Although there are remedies to collect what is owed on a private or public works project, when a party is not paid after providing work to a federal project, it only has the right to file a claim against the payment or construction bond. This is known as the Miller Act Bond.
When we think of the two words “payment bond”, security or collateral comes to mind, doesn’t it? Unfortunately and occasionally, a problem will arise when there is no bond to claim against.
One instance is when a particular project cost may be too low and does not meet the minimum bond requirement. Before any contract of more than $100,000 is awarded on a Federal Government project, the entity must furnish a payment and performance bond to the government. These bonds become binding when the contract is awarded.
Another example, and this is very rare, is when the party obligated to get the bond does not provide it, which is contrary to the law. If this happens, one’s initial reaction is to wonder whether a lawsuit against the government entity can be filed for its negligence in assuring that the appropriate bond was filed. The conventional rule is that the government still may not be held liable for failing to ensure that the proper bond was in place.
Cummins & White is currently representing a client who supplied materials to a Federal project in Arizona. We have called everyone associated with this project, including the US Army Corps of Engineers to try to obtain the payment bond information, as well as a copy of the payment bond. We know that the project contracted for more than the required $100,000, but apparently it was decided that the project didn’t require a bond because it wasn’t the type of work that fell under the Miller Act provisions. At least that’s what we are being told. We beg to differ.
There is no message here other than to send good wishes that you never experience any conflict such as the one stated above. You will, sadly, be out of luck in trying to collect any monies owed you through the payment bond process and will have no other recourse than to go after the entity that actually owes you the money.