B-177870, MAR 20, 1973

B-177870: Mar 20, 1973

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

SECRETARY: THIS IS IN REPLY TO LETTER 09CA/WHS:PBC DATED JANUARY 18. 000 TO ASSURE COMPLETION OF THE CONTRACT WHICH WAS ACCOMPLISHED FEBRUARY 9. SUBSEQUENT EFFORTS TO LOCATE THE CONTRACTOR HAVE BEEN OF NO AVAIL AND THEREFORE IT IS NOT POSSIBLE TO OBTAIN A RELEASE FROM THE CONTRACTOR OR AN ENDORSEMENT ON ANY CHECK MADE PAYABLE JOINTLY TO ST. SINCE THE ATTEMPT TO LOCATE THE CONTRACTOR SINCE THE CONTRACT WAS COMPLETED MORE THAN FOUR YEARS AGO HAS BEEN UNSUCCESSFUL AND NO CLAIM HAS BEEN RECEIVED FROM THE CONTRACTOR FOR THE FINAL BALANCE DUE. THERE IS NO CLAIM FOR THE MONEY FROM ANYONE OTHER THAN THE SURETY. IN THE CIRCUMSTANCES AND SINCE THE INDEMNIFICATION AGREEMENT WOULD PROTECT THE GOVERNMENT AGAINST A DOUBLE PAYMENT IN THE EVENT THE CONTRACTOR SUBSEQUENTLY WERE TO MAKE CLAIM FOR THE MONEY.

B-177870, MAR 20, 1973

CONTRACTS - PAYMENT OF CONTRACT BALANCE TO SURETY - AGREEMENT TO IDEMNIFY GOVERNMENT DECISION ALLOWING PAYMENT TO ST. PAUL FIRE AND MARINE INSURANCE COMPANY AS SURETY FOR DUNDEE, INC., OF THE BALANCE ON A CONTRACT AWARDED DUNDEE FOR THE CONSTRUCTION OF THE ENLISTED MEN'S BARRACKS AT THE U.S. NAVAL HOSPITAL, PHILADELPHIA, PA., IF ST. PAUL EXECUTES AN AGREEMENT TO INDEMNIFY THE UNITED STATES AGAINST ANY LOSS BY REASON OF THE PAYMENT. WHERE A SURETY HAS PAID OUT SUBSTANTIALLY MORE THAN THE CONTRACT BALANCE, GAO WOULD NOT OBJECT TO PAYMENT TO THE SURETY OF THE CONTRACT BALANCE IF THE SURETY SIGNS AN INDEMNIFICATION AGREEMENT. SEE B 162163, SEPTEMBER 11, 1967.

TO MR. SECRETARY:

THIS IS IN REPLY TO LETTER 09CA/WHS:PBC DATED JANUARY 18, 1973, FROM COUNSEL, NAVAL FACILITIES ENGINEERING COMMAND, CONCERNING PAYMENT TO ST. PAUL FIRE AND MARINE INSURANCE COMPANY (ST. PAUL) AS SURETY FOR DUNDEE, INC. (DUNDEE) OF THE CONTRACT BALANCE OF $7,004.13 UNDER CONTRACT NBY- 71422 FOR THE CONSTRUCTION OF ENLISTED MEN'S BARRACKS AT THE U.S. NAVAL HOSPITAL, PHILADELPHIA, PENNSYLVANIA.

DUNDEE EXPERIENCED DIFFICULTY IN PERFORMING THE CONTRACT AND ALTHOUGH NEVER DEFAULTED ON THE CONTRACT, ST. PAUL HAS REPRESENTED THAT IT EXPENDED AS SURETY MORE THAN $160,000 TO ASSURE COMPLETION OF THE CONTRACT WHICH WAS ACCOMPLISHED FEBRUARY 9, 1968. SUBSEQUENT EFFORTS TO LOCATE THE CONTRACTOR HAVE BEEN OF NO AVAIL AND THEREFORE IT IS NOT POSSIBLE TO OBTAIN A RELEASE FROM THE CONTRACTOR OR AN ENDORSEMENT ON ANY CHECK MADE PAYABLE JOINTLY TO ST. PAUL AND DUNDEE. SINCE THE ATTEMPT TO LOCATE THE CONTRACTOR SINCE THE CONTRACT WAS COMPLETED MORE THAN FOUR YEARS AGO HAS BEEN UNSUCCESSFUL AND NO CLAIM HAS BEEN RECEIVED FROM THE CONTRACTOR FOR THE FINAL BALANCE DUE, IT APPEARS THAT THE CONTRACTOR HAS ABANDONED THE CLAIM. FURTHER, THERE IS NO CLAIM FOR THE MONEY FROM ANYONE OTHER THAN THE SURETY.

COUNSEL HAS INDICATED THAT THE SURETY'S CLAIM TO THE CONTRACT BALANCE HAS BEEN DENIED BECAUSE OF DECISIONS 46 COMP. GEN. 389 (1966); B 163427, MARCH 1, 1968; AND B-168267, NOVEMBER 17, 1969 AND JANUARY 14, 1970. HOWEVER, COUNSEL HAS PROPOSED THAT THE NAVY BE AUTHORIZED IN THIS CASE TO PAY THE SURETY THE CONTRACT BALANCE UPON PROOF OF PAYMENT OF AT LEAST $7,004.13 TO COMPLETE THE WORK AND EXECUTION OF AN AGREEMENT BY THE SURETY INDEMNIFYING THE UNITED STATES AGAINST ANY LOSS BY REASON OF THE PAYMENT.

THE CITED DECISIONS MADE NO MENTION OF ANY INDEMNIFICATION AGREEMENTS. WHERE A SURETY THAT HAD PAID OUT SUBSTANTIALLY MORE THAN THE CONTRACT BALANCE PROPOSED TO FURNISH SUCH AN AGREEMENT WE STATED THAT WE WOULD NOT INTERPOSE ANY OBJECTION TO THE PAYMENT TO THE SURETY OF THE CONTRACT BALANCE AFTER THE DEDUCTION FOR AMOUNTS DUE INTERNAL REVENUE BY THE CONTRACTOR. SEE B-162163, SEPTEMBER 11, 1967, AND THE INDEMNIFICATION AGREEMENT SET FORTH THEREIN.

ACCORDINGLY, IN THE CIRCUMSTANCES AND SINCE THE INDEMNIFICATION AGREEMENT WOULD PROTECT THE GOVERNMENT AGAINST A DOUBLE PAYMENT IN THE EVENT THE CONTRACTOR SUBSEQUENTLY WERE TO MAKE CLAIM FOR THE MONEY, OUR OFFICE WOULD INTERPOSE NO OBJECTION IF A SETTLEMENT WERE ENTERED INTO WITH THE SURETY ALONG THE LINES CONTAINED IN THE CITED INDEMNIFICATION AGREEMENT.