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I. What is a Miller Act bond?

A. Miller Act recognizes that United States government has moral duty to protect parties furnishing materials and labor on government projects and encourages competitive bids for government projects

B. "Public Project"

1. Meaning liberally construed by Courts

2. Means construction or repair of any public building, highway, dam or ship financed by U.S. government funds

3. Borderline projects

a. Covered-Library at a federally funded college

b. Covered-property to be ceded to federal government

c. Not covered-low rent housing project federally funded but built by local housing authority

d. Not covered-interstate highway federally funded but contract let by state

C. Contract must be greater than $100,000--Bond requirement can be waived (or required on smaller contracts) by contracting officer

1. Bond can be waived by Secretary of Army, Navy, Air Force, Treasury and Commerce

2. Bond can be waived on construction and repair of merchant marine vessels

3. Contracting Officer cannot be liable for negligence by failing to require a bond

D. Actually is two bonds

1. Performance bond to benefit of US government

2. Payment bond to benefit materialmen, laborers and subcontractors (the bond which is the subject here)

II. Who can make a claim on a Miller Act bond?

A. Generally, party who is direct subcontractor or supplier for improvement of real estate or construction of a ship

B. But, only two classes of mechanic covered

1. Parties contracting directly with the prime contractor (the party who contracts with the federal government)

a. Subcontractors

b. Materialmen and laborers

2. Parties contracting directly with a subcontractor of the prime

a. "Subcontractor" not defined by Miller Act

b. United States Supreme Court defines "subcontractor" as a party to whom the prime contractor has delegated a specific part of its contract with the federal government

c. Examples

(1) Covered-Supplier to sub of prime

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(3) Not Covered-Supplier to supplier of prime

(4) Not Covered-Supplier to sub of sub to prime

III. What losses are protected by a Miller Act bond?

A. Limited to claims for the prime's (or subs) failure to pay for materials and labor used to perform prime contract

1. Standard of value is contractual value of labor or materials actually used on project

2. Examples

a. Cost of leased equipment and maintenance of it

b. Cost of authorized change orders

c. All material actually delivered to project which supplier believes will be used on it