B-167798, MAR. 20, 1970

B-167798: Mar 20, 1970

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736 FOR SETTLING LABOR AND MATERIALS CLAIMS UNDER SEVERAL NAVY CONSTRUCTION CONTRACTS WAS PROPER SINCE ONLY $1. NOTWITHSTANDING WHATEVER CLAIMS SURETY MIGHT HAVE AGAINST CONTRACTOR ON OTHER GOVT. WILL OBTAIN GOOD ACQUITTANCE FOR PAYMENT OF BALANCE DUE UNDER CONTRACT WHERE THERE ARE CONFLICTING CLAIMS OR POSSIBILITY OF CONFLICTING CLAIMS. CHECK WAS ISSUED IN FAVOR OF SURETY COMPANY LESS $665 WITHHELD ON BASIS TOTAL CLAIMED HAD NOT BEEN EXPENDED ON CONTRACT IN QUESTION. TO GUNNING & LAFAZIA: FURTHER REFERENCE IS MADE TO YOUR LETTER DATED FEBRUARY 18. THE CONTRACTS WERE COMPLETED BY THE CONTRACTOR AND THERE WAS SUBMITTED IN SUPPORT OF THE CLAIM OF THE HOME INDEMNITY COMPANY EVIDENCE TO SHOW THAT.

B-167798, MAR. 20, 1970

CONTRACTS--PAYMENTS--SURETY OF DEFAULTED CONTRACTOR--CONTRACT FUND EXCEEDS SURETY'S EXPENDITURES WITHHOLDING OF $665 FROM SURETY COMPANY'S CLAIM FOR $2,736 FOR SETTLING LABOR AND MATERIALS CLAIMS UNDER SEVERAL NAVY CONSTRUCTION CONTRACTS WAS PROPER SINCE ONLY $1,269 HAD BEEN EXPENDED IN PAYMENT OF BOND CLAIMANTS ON ONE CONTRACT. WHILE PAYMENT BOND SURETY MAY LOOK TO RETAINED CONTRACT FUND FOR REIMBURSEMENT, GAO WOULD NOT BE WARRANTED IN AUTHORIZING PAYMENT OF FULL AMOUNT OF RETAINED CONTRACT FUND IF IT EXCEEDS ACTUAL EXPENDITURES OF SURETY, NOTWITHSTANDING WHATEVER CLAIMS SURETY MIGHT HAVE AGAINST CONTRACTOR ON OTHER GOVT. CONTRACTS, UNLESS EVIDENCE CAN BE FURNISHED OF EXPENDITURES IN EXCESS OF $1,269 IN CONNECTION WITH DISCHARGE OF OBLIGATIONS UNDER PAYMENT BOND IN QUESTION. SEE HOME INDEMNITY CO. V. U.S; 180 CT. CL. 173, 376 F. 2D 890 (1967). CONTRACTS--PAYMENT--RELEASES- -CONFLICTING CLAIMS UNDER USUAL PROCEDURE TO ASSURE GOVT. WILL OBTAIN GOOD ACQUITTANCE FOR PAYMENT OF BALANCE DUE UNDER CONTRACT WHERE THERE ARE CONFLICTING CLAIMS OR POSSIBILITY OF CONFLICTING CLAIMS, GAO ISSUED VOUCHERS IN FAVOR OF CONTRACTOR AND FORWARDED SAME TO ATTORNEY FOR SURETY BUT UPON RECEIPT OF IDEMNITY AGREEMENT IN WHICH SURETY COMPANY AGREED TO HOLD GOVT. HARMLESS AGAINST ANY LOSS OR EXPENSE RESULTING FROM CLAIMS MADE BY OTHERS TO BALANCE DUE UNDER CONTRACT, CHECK WAS ISSUED IN FAVOR OF SURETY COMPANY LESS $665 WITHHELD ON BASIS TOTAL CLAIMED HAD NOT BEEN EXPENDED ON CONTRACT IN QUESTION.

