June 8, 2018

Construction Alert: No Liens on Land Owned by the Federal Government - How to Ensure You Still Get Paid

Preti Flaherty Construction Alert

Unpaid subcontractors and suppliers typically can file a mechanic’s lien against a project on public land when they are not paid.  When done correctly, the lien will attach to the property, and protect the unpaid party’s interests.  When the Federal Government owns the property, there is no legal right to file a mechanic’s lien.  However, there is still a remedy under federal law at 40 U.S.C. § 3131, et seq., which is more commonly known as the Miller Act.  The Miller Act requests that before any construction contract exceeding $100,000 is awarded by the Federal Government, the prime contractor must furnish to the Government a performance bond and a payment bond, which become binding when the contract is awarded (note that the corresponding Federal regulations set a benchmark of $150,000 before both bonds are required).

The performance bond protects the Government in the event of abandonment or nonperformance by the contractor.  The payment bond, on the other hand, protects subcontractors and suppliers.  If the prime contractor is not paid by the Government for the job, it cannot recover under its own payment bond, but may have a contract related claim against the Federal Government.

Under the Miller Act, first-tier subcontractors and material suppliers who have entered into a contract with the prime contractor can sue the surety on the payment bond if not paid in full within 90 days after the last day in which they performed labor or furnished materials for which the claim is being made.  Any lawsuit must be filed within one year from the last date that materials or services were provided.  A Miller Act Notice (see below) is not required.

Any party that has entered into a contract with a first-tier subcontractor, such as second-tier subcontractors and material suppliers to first-tier subcontractors, must deliver a Miller Act Notice to the prime contractor.  There are strict requirements for the Miller Act Notice, including that it must:

  • Be sent within 90 days from the last furnishing of labor and/or materials;
  • Be in writing;
  • State with substantial accuracy the amount owed,
  • Name the party to or from whom the labor or material was furnished; and
  • Be delivered by any means that provides written verification of delivery or by any means by which the United States marshal of the district in which the project is located may serve the summonses. 
  • Additionally, any lawsuit must be filed within one year from the last date that materials or services were provided. 

The Miller Act does not provide any protection for subcontractors below second-tier subcontractors/suppliers.  Instead, their remedy is a lawsuit against the party they contracted with.

If a party hasn’t been paid on a Federal project, it can obtain a copy of the bond and contract by sending an affidavit to the contracting agency confirming your role in the project.  Many states have passed “Little Miller Acts” which require contractors post similar performance and payments bonds for any state construction projects.

Firm Highlights


NH Gov. Sununu Issues Stay-At-Home Order - Construction Considered Essential Industry

Yesterday, in response to the COVID-19 outbreak, New Hampshire Governor Chris Sununu issued an emergency order shuttering all non-essential businesses in the state effective today. This morning, the governor's office released a list of...


Litigation and Arbitration Venue Provisions in Construction Contracts: When and How They Work

Venue and choice-of-law provisions are fairly standard in construction contacts, but can be overlooked due to their location within a contract. When drafted effectively, these provisions can help limit uncertainty about where and how...


Lien Waivers: Understanding the Risks in a Common Form

Lien waivers assure owners that once payment has been made to a contractor, or subcontractor, that contractor cannot obtain a mechanics' lien for that money at a later time. In this article for  Construction Executive , Kenneth...


Owner's Guide to Mitigating COVID-19 Risks in the AIA A201-2017 General Conditions

While the AIA A201-2017 is generally a well-understood contract, COVID-19 presents new logistical and economic risks that can leave owners at risk unless edits are made. This guide focuses on changes to the AIA...


Contractor's Guide to Mitigating Risks in the AIA A201-2017 General Conditions

The AIA A201-2017 is generally a well-understood contract document and is used in a significant number of construction projects each year. While this standard contract covers most risks, there are a number of areas...


Construction Alert: Gov. Baker Clarifies Massachusetts Construction Requirements and Possible Future Impacts for New Hampshire

The state of construction in Massachusetts continues to evolve as Governor Baker issued another order yesterday tightening  the list of types of construction that are allowed to proceed  as "essential services." Under the new...


Preti Flaherty COVID-19 Resources

In response to the ongoing COVID-19 pandemic, Preti Flaherty's attorneys have maintained a constant stream of the most up-to-date information and resources for our clients, business partners, and others struggling to navigate these complex...


Contractor's Guide to Mitigating COVID-19 Risks in the AIA A201-2017 General Conditions

The COVID-19 pandemic has presented new risks and challenges that will affect construction projects for years to come. This business level summary provides specific recommended edits that contractors and construction managers should consider when using...


The Moving Finish Line: Statutes of Limitation and Repose Are Not Always What They Seem

Having an end date for risk is important to construction professionals who need to know when they can close their books and destroy files relating to old projects. In this article for  Construction Executive...


COVID-19 and Contractual Non-Performance

Managing Risk on Existing Projects In contractual relationships extreme events may occur through no fault of the impacted party, temporarily inhibiting or completely preventing performance. During this pandemic, the inability of businesses to provide...