Protect Yourselves, Know the Miller Act!
In this blog, we’ll talk about the Miller Act and how all federal contractors need to know about this in order to protect ourselves in dealing with government contracts.
THE MILLER ACT
The Miller Act is a provision under U.S.C. Chapter 31 which helps protect contractors from non-payment of supplies and/or labor when working on federal contracts.
This Act requires prime contractors who get federal contractors put bonds on the job. A bond is a form of insurance policy that provides protection for all federal contractors because as you may or may not know, you cannot sue the federal government for non-payment.
The good thing is the Miller Act helps you out of this problem because it requires prime contractors to give a bond to ensure protection for the little guys out there.
Still, keep in mind that you must comply and meet the requirements. This means that if 90 days after the job and you were not paid yet, then you should file a claim. Consider that you only have up to one year to file that claim.
If you meet all those provisions, then you are due your money.
KEEP MIND OF WHAT TIER YOU FALL INTO
However, the bad side of the Miller Act provision is that it only provides protection to the first-tier and second-tier subcontractors. It does not provide protection if you fall outside of that window.
To give you a visual idea, when the federal government gives a contract to a company, this company is considered a prime.
However, most primes can’t do all of the job alone, so they hire a subcontractor to do some parts of the contract. These subcontractors are considered first-tier.
Now, if this subcontractor hires another company to work under them, this company will then be considered a second-tier subcontractor.
And if that second-tier subcontractor hires you for a portion of their contract, then you’re considered a third-tier subcontractor.
However, no matter how huge that contract is, you’re still a third-tier subcontractor. You have no remedies for ensuring that that person who hired you will pay you.
Naturally, you could sue them, if you’ve got the money and the resources. However, there’s no protection and there’s no provisions in the law that govern that. So now, you would have to sue them at your own expense.
Now, let’s assume that you try to complain to someone at the top, they’re going to read this law to you. They’re going to reference this particular section in the law that talks about bonds, what’s formally known as the Miller Act.
“If you’re out there and you’re operating in the auspice of the government. When you’re out there and you’re operating and you’re excited, know what position you are in on a contract. Know how close you are to the actual contract holder, so that way you can ensure you’re protected.”
MY PERSONAL STORY
To tell you the truth, I also have a story of how this Act affected me. This job was actually in Texas where we’re building a border patrol station and the first-tier subcontractor hired me and then I became a second-tier subcontractor.
Well, I got my equipment from H&E, which provided equipment for the job, because I don’t own all the machines and equipment for the job. So, H&E then became a third-tier to me.
Guess what happens? Well, the second guy who had the contract decided not to pay me because he failed to do something on his part. It then left me in a position where I could not pay H&E and H&E had no recourse to pursue the actual prime contractor or the government or the other guy for that matter.
Now, the good thing about that, for me at least, was because H&E was a much larger entity than myself and they had the power and money to hire an attorney to sue the first-tier subcontractor.
I just gave them all of the information. They read my contract and they also read the contract of the person who hired me. And they were able to sue the first-tier subcontractor and get the money that was due to them in that case.
So, in my particular situation, it worked out great, but it doesn’t always end up like that. That’s why I’m giving you this information.
“The more information that you know, the more you’re aware, then you can take precautionary efforts in place when you’re working with some of these companies. Maybe you could do things like ask for some money up front, maybe you can ask for a smaller window in terms of being paid. Whatever steps that you need to take to protect yourselves, I want to inform and educate everyone out there, so that you can take those necessary steps.”
With this in mind, if you want to learn more about doing business with the government, then join us here at GovCon Giants.
Just visit our website and other social media platforms or check the new GovCon Edu where you learn everything about government contracting!
You can also check these resources below:
All contractors of government jobs MUST watch this video. Miller Act.