#676 1935 · U.S. Congress (Rep. John E. Miller) · Construction / government contracting law
Subcontractors couldn't sue the government for their money, so Congress made contractors buy them a private safety net instead
the problem
Subcontractors on federal projects had no legal way to secure payment if a contractor stiffed them
background
On a private construction project, a subcontractor or supplier who went unpaid could file a mechanic's lien against the property itself, giving them a legal claim that had to be resolved before the owner could sell or refinance the building — real leverage that made contractors pay their subs. On a federal construction project, that same subcontractor had no such option: the doctrine of sovereign immunity, inherited from English law, meant no private party could place a lien against government property at all, leaving subcontractors with nothing but a lawsuit against a possibly insolvent contractor if payment never came.
Congress had tried to address the gap once before, passing the Heard Act in 1894 to require federal contractors to post some form of payment security, but the law was riddled with procedural traps — ambiguous filing deadlines, unclear rules about who could actually sue on the bond — that let legitimate subcontractor claims lapse or fail on technicalities Congress had never intended.
what everyone would do
Waive the federal government's sovereign immunity for construction claims and let subcontractors file liens directly against government property, the way they could against a private owner — the most direct fix, and one Congress was never going to grant, since it would expose federal property and funds to the same litigation risk private landowners face.
what they saw
The problem wasn't actually the subcontractor's inability to reach the building itself — it was the subcontractor's inability to reach any security at all if the general contractor didn't pay. A mechanic's lien on private projects was never really about the building; it was a claim that forced someone to set money aside to guarantee payment. If Congress required the prime contractor, not the government, to post a bond funded by a private surety company before the contract was even awarded, subcontractors got the exact same practical guarantee a lien would have given them — without any government property or sovereign immunity ever entering the picture.
the move
In 1935, Congress repealed the Heard Act and replaced it with the Miller Act, sponsored by Representative John E. Miller of Arkansas, requiring that before the government could award any federal construction contract above a set dollar threshold, the winning contractor had to post both a performance bond and a payment bond from a private surety company — the payment bond specifically guaranteeing that subcontractors and suppliers on the project would be paid, with a clear, workable right to sue directly against the bond if they weren't.
why it works
Requiring the payment bond as a condition of winning the federal contract in the first place meant the guarantee existed before any subcontractor even started work, rather than being something they'd have to fight for after a contractor defaulted. Because the bond was issued by a private surety company assessing the contractor's own financial risk, the government took on no new liability and never had to compromise its sovereign immunity at all — the entire protection lived in a private contractual relationship between the contractor and the surety, with subcontractors as the intended beneficiaries able to make a direct claim against that bond.
the payoff
The payment bond gave subcontractors the practical equivalent of a mechanic's lien — a guaranteed pool of money they could claim against if a contractor failed to pay them — without the government ever having to waive sovereign immunity or expose its own property to private claims. The clearer procedural rules fixed the technical traps that had undermined the Heard Act, giving legitimate claims a workable path to actual payment.
where it breaks
It only protects subcontractors who actually know to make a timely claim against the bond and meet its procedural requirements — the Miller Act's own predecessor, the 1894 Heard Act, was riddled with exactly these procedural traps that let legitimate claims lapse on technicalities, which is why Congress had to replace it. And the protection is only as strong as the surety company backing the bond; if a surety itself becomes insolvent or disputes the claim, subcontractors are back to fighting for money through litigation, just against a different, private defendant instead of the government.
what came after
The Miller Act remains the governing federal statute today, still requiring performance and payment bonds on federal construction contracts above a set threshold, and its structure — a private-law substitute for a legal remedy an immune party can't be subjected to — became the direct model for the "little Miller Acts" nearly every U.S. state has since passed to protect subcontractors on state and municipal public works projects, where the same sovereign immunity problem applies.
references
- [1]Miller ActAssociated General Contractors of America, 2022agc.org
- [2]The Miller Act | Federal Bonding Requirements for ContractorsGrit Insurance, 2023gritinsurance.com