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106th Congress                                            Rept. 106-277
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 1

======================================================================



 
          CONSTRUCTION INDUSTRY PAYMENT PROTECTION ACT OF 1999

                                _______
                                

                 July 30, 1999.--Ordered to be printed

                                _______


    Mr. Burton of Indiana, from the Committee on Government Reform, 
                        submitted the following

                              R E P O R T

                          [To accompany 1219]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Government Reform, to whom was referred the 
bill (H.R. 1219) to amend the Office of Federal Procurement 
Policy Act and the Miller Act, relating to payment protections 
for persons providing labor and materials for Federal 
construction projects, having considered the same, report 
favorably thereon with amendments and recommend that the bill 
as amended do pass.

                                CONTENTS

                                                                   Page
  I. Background and Need for the Legislation..........................2
 II. Legislative Hearings and Committee Actions.......................5
III. Committee Hearings and Written Testimony.........................6
 IV. Explanation of the Bill..........................................7
  V. Committee Oversight Findings.....................................7
 VI. Budget Analysis and Projections..................................8
VII. Cost Estimate of the Congressional Budget Office.................8
VIII.Statement of Constitutional Authority............................9

 IX. Committee Recommendation.........................................9
  X. Congressional Accountability Act; P.L. 104-1.....................9
 XI. Unfunded Mandates Reform Act; P.L. 104-4, Section 423............9
XII. Federal Advisory Committee Act (5 U.S.C. App.) Section 5(b)......9
XIII.Changes in Existing Law.........................................10


    The amendments are as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Construction Industry Payment 
Protection Act of 1999''.

SEC. 2. AMENDMENTS TO THE MILLER ACT.

    (a) Enhancement of Payment Bond Protection.--Subsection (a)(2) of 
the first section of the Miller Act (40 U.S.C. 270a(a)(2)) is amended 
by striking the second, third, and fourth sentences and inserting in 
lieu thereof the following: ``The amount of the payment bond shall be 
equal to the total amount payable by the terms of the contract unless 
the contracting officer awarding the contract makes a written 
determination supported by specific findings that a payment bond in 
that amount is impractical, in which case the amount of the payment 
bond shall be set by the contracting officer. In no case shall the 
amount of the payment bond be less than the amount of the performance 
bond.''.
    (b) Modernization of Delivery of Notice.--Section 2(a) of the 
Miller Act (40 U.S.C. 270b(a)) is amended in the last sentence by 
striking ``mailing the same by registered mail, postage prepaid, in an 
envelop addressed'' and inserting ``any means which provides written, 
third-party verification of delivery.''.
    (c) Nonwaiver of Rights.--The second section of the Miller Act (40 
U.S.C. 270b) is amended by adding at the end the following new 
subsection:
    ``(c) Any waiver of the right to sue on the payment bond required 
by this Act shall be void unless it is in writing, signed by the person 
whose right is waived, and executed after such person has first 
furnished labor or material for use in the performance of the 
contract''.

SEC. 3. IMPLEMENTATION THROUGH THE GOVERNMENT-WIDE PROCUREMENT 
                    REGULATIONS.

    (a) Proposed Regulations.--Proposed revisions to the Government-
wide Federal Acquisition Regulation to implement the amendments made by 
this Act shall be published not later than 120 days after the date of 
the enactment of this Act and provide not less than 60 days for public 
comment.
    (b) Final Regulations.--Final regulations shall be published not 
less than 180 days after the date of the enactment of this Act and 
shall be effective on the date that is 30 days after the date of 
publication.

    Amend the title so as to read:

      A bill to amend the Miller Act, relating to payment 
protections for persons providing labor and materials for 
Federal construction projects.

