Monday, May 7, 2012

Architect and Engineers Get No Respect from Miller Act

The purpose of the Miller Act is to provide security of payment to those who perform work on a Federal Project, but do not have a direct contract with the owner. The Miller Act requires that a "payment bond" be procured on all Federal Projects, which inures to the benefit of the subcontractors and suppliers.

But what happens when a prime contractor (a company with a contract with the owner) hires a design professional such as an architect or an engineer? Despite the Act's inclusive language regarding the range of contractors that qualify for protections, design firms providing professional services to a prime contractor on a federal project do not have rights under the Miller Act to make a claim against the prime contractor’s payment bond.

It's an odd exclusion, and reflects the way projects were conceived, planned and constructed before the days of more creative construction planning came about. There is, however, a limited exception to the general rule: if the design professional such as an architect or engineer performs on-site supervision or inspection duties, then the professional will be entitled to file a bond claim under the Miller Act.

In American Surety Co. of New York v. United States ex rel. Barrow-Agee Labs., 76 F.2d 67 (5th Cir. 1935) originally ruled on the question of what constitutes “labor.” In that case, the work performed was the inspection and analyzation of loads of gravel being placed for the construction of roads in Louisiana. Holding that the work “involved considerable physical labor and some experience and skill,” the court found that “[a]n ordinary workman could do it after being shown and having some practice.”

In the seminal case of United States ex rel. Thayer v. Metro Construction Corp., 330 F. Supp. 386 (E.D.Va. 1971), the court ruled engineers who prepare designs, drawings and specifications are not protected by the Miller Act and therefore cannot file or enforce claims on the prime contractor’s payment bond.

In general, since the Thayer case, the courts have focused on the nature of the services and how and where they are performed in order to determine whether Miller Act protection applies to the architect or engineer.

In short, if a design professional performs purely off site work, it will not be protected by the Miller Act. However, on-site services that relate to the construction, such as supervisory or inspection services, will most likely be covered by the Miller Act, and a Miller Act bond claim can be pursued.  Keep in mind, however, that the Miller Act will only permit recovery in most instances only to the value of the on-site work.

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