Don't Let Federal Works Jobs Intimidate You When it Comes to Getting Paid
By Elizabeth A. Walters, Esq. - Attorney Specializing in Collections and Mechanic's Lien Law

The thought of having to go after money you are owed on a federal government job can be daunting. However, the reality is that collection on a federal works job is often less complex and more streamlined with the benefit of longer time frames within which to utilize your collection remedies than on either private works or state public works jobs.

One example of this is that the rights of collection on a federal works job are the same in any state in the United States. So whether you are owed money for a federal job in Hawaii or in New Jersey, the path to collection is the same. This is, of course, especially helpful for companies that do work in multiple states.

Another unique consideration on federal jobs when pursuing payment is that there are no preliminary lien notices required. The requirement for preliminary lien notices is a state requirement with different time frames and rules state by state. Since federal law is the governing law, state regulatory requirements are not applicable. As a result, there is no document such as a preliminary lien notice that must be sent out when a company begins work on a job, or supplies materials to a job.

What streamlines collection efforts is that the collection remedy, in addition to pursuit of any breach of contract rights, is pursuit of the Miller Act Payment Bond (MAPB). There are no mechanic’s lien or stop notice rights on federal works jobs. Since it is the federal government that owns the property, it goes against public policy to allow federal land to have mechanic’s liens recorded against it. Likewise, there is no duty for the federal government to withhold disbursement of construction funds under stop notices. As a result, and similar to public (state) payment bond claims, under the Miller Act statute general contractors are required to post a payment bond on federal works jobs. The MAPB is there for those working under the general contractor to pursue if payment is not received.

Another advantage of pursuing collection on a federal job is the lengthy time period that a claimant has to pursue a claim against the MAPB. Unlike time frames that can be as short as 90 days such as on mechanic’s liens in California, a claimant has one year from the date the claimant last supplied labor and/or materials to the job to pursue the MAPB. The claimant must file suit within this one-year time frame in the federal court that has jurisdiction where the job is located or else lose its rights to pursue the MAPB.

An important step in pursuit of the MAPB for any claimant whose customer is not the general contractor is that the claimant must be directly below the first tier subcontractor in order to pass the “2nd tier” cutoff test. For example, if the claimant’s customer were a 2nd tier subcontractor, the claimant would be 3rd tier and would have no access to the general contractor's MAPB. Additionally, at no time does a supplier to a supplier have rights to the general contractor's MAPB, even if they meet the 2nd tier requirement.

When the claimant’s customer is not the general contractor, there is a notice that must be sent out within 90 days of the claimant last supplying labor/material to the job to the general contractor. There are service requirements for the notice that include sending the notice via certified mail with a green card. Should a claimant not send the notice within the 90-day time frame, the surety will most likely deny their claim against the MAPB. This notice is not a replacement for a preliminary lien notice and can only be sent out after the money is owed.

While collection problems can happen on federal jobs, the MAPB is a strong collection tool that can be used in any state.

Ms. Walters is a San Diego-based attorney specializing in dispute resolution in the general construction industry, including irrigation companies. She may be reached at eaw@eaw-law.com.

This article is for informational use only and does not constitute legal advice.