B-175023, MAR 27, 1972

B-175023, MAR 27, 1972

CONTRACTS - BALANCE DUE - PROPRIETY OF PAYMENT TO SURETY - ADJUDICATED CLAIM - HOLD HARMLESS AGREEMENT CONCERNING THE PROPRIETY OF PAYMENT TO WESTERN CASUALTY AND SURETY COMPANY OF THE BALANCE DUE E. W. BLAIR, INC., ON A CONTRACT FOR THE CONSTRUCTION OF ACCESS ROADS AT DIERKS DAM AND RESERVOIR IN ARKANSAS, NOTWITHSTANDING THE LACK OF A SIGNED FINAL PAYMENT ESTIMATE FROM THE CONTRACTOR. SINCE THE SURETY'S CLAIM HAS BEEN UPHELD BY THE U.S. DISTRICT COURT FOR THE EASTERN DISTRICT OF OKLA., THE SURETY MAY BE PAID ANY AMOUNT REMAINING UNDER THE CONTRACT UP TO THE AMOUNT OF JUDGMENT, UPON EXECUTION OF A PROPER HOLD HARMLESS AGREEMENT.

TO LIEUTENANT COLONEL EDDIE L. MORRIS:

YOUR LETTER DATED DECEMBER 20, 1971, WITH ENCLOSURES, ADDRESSED THROUGH CHANNELS TO HEADQUARTERS, DEPARTMENT OF THE ARMY, CONCERNING FINAL PAYMENT ON CONTRACT NO. DACW56-68-C-0235, WAS FORWARDED HERE FOR CONSIDERATION BY LETTER DATED JANUARY 19, 1972, BY THE OFFICE OF THE CHIEF OF ENGINEERS, FILE DAEN-GCK.

THE CONTRACT WAS ENTERED INTO ON MAY 29, 1968, BY E. W. BLAIR, INC., AND THE UNITED STATES FOR CONSTRUCTION OF ACCESS ROADS AT DIERKS DAM AND RESERVOIR IN ARKANSAS, FOR A CONTRACT PRICE OF APPROXIMATELY $582,985.50. WESTERN CASUALTY AND SURETY COMPANY PROVIDED THE PAYMENT AND PERFORMANCE BONDS ON THE CONTRACT. ALL WORK UNDER THE CONTRACT HAS BEEN COMPLETED AND ACCEPTED, AND THERE REMAINS DUE AND PAYABLE THE SUM OF $29,343.40.

YOU ADVISE THAT THE SURETY HAS CLAIMED THIS AMOUNT BECAUSE OF PAYMENTS IT HAS MADE TO MATERIALMEN UNDER THE PAYMENT BOND IT EXECUTED. YOU FURTHER ADVISE THAT THE SURETY HAS AGREED TO INDEMNIFY THE CORPS FROM ANY LIABILITY TO THE CONTRACTOR, UP TO THE AMOUNT PAID BY THE CORPS TO THE SURETY, IF THE BALANCE OF THE CONTRACT IS PAID TO IT. YOUR REPORT ALSO INDICATES THAT WESTERN CASUALTY HAS OBTAINED JUDGMENTS FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF OKLAHOMA DECLARING THAT IT HAS A "PRIOR AND SUPERIOR RIGHT OVER THAT OF E. W. BLAIR, INC. TO ANY FUNDS DUE OR TO BECOME DUE" UNDER THIS CONTRACT BY VIRTUE OF THE PAYMENTS IT HAS MADE, UP TO $30,834.69.

YOU STATE THAT YOU HAVE BEEN UNABLE TO LOCATE MR. BLAIR TO OBTAIN HIS SIGNATURE ON THE FINAL PAYMENT ESTIMATE, AND REQUEST OUR ADVICE AS TO WHETHER YOU MAY PAY THE CONTRACT BALANCE TO THE SURETY NOTWITHSTANDING THE LACK OF A SIGNED FINAL PAYMENT ESTIMATE FROM THE CONTRACTOR.

IN THE CIRCUMSTANCES AND IN VIEW OF THE JUDGMENTS IN THE MATTER, THE SURETY MAY, UPON EXECUTION OF A PROPER HOLD HARMLESS AGREEMENT, BE PAID ANY AMOUNT REMAINING DUE UNDER THE CONTRACT (UP TO THE AMOUNT OF JUDGMENT) LESS ANY CLAIMS WHICH THE GOVERNMENT MAY HAVE AGAINST THE CONTRACTOR. ALTHOUGH YOU STATE THAT YOU ARE NOT AWARE OF ANY INDEBTEDNESS DUE THE GOVERNMENT FROM THE CONTRACTOR, THE INTERNAL REVENUE SERVICE SHOULD BE CONTACTED WITH RESPECT TO POSSIBLE TAX CLAIMS PRIOR TO ANY PAYMENTS TO THE SURETY, THEREBY INSURING THAT THE GOVERNMENT'S INTERESTS ARE PROTECTED.