Definition:Miller Act
🏗️ The Miller Act is a federal statute enacted in 1935 that requires contractors on U.S. government construction projects exceeding $100,000 to furnish both a performance bond and a payment bond, making it one of the foundational laws governing surety bonding in the United States. Because the federal government cannot place mechanic's liens on public property, these bonds serve as the primary mechanism to protect the government and the chain of subcontractors and suppliers who contribute labor and materials. For surety companies and the brokers who place these bonds, the Miller Act defines the baseline demand for federal contract surety.
📜 Under the Act, the performance bond guarantees that the contractor will complete the project according to the contract's terms, while the payment bond ensures that laborers, subcontractors, and material suppliers receive what they are owed. If the contractor defaults, the surety must either arrange for project completion or compensate the government — an obligation that can involve substantial claim payouts and complex project takeover logistics. Claimants on the payment bond must typically file suit within one year of their last day of work or delivery, and second-tier claimants (those without a direct contract with the prime contractor) must provide written notice within 90 days. Underwriters assess the contractor's financial strength, work history, and bonding capacity before issuing these bonds, effectively performing a credit-underwriting function that differentiates surety from traditional insurance products.
⚖️ The Act's influence extends well beyond the federal sphere. Nearly every state has enacted a "Little Miller Act" imposing analogous bonding requirements on state and local public construction projects, vastly expanding the market for contract surety bonds. For surety carriers, this legislative framework creates a steady, regulation-driven demand floor that insulates the line of business from some of the cyclical swings affecting other property and casualty segments. At the same time, shifts in federal infrastructure spending — such as those triggered by major appropriations bills — directly influence bond volume and premium growth, tying surety underwriting fortunes closely to public policy decisions.
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