                 I. Background and Need for Legislation


                        A. Purpose for the Bill

    H.R. 1219, the Construction Industry Payment Protection Act 
of 1999, amends and updates the 1935 Miller Act (40 U.S.C. 270a 
et seq.). Under the Miller Act, contractors performing work on 
any Federal Government public works projects costing in excess 
of $100,000 are required to provide a payment bond. The payment 
bond is intended to protect subcontractors and suppliers of 
materials against the risk of nonpayment when working on 
Federal construction projects. The Miller Act also requires the 
prime contractor to provide a performance bond for the 
protection of the Government.
    The purpose of H.R. 1219 is to improve payment bond 
protections for persons who furnish labor or material for use 
on Federal construction projects. The bill would achieve this 
objective in a manner that does not unreasonably increase the 
financial exposure or other burdens placed on the prime 
contractor, usually a general contractor, or on the surety bond 
producers and corporate sureties that provide the Miller Act 
payment bonds.
    The bill makes a number of targeted amendments to the 
Miller Act. First, the bill would increase the amount of the 
payment bond from a level that has remained unchanged since the 
law was enacted in 1935. The bill would require that the amount 
of the payment bond be equal to the contract price. Second, the 
bill would modernize the methods by which notices required 
under the Act may be transmitted, but with the safeguard of 
requiring that the methods of notice generate a written third-
party confirmation of receipt. Third, the bill would void 
waivers of Miller Act payment bond protections prior to 
commencing the work.

                             B. Background

1. Surety Bonding Requirements Under the Miller Act

    The 1935 Miller Act requires a contractor who is awarded a 
Federal construction contract in excess of $100,000 to furnish 
two surety bonds to the Government--a performance bond and a 
payment bond. The 1935 Act authorizes payment bond claimants to 
file suits in U.S. District Courts and specifies the procedural 
requirements relating to such suits.
    A surety bond is a promise to be liable for the debt, 
default or failure of another. Contract surety bonds are three-
party instruments in which one party (the surety) guarantees or 
promises a second party (the project owner) the successful 
performance of a contract by a third party (the prime 
contractor). The Federal Government also uses surety bonds on 
construction projects as a way to pre-qualify prospective 
construction firms. A surety's underwriting process consists of 
an extensive pre-qualification process in order to guarantee to 
the project owner that the principal will fulfill the terms of 
the contract. Before issuing a bond, a surety will evaluate a 
contractor firm's ability to perform the job for which the bond 
is being sought. A surety will evaluate a contractor's past 
performance, including its financial and management 
capabilities and its payment of subcontractors and suppliers.
    The performance bond protects the Government in the event 
the prime contractor fails to perform its obligations under the 
contract. The performance bond assures that the contractor will 
complete the job and satisfy other obligations under the 
construction contract. The Miller Act gives the Federal 
contracting officer the discretion to specify the dollar amount 
of the performance bond. The government-wide Federal 
Acquisition Regulation (FAR), calls for a performance bond to 
be 100 percent of the award value of the construction contract, 
``unless the contracting officer determines that a lesser 
amount would be adequate for the protection of the 
Government.''
    The payment bond assures that certain suppliers of labor 
and materials on the project will be paid subject to 
restrictions and limitations imposed by statute, the contract 
or the bond. Coverage under the Miller Act extends to those 
persons in a direct contractual relationship with the prime 
contractor, and to those who have a direct contractual 
relationship with a first-tier subcontractor, but have no 
relationship with the prime contractor.
    The Miller Act also sets a payment bond amount as follows: 
50 percent of the contract price if the award price is not more 
than $1 million; 40 percent of the contract price if the award 
price is more than $1 million but not more than $5 million; or 
$2.5 million, if the award price of the contract exceeds $5 
million. While these amounts may have been appropriate in 1935, 
in some cases they no longer provide subcontractors with 
adequate protection. The $2.5 million payment bond amount could 
deprive some subcontractors and suppliers on large Federal 
construction projects of payment protection.
    Bonds are priced on the basis of a percentage of the 
contract amount. Market conditions and prevailing industry 
practices set the percentage. A single premium is typically 
charged for both the performance bond and the payment bond. A 
separate premium is charged for a payment bond when one is 
provided without an attendant performance bond. It is the 
Committee's understanding that an increase in the size of the 
Miller Act payment bond, beyond the current amount, will not 
increase costs to the Federal Government. Surety bond premiums 
are calculated based on the contract amount. A significant 
portion of a surety company's total cost involves the 
underwriting costs. An increase or decrease to the payment bond 
penalty does not significantly affect the underwriting process 
and, consequently, the underwriting cost.

2. Enhancement of payment bond protection

    H.R. 1219 would increase the amount of the payment bond to 
the total amount payable under the terms of the construction 
contract, unless the Federal department or agency contracting 
officer makes a written determination, supported by specific 
findings, that a payment bond in that amount is impractical. If 
the contracting officer finds that it would be impractical to 
set the payment bond in an amount that is equal to the contract 
price, the contracting officer can set a different amount; 
however in no case can the payment bond be less than the 
performance bond. It is the Committee's expectation that the 
revisions to the Federal Acquisition Regulation, implementing 
this legislation, will require that a contracting officer's 
written determinations supported by specific findings, be made 
part of the contract file relating to the construction 
procurement.
    Even if there were no performance bonds the contracting 
officer must be certain to specify a payment bond amount 
sufficient to fully protect the aggregate dollar value of the 
performance expected to be undertaken by all covered 
subcontractors and their direct suppliers.

