[Priority of Payment Between Assignee and IRS Under Army Contract]

The Army requested a decision on whether the Internal Revenue Service (IRS) or an assignee had priority to receive payments under a contract for flood control and river maintenance. GAO noted that IRS issued a levy for unpaid employment taxes against the payments the Army owed to the contractor. GAO held that: (1) the contractor made a valid assignment with a bank to finance the contract; and (2) since the tax liability arose after the contractor made the assignment, the assignment precluded the Army from offsetting the debt to IRS against the assignee's payments. Accordingly, the Army should pay the assignee first.