Claim for Final Payment Under Department of Army Contract

A construction firm filed a claim for final payment under an Army contract involving the satisfactory completion of upgrading three Government-owned wastewater treatment plants. The Army withheld the final payment because one facility was deeded to the local school board, and the Army questioned whether payment would be lawful under the contract in view of statutory prohibitions. Prior decisions indicated that the use of appropriated funds for the permanent improvement of privately owned property in the absence of specific statutory authority would violate the law. One provision of the law has been interpreted to preclude the financing of public improvements on the property of a State or one of its political subdivisions unless the Congress has specifically made such an appropriation. There is no statutory authority to allow the Army to pay for improvements to this facility. The remainder of the contract was valid regarding the other two facilities. Therefore, the firm was entitled to payment for work done on the two facilities, but not for work on the third one. Payment was made to the firm in excess of the costs for the work done on the two plants. Since there was no appropriation under which payment of the claim for work done at the plant in question could be made, the firm was indebted to the United States for the excess payments it received. GAO believed the situation appropriate for filing a report with Congress requesting consideration of the disputed amount as a Meritorious Claim. Accordingly, GAO held that the Army should take no collective action until the end of the next session of Congress.