News Release
FOR IMMEDIATE RELEASE

House Approves ASA-Initiated Subcontract Payment Protections

On August 2, 1999, the U. S. House of Representatives approved, by a vote of 416 to 0, legislation to improve subcontractor payment protections under the federal Miller Act.

ASA leaders applauded the House for its expeditious approval of H.R. 1219, the Construction Industry Payment Protection Act of 1999, and urged the Senate to act swiftly as well. A broad cross-section of construction industry and surety industry groups, including the ASA-led Coalition to Modernize the Miller Act, support the bill. Rep. Carolyn Maloney (D-NY) is the original sponsor of the legislation.

"H.R. 1219 would help bring an outdated federal law in line with today's economic and business realities," said 1999-2000 ASA President Floyd Warkol, chairman/CEO KSW Mechanical Services, Inc., New York, N.Y. ASA applauds the House for taking this step to improve the construction process on federal projects."

H.R. 1219, the construction Industry Payment Protection Act of 1999, would modify the Miller Act, which requires payment bonds to be in place on federal and federally-funded construction projects. In general, a payment bond provides financial protections to companies working on a construction project by guaranteeing that they will be paid for their work in case the general contractor defaults or in case the general contractor defaults or in case payment is wrongfully withheld.

However, the Miller Act, which was enacted in 1935, has not been updated to reflect economic and technological changes that have occurred since 1935, such as higher project costs and advances in electronic communications.

H.R. 1219 would update the Miller Act by:

Requiring the payment bond to equal the full price of the contract. The law currently caps 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.
Prohibiting prime contractors from requiring subcontractors to waive their payment bond rights prior to commencement of work. At present, federal law permits an agreement between a prime contractor and a subcontractor that requires the subcontractor to waive its rights, even before work has 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. Current law restricts the means of notification to registered mail delivery through the U.S. Postal Service.

"The proposed changes recognize that subcontractors and suppliers operate in a business environment very different than in 1935," said 1999-2000 ASA Government Relations Chair Robert Reick, president, Schoonover Electric Company, Mountainside, NJ. "ASA members want the Senate to take up and quickly pass this bill, and send it to the White House."

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