3. Methods of providing notice under the Miller Act

    H.R. 1219 includes a provision that would modernize the 
Miller Act's requirements for the methods of providing notice 
to the prime contractor of the intent of a claimant not in 
privity with the prime contractor to seek payment from the 
prime contractor's bond. The Miller Act currently allows a 
notice to be sent by the U.S. Postal Service's registered mail 
service. H.R. 1219 would permit notice by any means, including 
registered mail and private delivery service that provides 
written third-party verification of delivery. Anticipating the 
expansion of electronic commerce, the proposed amendment would 
accord recognition of a notice provided by electronic means, if 
such electronic method can provide written third-party 
verification of receipt.

4. Waivers

    The bill also specifies workable limitations on the 
conditions under which the Act's payment protections could be 
waived by an intended beneficiary of those protections. The 
bill would require that any waiver must be in writing and may 
be made only after a subcontractor or supplier has first 
furnished labor or materials for use in performance of the 
contract. This provision is designed to eliminate waivers from 
subcontractors or suppliers prior to their commencing work on a 
project. At the same time, the bill would preserve the right of 
a subcontractor or supplier to waive its Miller Act right under 
the payment bond once it has commenced performance under the 
contract.
    This bill does not void subcontract provisions requiring 
arbitration or other alternative methods of resolving disputes. 
Such provisions would remain enforceable with a claimant's 
Miller Act rights preserved by a timely suit that can be stayed 
pending the outcome of the subcontract dispute resolution 
procedure. The bill respects the freedom of the parties to the 
subcontract to specify means to resolve their disputes and the 
exclusive jurisdiction of the district court to decide issues 
arising under the Miller Act.

5. Construction task order contracts

    The Committee notes that Federal departments and agencies 
are making use of task-order type contracts. Such contracts, 
also referred to as ``task and delivery order contracts'' or 
``indefinite delivery/indefinite quantity contracts,'' may be 
awarded to a single prime contractor or to multiple prime 
contractors, as determined by regulatory requirements or the 
business judgment of the contracting officer. When such a task-
order type contract is used to provide construction-type 
services, such as maintenance of real property, the Committee 
believes that the amount of the payment bond should be 
determined by the amount of each task order made, rather than 
by the potential total value of the contract. Otherwise, 
construction contractors would be required to tie-up valuable 
bonding capacity based only on an expectation that the buying 
agency will place orders above any contractually-specified 
minimum order value, or that the same contractor would win each 
competition for each separate task order.

             II. Legislative Hearing and Committee Actions

    H.R. 1219, the ``Construction Industry Payment Protection 
Act of 1999,'' was introduced on March 23, 1999, by 
Representative Carolyn Maloney (NY) and was co-sponsored by 
Representative Stephen Horn (CA), Chairman of the Subcommittee 
on Government Management, Information, and Technology. The bill 
was also co-sponsored by Representative George Gekas (PA), 
Chairman of the Subcommittee on Commercial and Administrative 
Law, Committee on the Judiciary. The bill was referred to the 
Committee on the Judiciary and the Committee on Government 
Reform. The bill was considered by the Government Management 
Subcommittee on May 13, 1999, and passed unanimously by voice 
vote. An amendment in the nature of a substitute was offered by 
RepresentativeMaloney and was adopted unanimously by a voice 
vote. Representative Maloney's amendment deleted Section 1 of the 
introduced version of the bill. The bill was considered by the 
Committee on Government Reform on May 19, 1999, and passed by a voice 
vote.

