In November 2021, the Infrastructure Investment and Jobs Act became law, closed a protection gap for public-private projects, and broadened protections for many transportation projects.
A section of the law includes an amendment requiring payment and performance security on all federally financed infrastructure projects receiving TIFIA loans and grants. This amendment extends protections for P3 projects, when the federal government is not a named party to the contract. This amendment also broadens the bonding requirements and related protections by extending the Federal Miller Act to state-level projects where the involvement of the federal government is only by providing at least some of the project funding.
Since 1935 the Federal Miller Act has applied in some form to protect payments to laborers and suppliers “for the construction, alteration, or repair of any public building or public work of the Federal Government.” Before that, the Federal Heard Act provided similar protections. Historically, federal funding alone is not enough for protection under the Federal Miller Act—the federal government must be a party to the contract, and transportation projects are not necessarily covered.
Ostensibly, the Federal Miller Act provided protection for “all persons supplying labor and material in carrying out the work provided for in the contract.” From this, there seems to be no boundaries to protection. In application, however, there are only two protected groups: (1) subs and suppliers contracting directly with the prime and (2) suppliers and subs to the first-tier labor subs. All lower-tier subs or suppliers are not protected by the Federal Miller Act.
Following the federal model, each state enacted payment protections for public contractors and suppliers by adopting so-called “Little” Miller Acts, many of which provide nearly identical protections as the Federal Miller Act. But some Little Miller Acts provide broader protections by extending coverage to lower-tier suppliers and subs. And some Little Miller Acts are narrower by conditioning protection only upon timely written notice.
Now enters the new act expanding protections. Although not yet a problem, the new act could create confusion if both the Federal Miller Act and the state’s Little Miller Act apply. For example, one act may require a written notice as a condition to protection while the other act does not. In that instance, it is almost always better to timely provide the written notice and not need it than not provide it and later find it was required. Notice can be an easy problem to solve before time expires.
A bit bigger problem could arise when both acts apply but one extends protection farther downstream than the other. Though not insurmountable, this problem could be tricky to navigate. If the Federal Act applies, then it could supersede a broader State Act, which could cut off protection to lower tiers that would otherwise be protected under just the State Act. Courts tend to liberally apply payment protections. So, unless the Federal Act expressly trumps the State Act, the broader protections of the State Act would more likely apply. The pathway is uncertain, but time will tell.
Regardless of these potential problems, timing is still key in perfecting rights under either the federal or various state versions of the act. Generally, any claimant without a contract directly with the prime contractor must give notice within 90 days of the claimant’s last day of work, and any subsequent lawsuits must be filed within one year of the claimant’s last day of work. But not all “work” is created equally. For calculating deadlines, “work” typically means original or changed/extra scope. Some jurisdictions include corrective, punch list, or even administrative efforts as “work.” With very few exceptions, warranty work is not covered “work.” These are just a few of the statutory deadlines and definitions.
The statutes require the provision of the bond, which may have additional deadlines and notice requirements. The biggest problem can be that the bond terms and deadlines are not known to the downstream suppliers. Although provided by the prime contractor for the protection of payments to subs and suppliers, those lower tiers may not have a copy of the bond, and so may not know the hoops through which they must jump to receive the intended protections. Under the Federal Act, upon written request from the potential claimant, the federal government must provide a copy of the bond. Some state-level acts provide a similar statutory mechanism, but most do not. Instead, a potential claimant could request the bond information through state-level freedom of information acts (FOIA).
Principals: The risk of uncertainty may have just increased. Claimants: Don’t wait too long.