The Miller Act Applies Even if Contract Does Not Contain a Bonding Requirement

The Miller Act Applies Even if Contract Does Not Contain a Bonding Requirement

November 19, 2018

United States Court of Appeals for the Federal Circuit recently held, in K-Con, Inc. v. Secretary of Army, that the 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 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 Appeals Court cited a doctrine first articulated in G. L. Christian & Assocs. v. United States, 312 F.2d 418 (Ct. Cl. 1963) (popularly known as the Christian Doctrine) in arriving at this decision.  Under the Christian 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 the Miller Act bonding requirements are mandatory, because FAR Sections 28.102-1 and 28.102-3 require the bonds and direct the insertion of the clauses into federal government construction contracts.  The court further found that Miller Act bonding requirements are "deeply ingrained" in public procurement policy.  The Miller Act bonding requirements were thus held to be incorporated into federal government construction contracts by operation of law, at the time the contracts were awarded, under the Christian Doctrine.

To support its decision, the Appeals Court cited its earlier decision in S.J. Amoroso Const. Co. v. United States, 12 F.3d 1072 (Fed. Cir. 1993).  In Amoroso, the court had held that the "Buy American" clause for federal government construction contracts was incorporated into a construction contract, even though the contract contained the version of the clause applicable to supply contracts.  The concurring opinion in that case, provides the three main arguments against the application of the Christian Doctrine: (1) Unlike traditional contract doctrines, the Christian Doctrine is not tied to the intent of the parties, but rather on the abstract notion of "significant or deeply ingrained strand of public procurement policy," which is inherently unpredictable; (2) the federal government should enjoy the same contractual rights and remedies as all others, when contracting with the private sector.  Granting the federal government the authority to change its mind on which clauses were required to be included, based on an abstract notion of public policy, may go against the freedom of contract; and (3) absent predictable contractual rights, the market will increase the price of participation in the long run.  The application of the Christian Doctrine could thus arguably impose an unfair burden on contractors, and additional costs on the public in the long run.

In the aftermath of the K-Con decision, contractors seeking to do business with the federal government should be aware of the bonding requirements under the Miller Act.  Those requirements are part of a federal government construction contract, even if not expressly stated therein.