              III. Committee Hearing and Written Testimony

    No hearings were held specifically on H.R. 1219 during the 
106th Congress. The Committee relied on the extensive record 
generated during the second session of the 105th Congress with 
respect to predecessor legislation, H.R. 3032, the 
``Construction Subcontractors Payment Protection Enhancement 
Act of 1998.'' The Committee had the benefit of the 
administration's views on the bill, provided in the form of a 
letter from the Administrator for Federal Procurement Policy, 
Office of Management and Budget, on May 17, 1999. H.R. 1219 
contains proposals to amend the Miller Act that address the 
concerns of a variety of associations representing essentially 
every segment of the construction and surety industries.
    The Committee received the views from the following 
organizations, each of which expressed support for the bill: 
The Air Conditioning Contractors Association, American 
Insurance Association, American Subcontractors Association, 
Associated General Contractors of America, Mechanical 
Contractors Association of America, National Association of 
Plumbing-Heating-Cooling Contractors, National Association of 
Surety Bond Producers, National Electrical Contractors 
Association, Painting and Decorating Contractors of America, 
Sheet Metal and Air Conditioning Contractors National 
Association, Surety Association of America, American Fire 
Sprinkler Association, Architectural Woodwork Institute, 
Association of the Wall and Ceiling Industries--International, 
Automatic Fire Alarm Association, Independent Electrical 
Contractors, Mason Contractors Association of America, National 
Association of Credit Management, National Ground Water 
Association, National Insulation Association, and the World 
Floor Covering Association.
    The Subcommittee on Government Management, Information, and 
Technology and the Subcommittee on Commercial and 
Administrative Law of the Committee on the Judiciary held a 
joint hearing on H.R. 3032, the ``Construction Subcontractors 
Payment Protection Enhancement Act of 1998,'' on September 11, 
1998. Testimony was received from representatives of the 
American Subcontractors Association, the Associated General 
Contractors of America, and the Surety Association of America. 
The subcommittees also heard from two subcontractors with 
direct experiences relating to the need to modernize the Miller 
Act. The Honorable Deidre A. Lee, Administrator for Federal 
Procurement Policy, testified on behalf of the Administration.
    Mr. Robert E. Lee, the President of Lee Masonry in 
Nashville, Tennessee, testified on behalf of the American 
Subcontractors Association. Mr. Lee supported H.R. 3032 and 
testified about the need to modernize the Miller Act, including 
the provision for providing notice of Miller Act lawsuits. Mr. 
Fred Levinson, president of Levinson & Santoro Electric 
Corporation, testified in support of the bill and the need to 
update the Miller Act. Ms. Micki Weaver, the owner of Weaver 
Glass in Harrisburg, Pennsylvania, testified that neither the 
bond cost nor the construction cost would increase if the 
amount of the payment bond were increased. According to Ms. 
Weaver, bond prices are based on the value of the contract and 
the rating of the general contractor. Ms. Weaver expressed 
concern that specialty subcontractors were not bidding on 
Federal jobs because of the lack of payment protection.
    Mr. Andrew Stephenson, a partner at the law firm of Holland 
& Knight, represented the Associated General Contractors. Mr. 
Stephenson testified in opposition to the provision of H.R. 
3032 that requires general contractors to extend payment bond 
protections to all levels of subcontractors and suppliers. Ms. 
Lynn M. Schubert, president of the Surety Association of 
America, also representing the American Insurance Association 
and the National Association of Surety Bond Producers, 
testified in support of subcontractor payment provisions. Ms. 
Schubert also objected to certain provisions of the bill 
including the extension of payment bond protection to all 
levels of subcontractors and suppliers and a change to the 
American Rule governing the award of attorneys fees.

                      IV. Explanation of the Bill


                              A. OVERVIEW

    H.R. 1219, the Construction Industry Payment Protection Act 
of 1999, includes provisions that seek to modernize the 1935 
Miller Act.

                     B. SECTION-BY-SECTION ANALYSIS

Section 1. Short title

    The Act shall be known as the ``Construction Industry 
Payment Protection Act of 1999.''

Section 2. Amendments to the Miller Act

    This Section makes the following amendments to the Miller 
Act:
          (a) requires a general contractor to furnish a 
        payment bond in an amount equal to the total value of 
        the contract, unless the contracting officer makes a 
        written determination that a payment bond in that 
        amount is impractical;
          (b) permits notification of payment bond claims by 
        any means that provides for written third-party 
        verification of delivery. Current law specifies 
        notification only by registered United States mail; and
          (c) provides that a waiver of the right to sue on the 
        payment bond is void, unless such waiver is in writing 
        and is executed after the work on the contract is 
        commenced.

Section 3: Implementation through the governmentwide procurement 
        regulations

    This Section requires that proposed regulations regarding 
implementation of the provisions of this Act be published not 
later than 120 days after enactment. The bill provides not less 
than 60 days for public comment on these proposed regulations 
and requires that final regulations be published not less than 
180 days after enactment of this Act.

