B-111185, OCT. 24, 1956

B-111185: Oct 24, 1956

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TO DIMOND AND THORMAN: REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 9. WHO PERFORMED SERVICES AND OTHERWISE WERE SUBCONTRACTORS FOR THE PRIME CONTRACTOR. IN A LONG LINE OF DECISIONS IT HAS BEEN HELD THAT THERE IS NO PRIVITY OF CONTRACT BETWEEN SUBCONTRACTORS UNDER GOVERNMENT CONTRACTS AND THE UNITED STATES. OR CONFLICTING CLAIMS BY PARTIES APPEARING TO HAVE AT LEAST COLORABLE CLAIMS AGAINST THE GOVERNMENT. OR CIRCUMSTANCES UNDER WHICH WITHHOLDING IS SPECIFICALLY PRESCRIBED BY STATUTE. AMOUNTS DUE UNDER CONTRACTS WITH THE GOVERNMENT ARE FOR PAYMENT IN ACCORDANCE WITH THE PROVISIONS OF THE CONTRACTS. PARTIES TO WHOM THE CONTRACTOR MAY BE INDEBTED FOR MATERIALS OR SERVICES HAVE NO RIGHTS AGAINST THE GOVERNMENT.

B-111185, OCT. 24, 1956

TO DIMOND AND THORMAN:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 9, 1956, WHEREIN YOU REQUEST THAT WE DIRECT THE CONTRACTING OFFICER ON MST-222 JOB ORDERS NOS. 131 AND 134 TO WITHHOLD THE MAKING OF FURTHER PAYMENTS PENDING A DETERMINATION OF THE RIGHTS OF TWO OF YOUR CLIENTS, WHO PERFORMED SERVICES AND OTHERWISE WERE SUBCONTRACTORS FOR THE PRIME CONTRACTOR, PROJECT CONSTRUCTION CORPORATION.

IN A LONG LINE OF DECISIONS IT HAS BEEN HELD THAT THERE IS NO PRIVITY OF CONTRACT BETWEEN SUBCONTRACTORS UNDER GOVERNMENT CONTRACTS AND THE UNITED STATES. SEE JOSEPH PETRIN, ET AL. V. UNITED STATES, 90 C.CLS. 670; MERRITT V. UNITED STATES, 267 U.S. 338; UNITED STATES V. BLAIR, 321 ID. 730, 737; 32 COMP. GEN. 174, 175. HENCE, WE WOULD NOT BE LEGALLY JUSTIFIED IN TAKING JURISDICTION OVER ANY CLAIMS OR DISPUTES WHICH MIGHT ARISE OUT OF TRANSACTIONS BETWEEN YOUR CLIENTS AS SUBCONTRACTORS AND THE PRIME CONTRACTOR UNDER THE GOVERNMENT JOB ORDERS CITED BY YOU. NEITHER WOULD WE BE JUSTIFIED, MERELY ON THE GROUND OF THE CONTRACTOR'S ALLEGED INSOLVENCY, IN DIRECTING THE CONTRACTING OFFICER TO WITHHOLD FURTHER PAYMENTS TO THE PRIME CONTRACTOR, WHEN AND AS SUCH PAYMENTS BECOME DUE UNDER THE CONTRACT.

IN THE ABSENCE OF A CLAIM BY THE GOVERNMENT ITSELF, OR CONFLICTING CLAIMS BY PARTIES APPEARING TO HAVE AT LEAST COLORABLE CLAIMS AGAINST THE GOVERNMENT, OR CIRCUMSTANCES UNDER WHICH WITHHOLDING IS SPECIFICALLY PRESCRIBED BY STATUTE, AMOUNTS DUE UNDER CONTRACTS WITH THE GOVERNMENT ARE FOR PAYMENT IN ACCORDANCE WITH THE PROVISIONS OF THE CONTRACTS, AND PARTIES TO WHOM THE CONTRACTOR MAY BE INDEBTED FOR MATERIALS OR SERVICES HAVE NO RIGHTS AGAINST THE GOVERNMENT. SEE UNITED STATES V. MUNSEY TRUST COMPANY, 332 U.S. 234.

THE RECENT COURT CASES CITED BY YOU RELATE TO DISPUTES BETWEEN ADVERSE CLAIMANTS OF AMOUNTS UNPAID UNDER CONTRACTS ON WHICH THE CONTRACTOR HAD DEFAULTED, AND HENCE DO NOT APPEAR TO HAVE APPLICATION TO THE FACTS IN THE INSTANT MATTER. WE FIND NOTHING IN EITHER OF THE DECISIONS REFERRED TO WHICH APPEARS TO AFFECT THE RIGHT OF A CONTRACTOR WHO HAS PERFORMED HIS CONTRACT TO RECEIVE PAYMENT THEREFOR, WITHOUT REFERENCES TO HIS ACCOUNTS WITH SUBCONTRACTORS.