail the terms and conditions with respect to bonds for federal public projects. Although the statute is detailed in certain areas, case law has developed with respect to the interpretation of not only the detailed provisions, but also those areas found to be incomplete or ambiguous by the courts.

(Source: Manual of Credit and Commercial Laws, edited by Charles M. Tatelbaum and John K. Pearson)