TO GUNNING & LAFAZIA:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED FEBRUARY 18, 1970, RELATIVE TO THE ACTION TAKEN ON A CLAIM OF THE HOME INDEMNITY COMPANY, IN THE AMOUNT OF $2,736, REPRESENTING THE BALANCES OF $802 AND $1,934 DUE FROM THE GOVERNMENT UNDER NAVY CONSTRUCTION CONTRACTS NOS. NBY 56172 AND NBY-56176 WITH THE GABE CONSTRUCTION COMPANY, PAWTUCKET, RHODE ISLAND.

THE CONTRACTS WERE COMPLETED BY THE CONTRACTOR AND THERE WAS SUBMITTED IN SUPPORT OF THE CLAIM OF THE HOME INDEMNITY COMPANY EVIDENCE TO SHOW THAT, AS THE PAYMENT BOND SURETY ON THE TWO CONTRACTS AND ON OTHER NAVY CONSTRUCTION CONTRACTS WITH THE GABE CONSTRUCTION COMPANY, THE HOME INDEMNITY COMPANY HAD EXPENDED AN AMOUNT IN EXCESS OF $2,736 IN MAKING SETTLEMENTS WITH PERSONS OR FIRMS ON THEIR CLAIMS FOR THE FURNISHING OF LABOR AND MATERIALS IN THE PROSECUTION OF THE WORK REQUIRED UNDER THE SEVERAL CONTRACTS.

IN ACCORDANCE WITH OUR USUAL PROCEDURE IN SUCH CASES, DESIGNED FOR THE PURPOSE OF ASSURING THAT THE GOVERNMENT WILL OBTAIN A GOOD ACQUITTANCE FOR THE PAYMENT OF A BALANCE DUE UNDER A CONTRACT WHERE THERE ARE CONFLICTING CLAIMS OR THERE IS A POSSIBILITY OF CONFLICTING CLAIMS, WE ATTEMPTED TO SETTLE THE MATTER BY CERTIFYING VOUCHERS IN THE AMOUNTS OF $802 AND $1,934, STATED IN FAVOR OF THE GABECONSTRUCTION COMPANY WITH NOTICE TO THE DISBURSING OFFICE THAT THE CHECKS IN PAYMENT OF THE VOUCHERS SHOULD BE MAILED IN CARE OF YOUR FIRM AS ATTORNEYS FOR THE HOME INDEMNITY COMPANY. THE CHECKS WERE RETURNED WITH A REQUEST THAT NEW CHECKS BE ISSUED IN FAVOR OF THE HOME INDEMNITY COMPANY. FOLLOWING THE RECEIPT OF A REQUESTED INDEMNITY AGREEMENT UNDER WHICH THE SURETY COMPANY AGREED TO HOLD THE GOVERNMENT HARMLESS AGAINST ANY LOSS OR EXPENSE WHICH MIGHT RESULT IF FURTHER CLAIMS WERE MADE BY OTHERS IN REGARD TO THE BALANCES DUE UNDER NAVY CONTRACTS NOS. NBY-56172 AND NBY-56176, A CHECK FOR $2,071 WAS ISSUED IN FAVOR OF THE SURETY COMPANY. THAT AMOUNT IS $665 LESS THAN THE TOTAL OF THE TWO CONTRACT BALANCES. THE SUM OF $665 WAS WITHHELD FROM PAYMENT ON THE BASIS THAT THE SURETY COMPANY APPARENTLY HAD NOT EXPENDED MORE THAN THE SUM OF $1,269 ON SETTLEMENTS MADE WITH PAYMENT BOND CLAIMANTS WHOSE CLAIMS WERE BASED UPON THE FURNISHING OF LABOR AND MATERIALS IN THE PROSECUTION OF THE WORK UNDER CONTRACT NO. NBY-56176.

