An appeals court did something recently that contractors who work on federal government projects will want to know:
It determined that they’re bound by Miller Act bonding rules whether the agency they’ve contracted with includes the provisions of the law in its contract or not.
The Miller Act, for the uninitiated, compels contractors on federal government construction projects valued at over $150,000 to secure payment and performance bonds to assure their work is completed and that they pay subcontractors and vendors.
The Miller Act, in other words, protects the federal government from contractors who fail to deliver what they promise to do. It has been around since 1935.
The appellant in this case, a South Carolina company, was awarded two contracts by the Army for pre-engineered metal buildings.
There was no mention of Miller Act bonding provisions in its contract, but the Army told the company it needed to provide payment and performance bonds before it would get the green light to proceed.
The company, however, pushed back, arguing that it shouldn’t have to provide the bonds because its contract omitted any mention of the Miller Act.
Two years later, it finally agreed to obtain the bonds but then filed a claim for $116,000 to cover increases in material and labor costs caused by the delay.
Perhaps not surprisingly, its claim was denied.
When it appealed the denial, the Armed Services Board of Contract Appeals – in a decision later upheld by a federal appeals court – found that the Miller Act was incorporated as a matter of law under the so-called Christian Doctrine.
Created in the 1960s, this doctrine holds that certain regulatory provisions are incorporated into government contracts as a matter of law or public policy even if not explicitly referenced or cited therein.
There’s more to the case but you get the point:
Any contractor pursuing work with the federal government – and possibly by extension state or local governments if they follow the Christian Doctrine – best carefully review the solicitation and make sure that they understand and verify their Miller Act bonding requirements.
Tom Patton is a Surety and Insurance Advisor with CCIG. Reach him at TomP@thinkccig.com or 720-330-7922.
CCIG is a Denver-area insurance brokerage with personal and business insurance clients nationwide. We do more than make sure you have the right policy. We also help you lower your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.
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