B-160329, NOV. 7, 1966

B-160329: Nov 7, 1966

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NONR-3763 (00) (X) BECAUSE THAT AMOUNT IS OWED TO YOUR CLIENT. PARTIES CONTRACTING WITH PRIME GOVERNMENT CONTRACTORS GENERALLY ARE LIMITED TO THEIR REMEDIES AT LAW IN ANY CONTROVERSY ARISING OUT OF THE FAILURE OF THE PRIME CONTRACTOR TO PAY THE SUBCONTRACTOR FOR SUPPLIES AND SERVICES. THIS IS SO BECAUSE THERE IS NO PRIVITY OF CONTRACT BETWEEN THE GOVERNMENT AND SUBCONTRACTORS UNDER PRIME GOVERNMENT CONTRACTS AND THEREFORE NO LEGAL PERMISSIBLE WAY FOR THE GOVERNMENT TO ENFORCE THE SUBCONTRACTOR'S RIGHTS AGAINST THE PRIME CONTRACTOR OF FOR THE SUBCONTRACTOR TO MAKE CLAIM DIRECTLY AGAINST THE GOVERNMENT. EVEN WHERE IT IS KNOWN THAT THERE ARE OUTSTANDING CLAIMS AGAINST THE PRIME CONTRACTOR WHEN FINAL PAYMENT IS MADE BY THE GOVERNMENT.

B-160329, NOV. 7, 1966

TO RING, TURNER AND RING:

YOUR LETTER OF OCTOBER 25, 1966, REQUESTS THAT THE SUM OF $5,103.84 BE WITHHELD FROM PAYMENTS TO BE MADE TO SYSTEC, INC., AS A RESULT OF A TERMINATION FOR GOVERNMENT CONVENIENCE DIRECTED BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS, ASBCA NO. 9999, MARCH 31, 1966, UNDER CONTRACT NO. NONR-3763 (00) (X) BECAUSE THAT AMOUNT IS OWED TO YOUR CLIENT, INLAND MOTOR CORPORATION OF VIRGINIA, IN PAYMENT FOR CERTAIN MOTORS SOLD TO SYSTEC, INC., IN CONNECTION WITH THE ABOVE CONTRACT. YOUR LETTER ALSO STATES THAT YOUR CLIENT HAS A VALID JUDGMENT IN THE STATE OF CALIFORNIA AGAINST SYSTEC, INC.

WITH THE EXCEPTION OF THE RELIEF PROVIDED SUBCONTRACTORS ON GOVERNMENT CONSTRUCTION CONTRACTS IN EXCESS OF $2,000 UNDER THE MILLER ACT, 40 U.S.C. 270A, WHICH REQUIRES THE FURNISHING OF PAYMENT BONDS BY PRIME CONTRACTORS, PARTIES CONTRACTING WITH PRIME GOVERNMENT CONTRACTORS GENERALLY ARE LIMITED TO THEIR REMEDIES AT LAW IN ANY CONTROVERSY ARISING OUT OF THE FAILURE OF THE PRIME CONTRACTOR TO PAY THE SUBCONTRACTOR FOR SUPPLIES AND SERVICES. THIS IS SO BECAUSE THERE IS NO PRIVITY OF CONTRACT BETWEEN THE GOVERNMENT AND SUBCONTRACTORS UNDER PRIME GOVERNMENT CONTRACTS AND THEREFORE NO LEGAL PERMISSIBLE WAY FOR THE GOVERNMENT TO ENFORCE THE SUBCONTRACTOR'S RIGHTS AGAINST THE PRIME CONTRACTOR OF FOR THE SUBCONTRACTOR TO MAKE CLAIM DIRECTLY AGAINST THE GOVERNMENT. THUS, EVEN WHERE IT IS KNOWN THAT THERE ARE OUTSTANDING CLAIMS AGAINST THE PRIME CONTRACTOR WHEN FINAL PAYMENT IS MADE BY THE GOVERNMENT, THE GOVERNMENT IS UNABLE TO CONDITION PAYMENT TO THE PRIME ON PAYMENT BY THE PRIME OF OUTSTANDING OBLIGATIONS, OR TO MAKE PAYMENT DIRECTLY TO THE SUBCONTRACTOR TO WHOM THE PRIME OWES MONEY. SEE 23 COMP. GEN. 655; 37 ID. 115.

SINCE THERE IS NO INDICATION THAT THE CONTRACT IN QUESTION IS ONE COVERED BY THE PROVISIONS OF THE MILLER ACT, THERE DOES NOT APPEAR TO BE ANY WAY TO HONOR YOUR REQUEST THAT THE MONEY OWED YOUR CLIENT BY SYSTEC, INC., BE WITHHELD FROM SYSTEC, INC., AND PAID DIRECTLY TO YOUR CLIENT, AND YOUR REQUEST THEREFORE MUST BE DENIED.