Law360 recently reported on a newly-filed case in the U.S. District Court for the Southern District of Texas where a lower-tier subcontractor sued the project owner for non-payment, bypassing the subcontractor with whom it had contracted.
While the complaint does not appear to be related to government contracting, it nevertheless made me think about similar situations when the government is the owner. Specifically, can a second-tier subcontractor sue the government when it is not being paid under its subcontract with the prime?
The short answer is no, as there is no privity of contract between the sub and the government. And, the subcontractor cannot place a lien on a government project like in a traditional commercial setting. Because the sub cannot use a lien against a government owner as a mechanism for redress, the government enacted the Miller Act as a protective measure for non-payment of subcontractors by their primes.
When a government contract is covered by the Miller Act, a subcontractor who has not been paid can sue the prime contractor for various common law claims, but it can also sue the prime’s surety on behalf of the United States under the Miller Act (after the claim has been perfected). Through the Miller Act, the government provides an additional defendant from which a subcontractor can seek recovery. The surety is, in effect, a stand-in for the owner.
**Note: Law360 is a subscription service. If you are a member, the article is titled “Acciona Accused Of Owing $2M For Texas Wind Farm Work.” The case is Drill Tech Drilling & Shoring Inc. v. Acciona Energy USA Global LLC et al., case number 1:21-cv-00171, in the U.S. District Court for the Southern District of Texas, Brownsville Division.
Our government contracts posts are published by Attorney Kristi Morgan Aronica. She serves as litigation counsel to prime contractors and subcontractors in the government contracts market throughout Texas and nationally.