A Guide to the Miller Act & Little Miller Acts: Surety Bonds for Public Construction Projects

For public construction projects funded by the federal, state, or local governments, the Miller Act and Little Miller Acts are critical in ensuring contractors meet their obligations. This guide explains the Miller Act, Little Miller Acts, their requirements, and their impact on the surety industry.

What is the Miller Act?

The Miller Act, enacted in 1935, is a federal law requiring contractors on federal construction projects exceeding $100,000 to obtain performance and payment bonds. These bonds protect project owners, subcontractors, and suppliers involved in federal public works projects.

Key Features of the Miller Act:

1. Performance Bond: Guarantees the contractor will complete the project as specified. If the contractor defaults, the surety ensures completion, either by finding a replacement contractor or covering the costs.
2. Payment Bond: Protects subcontractors, suppliers, and laborers by guaranteeing they are paid for their work and materials. Unpaid parties covered by the Miller Act can file claims against the bond to recover costs.
3. Claim Rights: Subcontractors and suppliers can file a claim on the payment bond if they are unpaid, ensuring financial protection if the contractor defaults.

Why the Miller Act Matters:

• Protection for Subcontractors and Suppliers: Ensures that workers and suppliers are paid for their contributions to federal projects.
• Risk Management for Project Owners: The performance bond provides financial protection if a contractor fails to finish the project.

What Are the Little Miller Acts?

The Little Miller Acts are state laws that mirror the federal Miller Act, requiring performance and payment bonds for state and local government construction projects. Each state may have its own version of the Little Miller Act, but the core requirements remain consistent: contractors must provide these bonds to protect subcontractors, suppliers, and project owners.

Key Features of the Little Miller Acts:

1. State & Local Project Coverage: These acts apply to public construction projects funded by state or local governments, including schools, highways, and bridges.
2. Bond Requirements: Contractors must secure performance and payment bonds for projects exceeding a certain value, as defined by each state.
3. Protection for Subcontractors and Suppliers: Like the Miller Act, these laws protect certain subcontractors and suppliers by allowing them to claim against payment bonds if the contractor defaults.
4. State Variability: Each state has different thresholds for bonding requirements and claims processes, including notice and time requirements, requiring contractors to familiarize themselves with specific state rules.

Why the Little Miller Acts Matter:

• Expanded Coverage: These laws extend bonding requirements to smaller-scale public works projects at the state and local levels.
• Security for Subcontractors: Subcontractors and suppliers can rely on payment bonds for recovery if a contractor defaults.

How Do the Miller Act and Little Miller Acts Affect the Surety Industry?

The Miller Act and Little Miller Acts create a steady demand for surety bonds in the public sector, ensuring that contractors are financially responsible and complete projects as promised while protecting subcontractors and suppliers. Here's how these acts impact the surety industry:

1. Bonding Requirements for Public Projects
   Both the Miller Act and Little Miller Acts mandate performance and payment bonds for public projects, creating a consistent market demand for surety services.
2. Risk Management & Underwriting
   Sureties assess the financial stability and reliability of contractors before issuing bonds. Effective underwriting minimizes risk and ensures contractors can meet obligations.
3. Claim Exposure and Liability
   If a contractor defaults, the surety may need to step in to complete the project or pay claims. This liability underscores the importance of thorough contractor evaluation.
4. Opportunities for Sureties
   The Miller Act and Little Miller Acts provide surety companies with opportunities to serve a wide range of public construction projects, from large federal to smaller state and local projects.

Conclusion

The Miller Act and Little Miller Acts are essential in ensuring public construction projects are completed on time and within budget while protecting all parties involved. These laws require contractors to obtain performance and payment bonds, offering security for project owners, subcontractors, and suppliers. For the surety industry, they create ongoing demand for bonding services and provide opportunities across various public projects.

Understanding the Miller Act and Little Miller Acts is crucial for contractors, subcontractors, and suppliers navigating public construction. If you're seeking bonding solutions or looking to expand your portfolio in public works, these laws guide your approach to bonding.

How do I get a Surety Bond?

Surety bonds are issued by Merchants Bonding Company through insurance agents. Contact your local insurance agent or use our Find an Agent tool. They will guide you through the process, informing you of what documents and information are needed by Merchants to underwrite your bond.

All information provided is subject to change.