Miller Act Bonding Requirements: Complete Federal Contractor Guide 2025

Introduction

The Miller Act is the cornerstone of federal construction contract bonding requirements. Enacted in 1935, this federal law requires contractors on federal construction projects to provide performance and payment bonds, protecting both the government and subcontractors who cannot file mechanic's liens against federal property.

Understanding Miller Act requirements is essential for any contractor pursuing federal construction work. These bonding requirements affect project eligibility, cash flow, and risk management strategies for prime contractors and subcontractors alike.

This comprehensive guide covers everything you need to know about Miller Act bonding—from threshold requirements and bond types to obtaining coverage and filing claims.

Miller Act Quick Facts

Enacted: 1935 (40 U.S.C. § 3131-3134)
Threshold: Contracts exceeding $150,000
Bonds Required: Performance and payment bonds
Bond Amount: Typically 100% of contract value each
Protection: Subcontractors and suppliers who can't file liens

What is the Miller Act?

The Miller Act (40 U.S.C. § 3131-3134) is a federal law that requires contractors on federal construction projects to furnish performance and payment bonds. The law addresses a unique challenge in federal construction: subcontractors and suppliers cannot file mechanic's liens against federal property as they can with private projects.

Purpose of the Miller Act

Government Protection

Performance bonds guarantee project completion. If the prime contractor fails to complete the work, the surety must either complete the project or compensate the government for the cost of completion.

Subcontractor Protection

Payment bonds protect subcontractors and suppliers. Since they cannot file liens against federal property, the payment bond provides an alternative remedy for non-payment by the prime contractor.

Projects Covered by the Miller Act

The Miller Act applies to:

Construction, alteration, or repair of any public building or public work
Projects funded by federal agencies
Federal construction on federal property
Projects meeting the $150,000 threshold

What the Miller Act Does NOT Cover

State and local government projects (covered by Little Miller Acts)
Private construction projects
Federal contracts for services only (non-construction)
Federal contracts below $150,000

Threshold Requirements

The Miller Act applies different bonding requirements based on contract value. Understanding these thresholds helps contractors plan their bonding needs.

Contract Value	Performance Bond	Payment Bond
Under $35,000	Not required	Not required
$35,000 - $150,000	Agency discretion	Agency discretion
Over $150,000	Required (100%)	Required (100%)

Alternative Payment Protection

For contracts between $35,000 and $150,000, agencies may accept alternative payment protections in lieu of payment bonds:

Irrevocable letters of credit
Tripartite escrow agreements
Certificates of deposit
Accounts payable checks with co-payee designation

Important Threshold Considerations

The contract value for threshold determination includes the total anticipated value, including options. If contract modifications push the value over $150,000, bonding may be required retroactively.

Performance Bonds

Performance bonds guarantee that the contractor will complete the work according to contract specifications. This bond protects the federal government from contractor default.

Performance Bond Requirements

Amount: 100% of contract value (standard requirement)
Surety: Must be on Treasury Department's approved list
Duration: Remains in effect until project completion and acceptance
Form: Standard Form 25 (Performance Bond)

What Performance Bonds Cover

Completion of contract work per specifications
Correction of defective work during warranty period
Costs to complete if contractor defaults
Delay damages in some cases

Surety Options Upon Contractor Default

When a contractor defaults, the surety has several options:

Option	Description
Complete the Work	Surety arranges for project completion
Finance the Contractor	Provide funding to help contractor complete
Tender a New Contractor	Hire a replacement contractor
Pay the Bond Penalty	Pay up to bond amount to the government

Payment Bonds

Payment bonds protect subcontractors and suppliers by guaranteeing payment for labor and materials. This is particularly important in federal construction where mechanic's liens are not available.

Payment Bond Requirements

Amount: 100% of contract value (standard requirement)
Form: Standard Form 25A (Payment Bond)
Coverage: First and second-tier subcontractors and suppliers
Duration: Claims can be filed up to one year after last work performed

Who Can Claim Against a Payment Bond?

