the miller act
In the United States, the law requiring contract surety bonds on federal construction projects is known as The Miller Act.

This law requires a contractor on a federal project to post two bonds: a performance bond and a labor and material payment bond. The surety company issuing these bonds must be listed as a qualified surety on the Treasury List, which the U.S. Department of the Treasury issues each year.

The Miller Act (1935) provides that, before a contract that exceeds $100,000 in amount for the construction, alteration, or repair of any building or public work of the United States is awarded to any person, that person shall furnish the United States with the following:

1.) A performance bond in an amount that the contracting officer regards as adequate for the protection of the United States. The bond amount is normally 100 percent of the contract price.

2.) A separate payment bond for the protection of suppliers of labor and materials. The sum of the payment bond is equal to 50 percent of the contract price when the contract is less than $l-million and 40 percent when the contract is from 1-million to $5-million. Contracts in excess of $5-million require a payment bond in the amount of $2.5-million.

The Miller Act payment bond covers subcontractors and suppliers of material who have direct contracts with the prime contractor. These are called first-tier claimants. Subcontractors and material suppliers who have contracts with a subcontractor, but not those who have contracts with a supplier, are also covered and are called second-tier claimants.

Anyone further down the contract chain is considered too remote and cannot assert a claim against a Miller Act payment bond posted by the contractor.

A subcontractor or supplier who has a direct contract with the prime contractor has no duty to provide any notice to the prime contractor before filing a suit on the bond.

When the claimant is a second-tier subcontractor or material supplier, however, formal notice must be given to the prime contractor within 90 days of the last date the claimant furnished labor or materials for the project.

The final step in perfecting a claim on a payment bond is filing a lawsuit. For both first and second-tier claimants, suit must be filed no sooner than 90 days after the last labor and material were furnished and no later than one year after that date.

Many states in the U. S. have adapted the Miller Act for use at the state level. These state statutes are known as "Little Miller Acts. "