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A Guide to Federal Contract Bonds
This page explores the Miller Act, a legal regulation that applies to federal construction projects, and different bonds that may be required for federal construction projects. For more information about specific types of contract surety bonds, click here.
The bonding process can be tedious and frustrating for contractors new to the industry. However, with a thorough understanding of how bonding works and why it’s required, contractors will be well informed when they need to purchase a surety bond for a federal construction contract.
Federal Contractor Requirements
According to the U.S. General Services Administration Public Building Service, contractors who intend to work on federally funded construction projects that cost more than $100,000 must post bonds before work can begin. This requirement stems from the Miller Act, which was established in 1935.
The Miller Act and its bond requirement are in place to protect the federal government and taxpayers from losses in the event that a contractor defaults on a contract, participates in fraud, or other inappropriate performance. Additionally, The Miller Act specifically requires the use of performance surety bonds and payment surety bonds.
With any construction project, a contractor’s lack of performance can cause severe delays and unexpected expenses in the building process which disrupt the governmental procurement process. That is why performance bonds guarantee that a contractor will complete a project according to the contract. If a contractor fails to complete a project according to contractual terms, the project developer can make a claim on the bond, and the surety can be forced to pay a new contractor to finish the project. To avoid this problem, our surety underwriters filter out unqualified construction professionals by basing performance bond approval on a contractor’s past performance.
Payment bonds guarantee that contractors will pay those who provide labor, materials, equipment or supplies throughout a project. If contributors of the project are not paid, they evidently have the right to sue the contractor. In this instance, when a valid claim is brought against a payment bond, the surety must pay the money owed up to the bond’s full amount.
Little Miller Acts
Over the years, individual states have created their own versions of the federal Miller Act called “Little Miller Acts”. The Little Miller Acts are essentially the same as the original Miller Act, except the bonding requirements perform and are enforced for state level projects. However, because projects here are executed at a state level, the project threshold is much lower than $100,000.
Little Miller Act contract bond requirements vary by state, so contractors who need bond insurance should verify all paperwork and bond amounts with the government agency managing the project before contacting a surety bond company.
Get a Surety Bond for a Federal Construction Project
SuretyBonds.com has a history of helping contractors get bonded quickly and accurately. If you’re a contractor involved in a government-funded construction project and need a contract bond, submit an online contact form or contact SuretyBonds.com by calling 1 (800) 308-4358 and an expert surety specialist will happily assist you.