                    V. Committee Oversight Findings

    Pursuant to rule XIII, clause 3(c)(1), of the Rules of the 
House of Representatives, the results and findings for those 
oversight activities are incorporated in the recommendations 
found in the bill and in this report.

                  VI. Budget Analysis and Protections

    Clause 3(c)(2) of rule XIII, of the Rules of the House of 
Representatives, is inapplicable because the bill does not 
provide new budget authority, new spending authority, new 
credit authority, or an increase or decrease in revenues or tax 
expenditures.

         VII. Cost Estimate of the Congressional Budget Office

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, June 9, 1999.
Hon. Dan Burton,
Chairman, Committee on Government Reform,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1219, the 
Construction Industry Payment Protection Act of 1999.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is John R. 
Righter.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 1219--Construction Industry Payment Protection Act of 1999

    H.R. 1219 would make several amendments to the Miller Act 
of 1935, which governs the bonding requirements for federal 
construction projects. CBO estimates that enacting the bill 
would not have any significant impact on the federal budget. 
The bill would (1) require that a general contractor of a 
project generally obtain a payment bond in an amount that is 
equal to the total value of the federal contract, (2) permit 
subcontractors to notify contractors of an intent to sue by 
means other than registered mail, and (3) require that any 
waiver of a subcontractor's right to sue on a payment bond be 
in writing, signed, and executed after the subcontractor has 
furnished labor or materials for use in the project. The Office 
of Management and Budget would have 180 days to develop and 
publish final regulations for implementing the bill's 
provisions.
    The Miller Act requires that general contractors of federal 
projects provide both a performance bond and a payment bond. A 
performance bond is a guarantee to the government that the 
contractor will complete a contract within its time frame and 
conditions. The amount of the performance bond is generally 
equal to the price of the contract. A payment bond is a 
guarantee to subcontractors and suppliers that they will be 
paid for work they perform properly under the contract. With 
some exceptions, the amount of a payment bond for a federal 
project cannot exceed $2.5 million. The Administration, 
however, has proposed a rule that would lift that ceiling and 
instead require contractors to provide payment bonds in amounts 
that are equal to 40 percent of the value of any contract that 
exceeds $6.25 million (Federal Register, December 29, 1998).
    CBO estimates that implementing H.R. 1219 would not 
significantly affect the costs of federal construction, because 
the surety industry, which issues the payment and performance 
bonds, generally charges one premium for both bonds. As such, 
the surety premium--including the cost for issuing the payment 
bond--for a federal project is already calculated based on the 
higher contract price. Because it appears the Administration 
will adopt its proposed rule on payment bonds, it is even less 
likely that implementing the bill would appreciably affect such 
costs. To the extent that implementing H.R. 1219 would increase 
bonding costs for federal projects, CBO expects that 
contractors would pass through such costs to the federal 
government. However, by reducing the risks of nonpayment for 
subcontractors, H.R. 1219 could also result in some savings if 
subcontractors were to reduce any risk-related premiums 
currently charged for working on federal projects. CBO, 
however, has no basis for estimating the amount of such 
potential savings.
    Because enacting the bill would not affect direct spending 
or receipts, pay-as-you-go procedures would not apply. H.R. 
1219 contains no intergovernmental or private-sector mandates 
as defined in the Unfunded Mandates Reform Act and would impose 
no costs on the budgets of state, local, or tribal governments.
    The CBO staff contact is John R. Righter. This estimate was 
approved by Paul N. Van de Water, Assistant Director for Budget 
Analysis.

              VIII. Statement of Constitutional Authority

    Pursuant to rule XIII, clause 3(d)(1), the Committee finds 
that clauses 14 and 18 of Article I, Section 8 of the U.S. 
Constitution grant Congress the power to enact this law.

                      IX. Committee Recommendation

    On May 19, 1999, a quorum being present, the Committee 
ordered the bill favorably reported to the House for 
consideration by voice vote.

         X. Congressional Accountability Act; Public Law 104-1

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(B)(3) of the Congressional Accountability Act (P.L. 104-1).

    XI. Unfunded Mandates Reform Act; Public Law 104-4, Section 423

    The Committee finds that the legislation does not impose 
any Federal mandates within the meaning of section 423 of the 
Unfunded Mandates Reform Act (P.L. 104-4).

    XII. Federal Advisory Committee Act (5 U.S.C. APP.) Section 5(b)

    The Committee finds that the legislation does not establish 
or authorize establishment of an advisory committee within the 
definition of 5 U.S.C. App., Section 5(b).

