Surety Bonds: The Miller Act

Construction prime contractors executing federal construction contracts valued over $150,000 are required to comply with the Miller Act (48 CFR Subpart 28.1). The Miller Act requires surety bonds be posted by the contractor.  Two types of surety bonds are often needed: payment bonds and performance bonds.  A payment bond guarantees that the contractor will pay subcontractors and suppliers for work performed under the contact.  A performance bond guarantees that the contractor will meet the contract terms and conditions.   The payment and performance surety bond requirement for construction contracts are sometimes waived.  According to the GAO, surety bond waivers can be made for certain "cost-reimbursement" construction contracts with the Department of Defense and Department of Transportation. A recent GAO study confirmed that surety bond waivers are rare.