If you ever do a federal job, there will be a payment bond from the general contractor. And if you ever have a claim against the general contractor for payment, you need to know the timing requirement for filing your lawsuit against the bond. 

A recent court decision from Washington, D.C., concerns a job that almost could not have been worse. The timing of filing the lawsuit against the bond was a key issue, and the decision could easily have gone against the subcontractor. 

In this case, the U.S. Army Corps of Engineers (ACE) awarded a multimillion-­dollar contract to build flood control levees to a general contractor. That company ended up being a “broker” because it subcontracted the entire scope of work to one sub, except for some management and supervisory responsibilities. 

There were serious, ongoing problems almost from the start. The ACE issued numerous changes that the subcontractor claimed interfered with its work and caused delays and extra costs. The general contractor was late paying the subcontractor even though it had been paid by the ACE. 

At various points, the subcontractor threatened to stop work unless it was paid. But there was a clause in its subcontract that the subcontractor had to continue its work even though there were disputes. Another clause, however, stated that extra work would not be performed unless there was agreement between the parties on price and time. 

Eventually, the ACE threatened to default terminate the general contractor because the project was more than 500 days late. The general contractor sent that notice to the sub, which responded with explanations for the delays. Apparently nothing was resolved, because two months later the ACE actually default terminated the general contractor. 

Some events reported in the court’s decision were somewhat vague. It seems that the general contractor’s bonding company offered to pay the sub to complete the work, but negotiations with the sub failed because it wanted to be paid its outstanding balance and the bonding company would not do so.

There may have been other reasons why the sub waited to file a lawsuit besides the time spent negotiating with the bonding company. Perhaps it was negotiating with the ACE, but we do not know for sure. In any event, the sub waited a year before it filed suit against the bond. That was the biggest problem of all. 

On federal construction jobs, the law requires that the general contractor obtain a payment bond to protect its subs, known as a Miller Act bond. By the wording of that law, any lawsuit against the bonding company “must be brought no later than one year after the day on which the last of the labor was performed or material was supplied” by the subcontractor. In this case, the ACE’s default termination was on April 26, 2013, but the sub’s lawsuit was not filed until more than a year later on April 29, 2014. The bonding company argued that the lawsuit was too late. 

What did the subcontractor argue to say that it was not late? The sub said that its last work was actually on May 1, 2013, when it did some site cleaning, installed some fencing and completed some other minor work. Was that enough to comply with the Miller Act? 

Where the courts stand

The majority of courts that have had these disputes about when the one-year time starts answer that “the last of the labor” means substantive work, not corrective or repair work or site cleanup. In those courts, finishing minor work to complete the job does not delay the running of the one-year calendar. A small group of courts, however, look to the value or importance of the last work done even though substantial completion has been achieved. 

In the ACE case, the court took another approach. It reasoned that the language of the Miller Act says simply “the day on which the last of the labor was performed.” Because the subcontractor showed that some fencing was installed on its last day of work, the court found that would be enough to start the calendar running on that day even though the work was minor. However, site cleanup was held not to be “last labor” under the Miller Act. 

Conclusion

The lesson is this: Do not wait until the last moment to sue the bonding company. For those who wish to read the entire case, you can find it online at U.S. ex rel. American Civil Construction, LLC v. Hirani Engineering & Land Surveying, P.C. (D.C. Cir. Jan. 14, 2025). 

Tatiana / stock.adobe.com