IT IS STATED IN YOUR LETTER THAT YOU HAD PREVIOUSLY SUBMITTED A SCHEDULE OF PAYMENTS AND SUPPORTING DATA INDICATING THAT THE SURETY COMPANY'S OUTLAY ON CONTRACT NO. NBY-56176 WAS IN EXCESS OF $2,317.10; AND THAT THE SCHEDULE "DOES NOT FULLY REFLECT ALL PAYMENTS AND EXPENSES MADE BY THE SURETY IN CONNECTION THEREWITH." IT IS ALSO STATED THAT YOU WOULD APPRECIATE RECEIVING EITHER A CHECK FOR $665 OR A DETAILED EXPLANATION OF THE POSITION OF THE GOVERNMENT WITH RESPECT TO THE NON-PAYMENT OF THAT AMOUNT.

IT HAS BEEN HELD THAT A PAYMENT BOND SURETY MAY LOOK TO A RETAINED CONTRACT FUND FOR REIMBURSEMENT. SEE HOME INDEMNITY CO. V. UNITED STATES, 180 CT. CL. 173, 376 F. 2D 890 (1967). HOWEVER, IT IS OUR POSITION THAT WE WOULD NOT BE WARRANTED IN AUTHORIZING PAYMENT TO A SURETY ON A CONTRACT PAYMENT BOND OF THE FULL AMOUNT OF THE RETAINED CONTRACT FUND IF IT EXCEEDS THE ACTUAL EXPENDITURES OF THE SURETY IN DISCHARGING ITS OBLIGATIONS UNDER THE BOND, NOTWITHSTANDING WHATEVER CLAIMS THE SURETY MIGHT HAVE AGAINST THE CONTRACTOR IN CONNECTION WITH THE PERFORMANCE OF OTHER GOVERNMENT CONTRACTS.

THE SCHEDULE OF PAYMENTS REFERRED TO IN YOUR LETTER LISTS PAYMENTS OF THE AMOUNTS OF $794, $260 AND $215 ON CLAIMS OF GILCHRIST, INCORPORATED, W. H. GROFF ELECTRICAL CONTRACTORS, AND MURRAY TRINKLE FLOOR COVERING COMPANY; AND PAYMENTS OF $850 AND $198.10 ON CLAIMS OF D. DIXON DONOVAN, INCORPORATED, AND J. K. BEHAN. THE FIRST THREE PAYMENTS WERE CONSIDERED AS BEING APPLICABLE TO THE FURNISHING OF LABOR AND MATERIALS IN THE PROSECUTION OF THE WORK REQUIRED UNDER CONTRACT NO. NBY-56176. HOWEVER, THE PAYMENTS OF $850 AND $198.10 WERE QUESTIONED SO FAR AS THEY WERE PURPORTED TO BE RELATED TO THAT CONTRACT BECAUSE THE SUPPORTING DOCUMENTARY EVIDENCE CONCERNING THE PARTICULAR SETTLEMENTS INDICATES THAT THE SUMS OF $850 AND $198.10 WERE PAID BY THE HOME INDEMNITY COMPANY IN THE DISCHARGE OF ITS OBLIGATIONS UNDER THE PAYMENT BONDS FOR TWO OTHER NAVY CONTRACTS, NBY 56186 AND NBY-56172.

IN THE CIRCUMSTANCES, IT APPEARS THAT THE ACTION TAKEN ON THE CLAIM OF THE HOME INDEMNITY COMPANY WAS PROPER. WE THEREFORE WILL CONTINUE TO WITHHOLD AUTHORIZATION FOR THE PAYMENT OF ANY PART OF THE ABOVE AMOUNT OF $665 PENDING THE RECEIPT OF SUCH EVIDENCE AS MAY BE AVAILABLE TO SHOW CLEARLY THAT THE HOME INDEMNITY COMPANY EXPENDED MORE THAN THE SUM OF $1,269 IN CONNECTION WITH THE DISCHARGE OF ITS OBLIGATIONS UNDER THE PAYMENT BOND FOR CONTRACT NO. NBY-56176.