- In general, there are three situations where a payment bond may be waived under the Miller Act:
FOREIGN The Contracting Officer may waive the requirement for a bond for contracts to be performed in a foreign country (See 40 U.S.C. § 3131 (d) ).
MILITARY The Secretaries of the Army, Navy and Air Force, can waive the requirement for a payment bond on certain cost-plus contracts. (See 40 U.S.C. § 3134(a)).
TRANSPORTATION The Secretary of the Dept. of Transportation can waive the requirement for a payment bond on certain cost-plus contracts. (See 40 U.S.C. § 3134(a)) and certain contracts relating to construction, alteration, etc., of vessels under the Merchant Marine Act. (See 40 U.S.C. § 3134 (b)).
- Public-private partnerships (P3s) raise concerns for subcontractors and suppliers regarding payment assurances. The "blending" of private and public financing and ownership of construction and real estate poses unique risks for subcontractors and suppliers, who cannot file mechanic's liens on projects where the federal government owns the land. At the same time, subcontractors and suppliers don't have the assurances of payment bonds when P3s are privately owned or financed. On such projects, no Miller Act bond is required.
- Federal bond statute requiring a payment and performance bond on all projects over $100,000. 'Before any contract of more than $100,000 is awarded for the construction, alteration, or repair of any public building or public work of the Federal Government, a person must furnish to the Government the following bonds, which become binding when the contract is awarded: (1) Performance bond. (2) Payment bond.' -Miller Act 40 U.S.C. § 3131 The bond must be with an approved surety company. Listing of Approved Sureties: (This list is also known as the Circular 570.) https://fiscal.treasury.gov/surety-bonds/circular-570.html
- The Miller Act notice must state with "substantial accuracy" the amount sought and the name of the party to whom the labor or material was provided.
- The Miller Act does not discuss contingent payment clauses. The Prompt Pay Act [31 U.S.C. § 3901 et seq.] does not require payment to a sub until 7 days after a prime receives payment from the agency. As such, the best practice is to assume pay-if-paid clauses are enforceable and might waive bond rights.
- Contractors must post two bonds, a performance bond and a material payment bond, when working on federal projects. Only qualified surety companies can properly issue these bonds, and a list of these companies is published annually by the U.S. Treasury.
- Payment bonds on contracts valued at less than $1 million are to be at 50% of the contract price. On contracts valued between $1 million and $5 million, that percentage is reduced to 40%, and any contract greater than $5 million requires a payment bond of $2.5 million.
- Last furnishing is generally held to mean "substantial completion" and small additional shipments or replacement and repair that generally do not extend the 90 day notice period.
- On federal contracts between $25,000 and $100,000, bond protection is not required but payment protection is required for subcontractors and suppliers (posting of cash etc).
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