As in commercial settings, primes with government construction contracts will rely on various tiers of subcontractors to complete the work. Unlike in private projects, though, the payment protections of mechanics liens for suppliers do not exist. A lien cannot attach to government property. Instead, prime contractors are required to furnish bonds under the Miller Act. An unpaid subcontractor may sue the prime and its surety in federal court on the bond through a Miller Act cause of action. While many subs focus on perfecting their claims by filing suit within the prescribed time frame, a closer look at the issue whether a “Miller Act bond” is even present should be undertaken. Otherwise, no claim exists to file.
The Act does not explicitly mention that a bond is necessary to preserve a court's jurisdiction and therefore the ability of a sub to bring its claim. This means that some suppliers may believe they have a Miller Act cause of action simply because the work was undertaken on a federal construction project – irrespective of the existence of a bond. However, federal case law has established that a claim under the Miller Act cannot be maintained without one. Accordingly, if a prime has failed to obtain a Miller Act bond and does not pay its subcontractor, then the sub has no remedy under the statute, even if it performed covered work.
The more difficult question is what constitutes a proper bond to support a Miller Act claim. A subcontractor's right to sue for recovery under the Act is traditionally limited to the prime’s bond. Courts have interpreted the requirement in 40 U.S.C. §3131(b) that the bond be “furnish[ed] to the Government” to mean that a Miller Act bond must list the United States as the obligee for a claim to be actionable. Often in construction projects, subcontractors will secure payment bonds as well. For example, a second-tier-sub may obtain a bond as the principle with the first-tier sub as the obligee in order to protect those supplying materials or labor in furtherance of the work outlined in the subcontract. This type of bond is insufficient to support a Miller Act claim. The only bonds on a government project that are suitable for purposes of bringing a Miller Act case are those obtained by the prime contractor with the government as obligee. Thus, subcontractors excluded from the Miller Act framework cannot attempt to label a subcontractor payment bond as a Miller Act bond and reasonably expect to be able to maintain a claim.
In light of the foregoing, subcontractors who are eligible under the Miller Act will want to ensure that the prime has secured the requisite bond and that the government is identified as the obligee. And, subs will not want to make the mistake of thinking that simply because bonds exist on the project they will be considered “Miller Act bonds" sufficient to support a legal claim under the statute. An unpaid subcontractor will not want to hear the bad news from counsel, or worse yet from a judge on an unfavorable ruling on a motion to dismiss, that it cannot maintain a Miller Act cause of action because a proper bond is not in place.