Legal Protections for Subcontractors on Federal Prime Contracts [January 27, 2014]   [open pdf - 279KB]

From the Document: "Payment and other protections for subcontractors on federal contracts are of perennial interest to Members and committees of Congress, in part, because many subcontractors are small businesses, and it is the 'declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small business concerns.' Subcontractors on federal contracts are not in privity of contract, or direct contractual relationship, between the government and the subcontractors. As such, subcontractors would generally lack the payment and other protections that federal prime contractors enjoy. However, Congress has enacted several measures that give small business and other subcontractors certain protections. Key among these are the Miller Act, the 1988 amendments to the Prompt Payment Act, and Section 8(d) of the Small Business Act. The Miller Act of 1935, as amended, authorizes subcontractors who furnished labor or materials used in carrying out federal construction projects valued in excess of $150,000 to bring a civil action against prime contractors' payment bonds to obtain payments due. Congress enacted the Miller Act to compensate for the difficulties that subcontractors would otherwise have in obtaining payment from federal construction contractors, given that they cannot place a mechanic's lien on the work because the government has sovereign immunity. The doctrine of sovereign immunity protects the government from being sued without its consent, and the Contract Disputes Act waives the government's sovereign immunity only as to suits involving contracts to which the government is a party, not subcontracts under these contracts. Relatedly, because there is no privity of contract between the government and the subcontractor, the subcontractor generally cannot sue to enforce the payment or other terms of the subcontract against the government."

Report Number:
CRS Report for Congress, R41230
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