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This blog was taken from a webinar presented by SunRay Construction Solutions and Alex Barthet. Alex is a board-certified construction lawyer who serves clients in Florida. We will discuss how to get paid on Florida state and federal projects.
What to File and When to Assert a Miller Act (Federal) Claim
Now we will discuss about the Miller Act and how it can be used on federal claims.
1. What is the Miller Act?
If you work on projects where the property is owned by the federal government, you may have a right to be paid under the Miller Act which is similar to the lien and bond claws in most states. What it allows you to do is make a claim against the bonded contractor to ensure that you get paid.
2. When does it apply?
Again, it applies to work by you on property that is owned by the federal government.
3. Are all jobs bonded?
Not all jobs are bonded so in order to get rights, the project has to be in excess of $100,000. Jobs on federal projects that are less than $100,000 are not likely bonded.
Step 1: Do I have rights under the Miller Act?
1. Who is protected?
The first thing you should understand is whether or not you have rights under the Miller Act.
2. Prime contractors must make a claim against the public entity
So, if you are the prime contractor, meaning that you have a contract with the federal government, your claim is against the public entity.
3. Who is able to make claims under the Miller Act?
If you have a contract with the prime contractor, your claim is against the prime contractor’s bond. So, you would be a first-tier subcontractor. If you are a material supplier to the prime contractor, you would have rights under the prime contractor’s payment bond under the Miller Act.
Second-tier subcontractors and material suppliers are able to make claims as well. So, a sub-subcontractor can make a claim, and material supplier to a subcontractor can make a claim as well.
So those that have contracts with subcontractors are entitled to make claims under the Miller Act. Once you determine that you do have rights under the Miller Act, the question is what do you do if you are a first-tier subcontractor, (meaning that you have a contract with the prime contractor)?
Step 2: Send the Miller Act Notice
1. First-tier subcontractors and material suppliers need not send notice
You need not send a Miller Act Notice or Notice of Nonpayment, but you should because it will allow the contractor to know that you intend to make a claim under their bond.
2. Second-tier subcontractors and material suppliers must send the Miller Act notice to the bonded prime contractor
Second-tier subcontractors and material suppliers to those prime contractors need to send a bond claim which is a Notice of Nonpayment within 90 days of their last work on the job. So, if you are a second-tier subcontractor or you are a material supplier to that subcontractor, you need to send this Notice of Nonpayment.
3. No supplier-to-supplier rights
Understand that there are no rights for suppliers to suppliers. If you have your supplier and you are providing materials to another supplier, you have no rights under the Miller Act. The Notice of Nonpayment must state the amount that you are owed at the time you make the claim as well. you should include who you contracted with, because that will give the contractor an opportunity to determine whether or not they have in fact paid that party.
Step 3: Send the Notice to Contractor
1. Service via certified mail, return receipt requested will suffice under the statute
Service is via certified mail and the return receipt is quested, because in order for you to determine whether or not you have made the claim you need to make sure you can prove that it was timely sent. While you may not get the green card back if it is rejected, proof that you attempted to serve it is critical.
2. Notice should be sent to the surety and the party you contracted with
You should send a copy of the Notice of Nonpayment to the surety and any other party that you contracted with.
Step 4: Send the Notice of Nonpayment
1. Those in privity with the bonded prime contractor need not send a Notice of Nonpayment
Filing suit is done no later than one year later, but interestingly, it cannot be done sooner than 90 days after your last work. As long as you are within that window you can file suit. Any claims after one year are automatically extinguished. But now we will talk about how to assert a claim against a public project in the state of Florida.
What to File and When to Assert a Florida Public Project Claim
Now we will talk about how to assert a claim against a public project in the state of Florida.
1. What is 255.05, the Florida public bonding statute?
In Florida, there is a statute that requires that jobs done on public property must be bonded.
2. What does it apply?
The threshold for those bond claims is projects in excess of $100,000.
3. Are all jobs bonded?
If the job is between $200,000 and 400,000 the municipality or governing agency can determine whether or not they want the bond on the job. Anything less than $200,000 does not need a bond.
4. FDOT rules are slightly different
Understand that the Florida Department of Transportation (FDOT) as their own statute that governs road building, and those rules are similar but slightly different to the rules that we are about to describe. So, do not assume that claims asserted under the FDOT for FDOT work are identical to what we are going to talk about.
Step 1: Do I Have Rights Under 255.05?
1. Who is protected?
First you need to determine whether or not you are protected under Chapter 255.05.
2. Prime contractors must make a claim against the public entity
Prime contractors or those who have a contract with the municipality or agency must bring a claim against those agencies directly.
3. First-tier subcontractors and material suppliers can make claims
First-tier subcontractors and material suppliers to prime contractors are able to make a claim under the prime contractor’s bond.
4. Second-tier subcontractors and material suppliers can make claims
Second-tier subcontractors and material suppliers can make claims as well. So those would be sub-subcontractors and material suppliers to subcontractors.
5. Suppliers to second-tier subcontractors can make claims
The last tier of folks that are entitled to make claims under 255.05 are suppliers to sub-subcontractors.