                        committee correspondence

                          House of Representatives,
                                Committee on the Judiciary,
                                     Washington, DC, June 18, 1999.
Hon. Dennis Hastert,
The Speaker, House of Representatives,
Washington, DC.
    Dear Mr. Speaker: I understand that the Government Reform 
Committee desires to take H.R. 1219, the ``Construction 
Industry Payment Protection Act,'' to the floor without this 
committee reporting the bill. The bill contains certain matters 
within the Rule X jurisdiction of the Judiciary Committee which 
were the basis of your referral of the bill to us. Such matters 
include amendments to the Miller Act made by section 3 and 
procedural rules for promulgating revisions to the Federal 
Acquisition Regulation established by section 4.
    In the interest of moving this non-controversial bill 
forward expeditiously, I will agree to the Judiciary Committee 
being discharged from further consideration of H.R. 1219. 
However, this should not be construed as a relinquishment of 
the Committee's Rule X jurisdiction as to the matters addressed 
by the bill or any further amendments relating to it. I also 
request that the Committee's rights to have our Members named 
to any conference committee on the bill or any similar bill be 
protected.
            Sincerely,
                                           Henry J. Hyde, Chairman.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                             THE MILLER ACT

That (a) before any contract for the construction, alteration, 
or repair of any public building or public work of the United 
States is awarded to any person, such person shall furnish to 
the United States the following bonds, which shall become 
binding upon the award of the contract to such person, who is 
hereinafter designated as ``contractor'':
  (1) A performance bond with a surety or sureties satisfactory 
to the officer awarding such contract, and in such amount as he 
shall deem adequate, for the protection of the United States.
  (2) A payment bond with a surety or sureties satisfactory to 
such officer for the protection of all persons supplying labor 
and material in the prosecution of the work provided for in 
said contract for the use of each such person. [Whenever the 
total amount payable by the terms of the contract shall be not 
more than $1,000,000 the said payment bond shall be in a sum of 
one-half the total amount payable by the terms of the contract. 
Whenever the total amount payable by the terms of the contract 
shall be more than $1,000,000 and not more than $5,000,000, the 
said payment bond shall be in a sum of 40 per centum of the 
total amount payable by the terms of the contract. Whenever the 
total amount payable by the terms of the contract shall be more 
than $5,000,000 the said payment bond shall be in the sum of 
$2,500,000.] The amount of the payment bond shall be equal to 
the total amount payable by the terms of the contract unless 
the contracting officer awarding the contract makes a written 
determination supported by specific findings that a payment 
bond in that amount is impractical, in which case the amount of 
the payment bond shall be set by the contracting officer. In no 
case shall the amount of the payment bond be less than the 
amount of the performance bond.
  Sec. 2. (a) Every person who has furnished labor or material 
in the prosecution of the work provided for in such contract, 
in respect of which a payment bond is furnished under this Act 
and who has not been paid in full therefor before the 
expiration of a period of ninety days after the day on which 
the last of the labor was done or performed by him or material 
was furnished or supplied by him for which such claim is made, 
shall have the right to sue on such payment bond for the 
amount, or the balance thereof, unpaid at the time of 
institution of such suit and to prosecute said action to final 
execution and judgment for the sum or sums justly due him: 
Provided, however, That any person having direct contractual 
relationship with a subcontractor but no contractual 
relationship express or implied with the contractor furnishing 
said payment bond shall have a right of action upon the said 
payment bond upon giving written notice to said contractor 
within ninety days from the date on which such person did or 
performed the last of the labor or furnished or supplied the 
last of the material for which such claim is made, stating with 
substantial accuracy the amount claimed and the name of the 
party to whom the material was furnished or supplied or for 
whom the labor was done or performed. Such notice shall be 
served by [mailing the same by registered mail, postage 
prepaid, in an envelop addressed] any means which provides 
written, third-party verification of delivery to the contractor 
at any place he maintains an office or conducts his business, 
or his residence, or in any manner in which the United States 
marshal of the district in which the public improvement is 
situated is authorized by law to serve summons.

           *       *       *       *       *       *       *

  (c) Any waiver of the right to sue on the payment bond 
required by this Act shall be void unless it is in writing, 
signed by the person whose right is waived, and executed after 
such person has first furnished labor or material for use in 
the performance of the contract.

           *       *       *       *       *       *       *