For general contractors who commonly work on government projects, obtaining a surety bond should not be a new concept. Additionally, materials suppliers or specialty contractors may be familiar with the process of filing a bond claim for nonpayment, or if anything has gone awry on a government project.
Since the 1930s, there have been laws in place to regulate this process at the federal level and ensure these projects are completed. Now, all 50 U.S. states have adopted their own version of these laws to ensure that state-funded projects are also protected.
These state laws, known as Little Miller Acts, are also vital in protecting payments on public projects to suppliers and specialty contractors, especially because public projects are not subject to mechanics liens. Below we'll explore what Little Miller Acts are, what they may require, and how to determine what's mandated for public projects in your state.
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Let’s start with the Miller Act, which was passed in 1935 and applies to federally funded public works projects. It protects the federal government as well as first-tier subcontractors and suppliers by requiring general contractors to purchase performance and payment bonds on certain federally-funded projects.
These bonds protect the government from unfinished work and protect first-tier suppliers and subcontractors from nonpayment. If a subcontractor or supplier is not getting paid, they can typically file a claim against the payment bond on the project. The surety will investigate the claim and, if they deem it to be valid, pay the claimant.
The term "Little Miller Acts" refers to each state's version of the federal law. Though the statutes are not formally called "Little Miller Acts," many of them follow similar guidelines as the federal Miller Act.
Little Miller Acts prescribe the bonds that a general contractor must secure to work on state-owned government projects. Each state mandates its own Little Miller Act, so terms within each state’s laws often differ.
Although each state has its own set of laws regarding performance and payment bonds on state-funded projects, there are some similarities among them.
Each state mandates that the general contractor must purchase performance and payment bonds on state-funded public works projects. Usually, there is a baseline contract amount that has to be exceeded before bonds need to be purchased. For example: In Texas, bonds are required on projects over $25,000; in Nevada, the threshold is $100,000.
The value of the bonds also varies, as some states, like Alabama, only require a bond for 50% of the contract value. Requirements like these can make collecting difficult if you delay filing a claim. That’s why it’s always good to file as soon as possible.
Some states require subcontractors and suppliers to submit a preliminary notice before beginning work on a project. This notice may need to be sent to the owner and general contractor, and then possibly recorded with the county clerk. Failing to submit a preliminary notice when required may invalidate a party's right to file a bond claim.
If a first-tier supplier or subcontractor hasn’t been paid, they have a certain number of days after the project is completed to file a payment bond claim. The deadline to file varies by state and can be anywhere from 75 days to a year. If a claimant misses the deadline for filing a bond claim, the claim will likely be denied.
Each state sets its own bond requirements for public construction projects. The list below contains links to the relevant statute for each state.
