Working on Public Projects? Know Your Bond Rights!

Reposted from the On the Level Newsletter – Click Here to Subscribe

On July 7, 2022, the Ohio Facilities Construction Commission announced the approval of more than $307 million in state funding for five school construction projects. Combined with $151 million in local funding, these projects represent more than $458 million in public construction work. So, there is plenty of work coming up, but what if you have trouble getting paid? You cannot file a mechanic’s lien against public property, and attested account claims against state projects are limited to the contract proceeds remaining at the time you file. The answer is pursuit of a bond claim.

Ohio’s “Little Miller Act,” Ohio Revised Code §§ 153.54 -153.57, (modeled after the federal Miller Act) requires any person bidding on a state contract to file a bond valued at the total amount of the bid, as security for payment and performance on the project. It is important for any lower-tier subcontractor or supplier to familiarize themselves with the requirements of Ohio’s Little Miller Act, if they would like to secure their payment rights. A contractor’s compliance with the statutory requirements of perfecting its bond claim is always a central issue in Ohio Little Miller Act litigation.

Who Has the Right to Bring a Claim Under the Ohio’s Little Miller Act?
Ohio’s Little Miller Act allows anyone supplying material, services or labor—no matter how far down the contractual privity chain—the right to pursue a bond claim.

Who Must Give Pre-Suit Notice?
Under Ohio’s Little Miller Act, lower-tier claimants with contracts in excess of $30,000, who are not in direct privity of contract with the principal contractor for the public improvement, must provide:

• a notice of furnishing to the prime contractor within 21 days of their first date of work identifying with whom the lower-tier is contracting for the material or labor; and
• the surety notice of the claim and an account statement showing the amount due within 90 days after the acceptance of the project by the public owner.

What is the Deadline to File Suit?
A claimant on an Ohio Little Miller Act bond must wait 60 days after sending notice and the account statement to the surety before it may file suit. However, the bond claimant cannot wait too long, as the lawsuit must be filed within 1 year from the public owner’s acceptance of the project or else it is waived.

While the public owner’s acceptance of the project is not something within the claimant’s control, a contractor should know and be able to document its own last date of work. And the contractor’s last date of work is always sooner than project acceptance. For these reasons, and because the failure to timely file suit is a complete bar to the payment bond claim, the best practice is to use your last date of work (as opposed to the date of project acceptance) as the date on which to start the clock for the one-year deadline to file suit.

Ohio’s Little Miller Act is a powerful tool in securing payment on an Ohio public project. It is in your best interests to know, understand, and follow these statutory requirements.