B-159304, AUG. 5, 1966

B-159304, AUG. 5, 1966

TO CALIFORNIA PUMP AND WELLS:

THIS IS IN RESPONSE TO YOUR LETTER DATED JULY 13, 1966, WITH FURTHER REFERENCE TO YOUR CLAIM AGAINST THE PRECISION DRILLING COMPANY, SANTA ROSA, CALIFORNIA, AND THE HARTFORD INSURANCE GROUP, SAN FRANCISCO, CALIFORNIA, SURETY ON CONTRACT NO. DA 04-036-AMC-28/M).

WE HAVE ATTEMPTED TO EXPLAIN IN PAST LETTERS TO YOU THAT THE UNITED STATES GENERAL ACCOUNTING OFFICE DOES NOT HAVE THE LEGAL AUTHORITY TO SETTLE CLAIMS WHICH ARE NOT BASED ON STRICT LEGAL LIABILITY. WE HAVE ALSO EXPLAINED THAT SINCE CALIFORNIA PUMP AND WELLS, SUBCONTRACTOR ON THE AFOREMENTIONED CONTRACT, IS NOT A PARTY TO THE PRIME CONTRACT BETWEEN PRECISION DRILLING COMPANY AND THE UNITED STATES, THERE IS NO PRIVITY OF CONTRACT BETWEEN YOU AND THE UNITED STATES AND, THEREFORE, OUR OFFICE IS NOT THE PROPER JURISDICTION IN WHICH TO PURSUE YOUR CLAIM.

YOU NOW ALLEGE THAT THE GOVERNMENT HAS FAILED TO DO ITS PART IN PROTECTING PAYMENT TO YOU, AND YOU ASK WHY THE BONDING COMPANY IS NOT LIABLE. WHAT WE WOULD LIKE YOU TO UNDERSTAND IS THAT THE GOVERNMENT DOES PROVIDE PROTECTION TO SUBCONTRACTORS, MATERIALMEN, AND LABORERS PERFORMING SERVICES FOR THE PRIME CONTRACTOR UNDER A GOVERNMENT CONTRACT. THE MILLER ACT, 40 U.S.C. 270A ET SEQ., REQUIRES THE EXECUTION OF A PAYMENT BOND BETWEEN THE PRIME CONTRACTOR AND THE SURETY ON CONSTRUCTION CONTRACTS WITH THE GOVERNMENT. SINCE SUPPLIERS OF MATERIAL AND LABOR DO NOT HAVE A LIEN AGAINST PROPERTY OF THE GOVERNMENT FOR THE AMOUNTS DUE THEM UNDER THEIR CONTRACTS, THEIR RIGHT OF RECOVERY IS AGAINST THE SURETY ON THE PAYMENT BOND. THE SUBCONTRACTOR OR MATERIALMAN MUST FILE SUIT UNDER THE MILLER ACT IN A UNITED STATES DISTRICT COURT NOT LATER THAN ONE YEAR FROM THE DATE ON WHICH THE LAST LABOR WAS PERFORMED OR MATERIAL FURNISHED. U.S.C. 270B (B). THIS TIME LIMIT FOR INSTITUTION OF SUIT AGAINST THE PRIME CONTRACTOR AND HIS SURETY ON A GOVERNMENT PROJECT IS A LIMITATION ON LIABILITY ITSELF. IT IS A CONDITION PRECEDENT TO THE INSTITUTION OF THE SUIT THAT IT BE BROUGHT WITHIN THE ONE YEAR TIME LIMIT PROVIDED. UNITED STATES V. SOUTHERN CONSTRUCTION COMPANY, 236 F.SUPP. 742 (1964). THE ACTION THAT A SUPPLIER BRINGS AGAINST THE SURETY UNDER THE MILLER ACT IS BASED SOLELY UPON THE PAYMENT BOND WRITTEN PURSUANT TO THAT ACT. THEREFORE, THE ACTION AGAINST THE SURETY CANNOT BE ANY BROADER THAN THE PROVISIONS OF THE ACT. IT IS FOR THIS REASON THAT THE SURETY, HARTFORD INSURANCE GROUP, MAY NOT BE LIABLE.

IT HAS BEEN HELD THAT THE "DISPUTES CLAUSE" OF THE PRIME CONTRACT, REQUIRING RESOLUTION OF DISPUTES BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS BEFORE THE BRINGING OF AN ACTION, DOES NOT PRECLUDE A SUBCONTRACTOR FROM BRINGING AN ACTION UNDER THE MILLER ACT AGAINST THE PRIME CONTRACTOR AND ITS SURETY WHILE A CLAIM IS PENDING BEFORE THE APPEALS BOARD. FANDERLIK-LOCKE CO. V. UNITED STATES, 285 F.2D 939 (1960). THE FACT, THEN, THAT PRECISION DRILLING COMPANY PURSUED YOUR CLAIM BEFORE THE ASBCA DID NOT STAY THE RUNNING OF THE ONE YEAR STATUTE OF LIMITATIONS UNDER THE MILLER ACT. THE TENTH CIRCUIT COURT OF APPEALS STATED IN THE FANDERLIK CASE ON PAGE 942:

"* * * THE REMEDY FOR ONE SEEKING TO RECOVER FOR LABOR AND MATERIALS FURNISHED ON A GOVERNMENT CONTRACT IS UNDER THE MILLER ACT, AND ORDINARILY THE FACT THAT A PRIME CONTRACTOR HAS A CLAIM FOR THE SAME AMOUNTS PENDING UNDER THE "DISPUTES CLAUSE" OF THE PRIME CONTRACT, DOES NOT AFFECT MILLER ACT CASES. * * *"

THE GOVERNMENT DID PROVIDE YOU WITH THE PROTECTION CALLED FOR BY LAW. CANNOT ACT IN YOUR BEHALF IN ENFORCING YOUR RIGHTS. YOU ARE, OF COURSE, NOT PRECLUDED FROM BRINGING AN ACTION IN A COURT OF THE PROPER JURISDICTION BASED UPON YOUR CLAIM OF BREACH OF CONTRACT BY PRECISION DRILLING COMPANY.