First-Tier Claimants (Direct Contract with Prime)

Subcontractors with direct contract with prime
Material suppliers to the prime contractor
No notice requirement before filing suit

Second-Tier Claimants (No Direct Contract with Prime)

Sub-subcontractors
Suppliers to first-tier subcontractors
Must provide written notice within 90 days of last work

Payment Bond Claim Timeline

Deadline	Requirement
90 Days	Second-tier claimants must provide written notice
1 Year	Lawsuit must be filed within one year of last work

Obtaining Miller Act Bonds

Securing Miller Act bonds requires working with a surety company approved by the U.S. Treasury Department. The process involves credit evaluation and underwriting similar to obtaining a loan.

Treasury Department Approval

All sureties providing Miller Act bonds must be listed on the Treasury Department's Circular 570, which lists approved sureties and their underwriting limits.

Factors Affecting Bond Approval

Financial Strength

Working capital and liquidity
Bank line of credit
Debt-to-equity ratio
Financial statement quality (CPA-prepared preferred)

Experience and Track Record

Years in business
Completed projects of similar size and scope
Past performance on bonded work
Management team experience

Character and Capacity

Personal credit of owners
Business reputation
Current workload and capacity
Equipment and personnel resources

Bond Costs

Bond premiums typically range from 1% to 3% of the contract value, depending on:

Contractor's financial strength and experience
Project size and complexity
Contract terms and risk factors
Surety company's underwriting standards

Filing Bond Claims

Subcontractors and suppliers who are not paid can file claims against the payment bond. Understanding the claims process is essential for protecting your rights.

Steps to File a Miller Act Claim

Step 1: Obtain Bond Information

Request a copy of the payment bond from the contracting officer. Federal agencies must provide this information upon written request.

Step 2: Provide Notice (Second-Tier Only)

If you don't have a direct contract with the prime contractor, send written notice within 90 days of your last work. Notice must include:

Amount claimed
Name of party for whom work was performed
Description of labor/materials provided

Step 3: File Lawsuit

If payment is not received, file suit in federal district court where the project is located. Lawsuit must be filed:

No earlier than 90 days after last work performed
No later than one year after last work performed

Important Claim Considerations

Claims must be for labor or materials actually furnished
Third-tier claimants generally cannot recover (too remote)
Lost profits typically not recoverable
Attorney's fees may be recoverable in some cases

Compliance Best Practices

Following best practices helps ensure smooth bonding processes and protects all parties in federal construction projects.

For Prime Contractors

Maintain strong financial statements (CPA-prepared)
Build relationships with multiple surety companies
Keep current on subcontractor and supplier payments
Document all project communications thoroughly
Notify surety immediately of potential problems
Maintain adequate working capital reserves

For Subcontractors and Suppliers

Obtain bond information at project start
Keep detailed records of work performed
Document payment applications and dates
Track 90-day notice deadlines carefully
Send preliminary notices even if not required
Consult with construction attorney for claims

Documentation to Maintain

Signed contracts and purchase orders
Delivery tickets and inspection reports
Daily logs and timesheets
Payment applications and invoices
Correspondence regarding payment
Lien waivers and releases

Frequently Asked Questions

What is the difference between Miller Act and Little Miller Acts?

The Miller Act applies to federal construction projects, while Little Miller Acts are state laws that impose similar bonding requirements on state and local government projects. Each state has its own version with varying thresholds and requirements.

Can a surety be held liable beyond the bond amount?

Generally, the surety's liability is capped at the bond penalty (face amount). However, in some cases involving bad faith or delayed payment, courts have awarded amounts exceeding the bond penalty for interest and damages.

What happens if the prime contractor goes bankrupt?

Subcontractors and suppliers can still pursue claims against the payment bond. The surety remains obligated regardless of the prime contractor's financial condition. Bond claims are separate from bankruptcy proceedings.

Are retention payments covered by the payment bond?

Yes, retainage is generally recoverable under a Miller Act payment bond. The claim period runs from when the retention becomes due, which is typically upon project completion or acceptance.

Can I require my subcontractors to provide bonds?

Yes, prime contractors often require subcontractors to provide their own performance and payment bonds, especially for larger subcontracts. This shifts risk and can provide additional protection.

Conclusion

The Miller Act provides essential protections for federal construction projects, ensuring project completion and payment security for subcontractors and suppliers. Understanding these bonding requirements is crucial for any contractor pursuing federal work.

Success in federal contracting requires maintaining strong financials to qualify for bonding, understanding your rights as a subcontractor or supplier, and following proper procedures for claims when necessary. Work with experienced surety professionals and construction attorneys to navigate complex situations.

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