Federal Ownership Alone Does Not Guarantee Miller Act Protection

A recent federal court decision highlights an important risk for subcontractors performing work at federally owned facilities: a project’s connection to the federal government does not necessarily make the Miller Act applicable.

In U.S. v. E.W. Howell Co. LLC, a steel subcontractor sought to recover approximately $1.5 million allegedly due for work performed at Brookhaven National Laboratory. Although the laboratory is owned by the federal government, it is operated by a private entity that contracted with the project’s prime contractor.

The prime contractor furnished payment and performance bonds to the private operator. The United States was not named as an obligee on the bonds.

The subcontractor argued that the Miller Act applied because the work was performed on federally owned property and federal regulations required the United States to be named on the payment bond. The Court rejected those arguments and dismissed the case for lack of federal jurisdiction.

The Court concluded that:

• The payment bond was furnished to a private entity, not to the United States.
• The private operator was a federal contractor, not an agent of the federal government.
• The Court could not treat the United States as an obligee merely because it should have been included on the bond.
• The subcontractor was responsible for confirming that the required payment protections were actually in place.

The decision also left the subcontractor subject to the subcontract’s requirement that disputes be litigated in Nassau County Supreme Court and its requirement that the parties participate in mediation before commencing litigation.

Subcontractors should not assume that the Miller Act applies simply because the project involves federally owned property, federal funding, or a federal facility. Before beginning work, subcontractors should obtain and review the payment bond and confirm:

1. The identity of the bond obligees;
2. Whether the United States is expressly named;
3. Whether the bond satisfies applicable federal requirements; and
4. Whether the subcontract contains mandatory mediation, notice, or forum-selection provisions.

The best time to determine whether a payment remedy exists is before the work is performed—not after payment stops.

If you would like more information regarding this topic please contact Thomas S. Tripodianos at ttripodianos@wbgllp.com or call (914) 607-6440