The Miller Act: Federal Bonding Requirements for Construction Contractors

What Is the Miller Act?

The Miller Act is a federal law that requires contractors on federal construction projects to obtain surety bonds before they can start work. It was originally passed in 1935 and has been updated since. The purpose is straightforward: to protect the federal government and subcontractors from contractors who win a job and don't finish it — or finish it but don't pay the people who worked on it.

The law applies to all federal construction, alteration, or repair contracts above $100,000. Below that threshold, contracting officers have discretion.

Which Contracts Trigger Miller Act Requirements?

The Miller Act applies to contracts with the federal government — not state or local contracts. The triggers:

• Prime contract value over $100,000 — above this amount, bonds are required
• Construction, alteration, or repair — the law covers physical construction work, not services or supplies
• Public building or public work — the work must be on federal property or on behalf of the federal government

If all three conditions are met, the prime contractor must obtain a performance bond and a payment bond before work begins.

What Bonds Are Required — and When?

The Miller Act creates two separate bonding requirements at different stages of the contract process.

At the Bidding Stage: Bid Bonds

Before the award decision, many federal solicitations require a bid bond. The bid bond is a guarantee that if you're awarded the contract, you'll sign it and provide the required performance and payment bonds. Bid bonds aren't technically mandated by the Miller Act itself — the Miller Act covers performance and payment bonds. But bid bonds are required by the Federal Acquisition Regulation (FAR) on most construction solicitations and are effectively unavoidable in practice. The bid bond amount is typically 20% of the bid price, though it varies by solicitation.

After Award: Performance Bond and Payment Bond

Once you're awarded a contract covered by the Miller Act, you must furnish two bonds before work begins:

• Performance Bond — Guarantees that you'll complete the project according to the contract terms. If you default, the surety company is responsible for ensuring the project gets finished. The Miller Act requires the performance bond to be for 100% of the contract price.
• Payment Bond — Guarantees that you'll pay your subcontractors, laborers, and material suppliers. Unlike private projects, subcontractors on federal work can't file a mechanic's lien on federal property. The payment bond is their protection. The Miller Act requires the payment bond to be for 100% of the contract price on contracts over $5 million. On contracts between $100,000 and $5 million, the contracting officer determines the required amount.

What Happens If You Can't Get a Bond?

If you win a federal contract and can't furnish the required bonds, you're in default. The government can award the contract to the next bidder and hold you responsible for any cost difference. It can also result in debarment — being barred from federal contracting.

Getting bonded before you bid is the only safe approach. Don't win the contract first and try to figure out the bond after.

How Are Miller Act Bond Premiums Calculated?

Performance bond premiums are a percentage of the contract value. The rate is set by the surety carrier based on:

• The contractor's financial strength (balance sheet, working capital, net worth)
• Bonding history and current open bonded projects
• The size and type of the project
• The contractor's experience with similar work

Different carriers weigh these factors differently. That's why the rate you get from one producer may not be the best rate available — shopping carriers can result in a meaningfully lower premium on a large contract.