Miller Act Payment Bond Rights do Not Extend to Third Tier Subcontractors / Suppliers

If you are a third tier subcontractor (a sub-sub-subcontractor) on a federal construction project, you do not have Miller Act payment bond rights.

If you are a supplier to a second tier subcontractor (a supplier to a sub-subcontractor) on a federal construction project, you do not have Miller Act payment bond rights.

Miller Act payment bond rights do not extent to third tier subcontractors or third tier entities on federal construction projects.

Rather, Miller Act payment bond rights extend to subcontractors of prime contractors and those having a direct contractual relationship with a subcontractor (provided those in privity with subcontractors properly preserve their payment bond rights).

For example, a third tier subcontractor argued that it should have Miller Act payment bond rights because it should be treated as a second tier subcontractor. In making this argument, the third tier subcontractor argued that the prime contractor and first tier subcontractor were really the same entity since the prime contractor was a joint venture and the subcontractor was a contractor-partner of the joint venture. Thus, if the prime contractor and subcontractor were treated as one in the same, then the third tier subcontractor’s status would be changed to a second tier subcontractor having Miller Act payment bond rights. Albeit creative, the court did not buy this argument meaning that while the third tier subcontractor potentially had a breach of contract action against the second tier subcontractor that hired it, the third tier subcontractor did not have Miller Act payment bond rights.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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