Know What You’re Signing Up For—The Miller Act Is Now Part of Your Federal Government Construction Project
By Oles Morrison on January 10, 2019 | Posted in Procurement Issues
One of the biggest differences between federal government and commercial contracting is that certain clauses may be incorporated by reference (and hence controlling) in a federal contract even if the clause was not expressly included in the contract by the parties. In a departure from the general principle that contracts should only reflect the bargain made by the parties, and hence courts should not read provisions into a contract that are not there, federal government contracts take a different approach because of the public policy considerations that underlie every federal contract that ultimately is being performed on behalf of the taxpayer. In this regard, when it comes to government contracts, the courts will on occasion apply the so-called Christian doctrine (taken from L. Christian & Assocs. v. United States, 312 F.2d 418 (Ct. Cl. 1963)) to determine whether a provision should be read into a government contract because not doing so would frustrate important policy considerations for either the protection of the government or the contractor. While the application of the Christian doctrine has only been applied to certain contract clauses, a recent decision has now added the Miller Act’s bonding provisions to the list of clauses that has been held to be incorporated by reference into a government contract.
In this regard, the United States Court of Appeals for the Federal Circuit recently held, in K-Con, Inc. v. Secretary of Army, that bonding requirements under the Miller Act apply to federal government construction contracts, even when the bonding provisions were not part of the contract. C.A. No. 2017-2254, 2018 WL 5780251 (Fed. Cir. Nov. 5, 2018). The Miller Act, as implemented at Federal Acquisition Regulation (FAR) 28.102-1, requires that before any contract of more than $150,000 is awarded for the construction, alteration, or repair of any public building or public work of the federal government, a person must furnish to the government, performance and payment bonds, which become binding when the contract is awarded. 40 U.S.C. §§ 3131(b).
The Court of Appeals cited the Christian doctrine in arriving at its decision. As noted, under this doctrine, a court may insert a clause into a government contract by operation of law if: (1) that clause is mandatory under applicable federal administrative regulations; and (2) it expresses a significant or deeply ingrained strand of public procurement policy. The Court found that both of these applied to this matter as FAR Sections 28.102-1 and 28.102-3 require federal government contracts to insert the Miller Act and the that Miller Act is deeply ingrained in public procurement policy.
“Based on this long-standing statute and its legislative history, we conclude that the payment and performance bond requirements are “deeply ingrained” in procurement policy.” As such, the Court of Appeals held that the bonding requirements were incorporated into the underlying federal government construction contracts by operation of law.
Based on this decision, contractors seeking to be awarded federal government construction contracts should always be aware of the bonding requirements under the Miller Act. The bonding requirements will be part of any federal construction contract even if they are not expressly stated in the four corners of the contract documents. Because the Miller Act now applies as a matter of law to all applicable federal construction contract, contractors seeking to participate in such projects should bear these considerations in mind and also consider the risks and requirements that these bonding requirements may have on the project.