News Release
FOR IMMEDIATE RELEASE

Late afternoon on August 17, 1999, President Bill Clinton signed into law new subcontractor payment protections on federal and federally funded construction.

The ASA-initiated "Construction Industry Payment Protection Act of 1999" modifies the federal Miller Act, which requires prime contractors on federal and federally funded construction to provide payment bonds. In general, a payment bond provides financial protections to subcontractors and suppliers by guaranteeing that they will be paid for their work in case the general contractor defaults or in case payment is wrongfully withheld.

"Once again, ASA has been at the forefront of protecting subcontractor interests," said Floyd Warkol, ASA's 1999-2000 president and chairman/CEO, KSW Mechanical Services, New York, New York. "This new law is just one more success in our efforts to improve the business environment for our members."

The new law updates the 1935 Miller Act by:

• Requiring the payment bond to equal the full price of the contract. The old law capped the total amount of the payment bond for subcontractors at $2.5 million on federal and federally funded construction projects, no matter what the amount of the contract was.
• Prohibiting prime contractors from requiring subcontractors to waive their payment bond rights prior to commencement of work. The old law permitted an agreement between a prime contractor and a subcontractor that required the subcontractor to waive its rights, even before work had begun.
• Permitting a subcontractor to notify a prime contractor that the subcontractor has initiated an action under provisions of the Miller Act by any means of notification that can be verified by a third party. The old law restricted the means of notification to registered mail delivery through the U.S. Postal Service.

Now that President Clinton has signed the legislation, regulators have no more than 180 days to issue final regulations. ASA will be an active participant in the development of the final regulations.

The legislation was supported by a coalition of specialty trade groups, as well as associations representing general contractors and the surety industry.