7.4 Public Works Bonding & Little Miller Act

Public Works Bonding & The Tennessee Little Miller Act

Public construction projects—such as state university buildings, county court houses, municipal water treatment facilities, and state highways—are funded by taxpayers. Because government entities enjoy sovereign immunity, mechanic's liens cannot legally attach to publicly owned land or buildings.

To ensure that public projects are completed and that trade contractors, sub-subcontractors, and material suppliers receive payment, federal and state governments enacted statutory bonding laws. Federal projects are governed by the Miller Act (40 U.S.C. § 3131), while state and local public projects in Tennessee are governed by the Tennessee Little Miller Act (TCA § 12-4-201 through § 12-4-206).

---

Mandatory Statutory Thresholds & Requirements

Under TCA § 12-4-201, no contract for the construction of any public building, structure, or highway infrastructure project may be awarded by the State of Tennessee, or any county, municipality, or public school board, unless the prime contractor provides statutory bonds prior to starting work.

---

Structure of Claimants under Payment Bonds

The Little Miller Act creates a clear statutory remedy for unpaid parties who provide labor, materials, or equipment to a public project. However, rights and preliminary notice duties depend on the claimant's contractual distance from the prime contractor:

Public Project Contracting Hierarchy & Notice Obligations
 ├── Prime Contractor (Files 100% Performance & Payment Bonds)
 │    ├── First-Tier Claimant (Direct Contract with Prime)
 │    │    └── Direct Claim: No 90-day preliminary notice required; can file direct claim/suit.
 │    └── Second-Tier Claimant (Sub-subcontractor or Supplier to Sub)
 │         └── Notice Obligation: MUST serve 90-Day Written Notice (TCA § 12-4-205).

First-Tier Claimants vs. Second-Tier Claimants

• First-Tier Claimants: Subcontractors or material suppliers who have a direct contractual relationship with the prime contractor. Because the prime contractor has direct accounting knowledge of their invoices, first-tier claimants are not required to serve a 90-day preliminary notice prior to filing a bond claim.
• Second-Tier Claimants: Sub-subcontractors, trade vendors, or material suppliers who contract with a subcontractor rather than the prime contractor. Because the prime contractor has no direct accounting records for these vendors, second-tier claimants must strictly comply with statutory written notice rules to protect their bond rights.

---

Statutory Notice & Lawsuit Deadlines

Failure to meet the rigid procedural deadlines established by Tennessee statutes results in the complete forfeiture of bond claim rights.

1. The 90-Day Written Notice Requirement (TCA § 12-4-205)

Any second-tier claimant who has not been paid for labor or materials furnished to a public project must deliver written notice of claim to both the Prime Contractor and the Surety within 90 days from the last date the claimant performed work or supplied materials to the project.

Mandatory Contents of the 90-Day Notice:

• Itemized statement of the claim amount due and unpaid
• Precise description of the labor, materials, or equipment provided
• Identification of the party/subcontractor for whom the work was performed
• Description of the public project site location
• Delivery Method: Served via registered or certified mail with return receipt requested, or personal hand delivery.

2. The 1-Year Statute of Limitations (TCA § 12-4-206)

If a payment bond claim remains unpaid following notice, the claimant must file a formal court lawsuit against the bond. Under TCA § 12-4-206, any lawsuit to enforce a payment bond claim on a public project in Tennessee must be instituted within one (1) year from the date of final completion of the public work project.

---

Comparison: Public Bond Claims vs. Private Mechanic's Liens

Understanding the distinction between private lien remedies and public bond remedies is heavily tested on the Tennessee General Contractor exam: