B-164641-2, SEP 18, 1969

B-164641-2, SEP 18, 1969

CONTRACTS - PAYMENTS - DEFAULT DECISION TO DISCOUNT CO. HOLDING THAT PARTIAL PAYMENT OF A DELAY DAMAGES SETTLEMENT UNDER A CONTRACT FOR CONSTRUCTION OF THE NORTH WALDO CAMPGROUND IN WILLAMETTE NATIONAL FOREST, OREGON WOULD NOT BE PROPER SINCE CONTRACTOR HAS BEEN DECLARED IN DEFAULT, SURETY HAS TAKEN OVER COMPLETION AND INTERNAL REVENUE SERVICE HAS AN OUTSTANDING LEVY AGAINST THE CONTRACTOR.

YOUR LETTER OF SEPTEMBER 8, 1969, STATES THAT THE UNION PACIFIC INSURANCE COMPANY WHICH SUPPLIED THE PAYMENT BOND FOR CONTRACT NO. 002112 BETWEEN DISCOUNT CO. AND THE FOREST SERVICE HAS REFUSED TO PAY YOU FOR SUPPLIES DELIVERED TO THE DISCOUNT CO.

THE PAYMENT BOND REQUIRED OF THE CONTRACTOR UNDER THE MILLER ACT (40 U.S.C. 270A-D) IS DESIGNED SPECIFICALLY TO PROTECT LABORERS AND MATERIALMEN, AND IN THE EVENT OF A FAILURE BY THE CONTRACTOR TO PAY HIS OBLIGATIONS IN THAT REGARD THE RECOURSE OF THE LABORERS AND MATERIALMEN LIES AGAINST THE SURETY ON THE BOND. OTHER THAN THE REMEDY PROVIDED BY THE MILLER ACT PAYMENT BOND, WHICH IS IN THE NATURE OF A SUBSTITUTE FOR LIENS NOT RECOGNIZABLE BY THE GOVERNMENT, THERE IS NO LEGAL AUTHORITY FOR THE SETTLEMENT OF SUBCONTRACTORS' CLAIMS BY THE GOVERNMENT, THERE BEING NO PRIVITY OF CONTRACT BETWEEN SUCH PERSONS AND THE UNITED STATES. SEE KELLOGG V. UNITED STATES, 7 WALL. 361. ..END :