Step 2: Send the Notice to Contractor
So how do you prefect your rights under 250.505? The first step is to send what is called a Notice to Contractor. It is a preliminary notice similar to the Notice to Owner.
1. First-tier subcontractors and material suppliers need not send notice
First-tier subcontractors and material suppliers do not need to send this notice. That is, those who have a direct contract with the bonded contractor are not obligated to send this notice. However, we would highly encourage that you do that to let the contractor know that you intend to assert your rights.
2. Second-tier subcontractors and material suppliers must send notice
Second tier-subcontractors and material suppliers need to send this Notice to Contractor within 35 days of their first work or delivery of materials to the property. Understand that the bonded prime contractor knows about their first-tier subcontractors and material suppliers.
But for anyone beyond them, that is the purpose of sending the Notice to Contractor. Let them know that these folks are on the job. They are going to look to that bonded contractor’s bond in order to get paid.
3. Service via certified mail, return requested will suffice
As with the Miller Act, service is via certified mail and the return receipt is the most common and preferred method of getting service under the statute. And while it is not required it is strongly recommended that you send a copy of the Notice to Contractor to the surety and the party that you contract with.
If you use SunRay to do your notices whether it is a Notice to Owner or Notice to Contractor, we will make sure it gets to all the right people based on the information on the bond and that which is provided to.
Step 3: Send the Notice of Nonpayment
The third step in protecting your rights on a public project in the state of Florida is if you have a contract with the prime contractor.
1. Those in privity with the bonded prime contractor need not send a Notice of Nonpayment
You do not need to send a Notice of Nonpayment, but you should.
2. All other claimants must send the notice of Nonpayment to the bonded prime contractor
All other claimants must send the Notice of Nonpayment to the bonded prime contractor within 90 days of their last work.
In any instances, as an example for the Miller Act, even if you have a contract with the bonded prime contractor, you need to send this Notice of Nonpayment within 90 days but under chapter 255.05, even if you have not been paid in 90 days of your last work the Notice of Nonpayment is not required.
But we strongly encourage that you do send the Notice of Nonpayment within 90 days of your last work even if you have a contract with the bonded contractor.
Read more: How to get paid after sending a Notice of Nonpayment
3. The notice must state the amount due and who you contracted with
The notice must state the amount you are owed and who you contract with.
4. Service via certified mail and return receipt requested will suffice under the statute
Again, it must be sent via certified mail and return receipt requested will satisfy the requirements under the statute.
5. While not required, notice should also be sent to surety and party you are contracted with
Under the Miller Act, while is not required to send a copy to the surety, it is strongly recommended that you send a copy to them and anyone else that you are aware of on the project that is above you.
6. File suit on the claim
The last step is to file suit and you need to do that within one year of your last work or delivery of materials on the project.
If you have a claim solely for retainage, you are able to bring that claim later than one year. There are certain rules and notices that have to be provided but understand that if all you are owed is retainage, you have slightly longer than here from the last work. If you have a dollar of non-retainage amounts that are due whether it is change order or other-based contract work, then you need to bring the entire claim within one year of your last work.
Common Traps to Avoid
Now we will talk about some common traps that we see on a regular basis.
1. Do not wait until the last minute to send your notices or file suit
Do not wait until the last minute to send your notice or to file suit. It takes time for us at Sunray when we are hired to file the lawsuit, to prepare the paperwork, and get it filed and served.
Waiting until the 85th day is a problem because if you are going to send your notice, you should try to do it much sooner. Do not wait until a few days before the one-year expires. Give yourself and those that you work with ample time to process the paperwork.
2. Just because you have bond rights, don’t ignore other ways to limit your credit risk
Just because you have bond rights, does not mean that you should ignore the other ways to limit your credit risk. So, if you are a supply house, even if you have bond rights to the extent that this job and the party you are contracting with, can provide other security, should do that. As an example, material suppliers may routinely get personal guaranties or other types of guarantees in order to sell on credit.
For subcontractors in construction, what we recommend in order to overcome certain credit risks is inserting in your contracts the ability to limit the right or obligation to continue working if you have not been paid. This occurs primarily with pay-when-paid issues but if you are not being paid on the job, you have to continue. That could be tremendously problematic.
So, if you can include in your contract the right to stop work or slow work if you have not been paid, that can go a long way to limiting your credit risk.
3. Look for subcontractor bonds
Finally, look for subcontractor bonds. So as an example, if you are a subcontractor on a state or federal project, in addition to the rights that you may have against the bonded prime contractor, if the party that you have a contractor with (subcontractor) also got a payment and performance bond, which is not uncommon, you would have rights under that bond as well.
The party that will likely let you know whether or not that subcontractor that you have a contract with has a bond, is the bonded prime contractor. The reason is that they would prefer that if there was an issue that you would pull after subcontractor’s bond route rather than theirs.
In order to perfect your rights against the subcontractor’s bond, you need to get a copy of it and ensure that you comply with the notice requirements that are in terms of that payment bond that the subcontractor has.
