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Request for Entitlement to Proceeds of Contracts

B-201451 Sep 04, 1981
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Highlights

A Navy disbursing officer requested a GAO decision concerning the propriety of paying a claim representing the unpaid balance of two Navy contracts. Two companies contended that they were entitled to the money. Southern Equipment, Inc. contended that it was entitled to the money as the assignee of the proceeds of the two Navy contracts with Magna Cool Corporation. Magna Cool contended that it was entitled to the money because the proceeds involved were not assigned to Southern. Magna Cool has since been dissolved, and the equipment being used under contract now belongs to Southern. The Navy reported that the possibility existed that Southern may have a valid equitable claim for rental payments flowing from the Navy's use of Southern's equipment. GAO investigated the claims and concluded that Southern had not presented sufficient evidence to establish entitlement to the proceeds of the contract because the contracts could not be legally transferred to the assignee. Further, the available evidence did not indicate valid assignment of the contracts proceeds. GAO concluded that Magna Cool's actions raised serious doubts concerning its entitlement to the proceeds of the two contracts. Accordingly, GAO recommended that payment of the proceeds be withheld pending an agreement of the parties or a judgment of a court of competent jurisdiction.

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