[Request for Advance Decision Concerning Forest Service Disbursement of Funds]

The Forest Service requested an advance decision regarding the priority of claims for the disbursement of funds withheld under two contacts between the Forest Service and one of its contractors. The firm filed for bankruptcy and both contracts were terminated for default. One contract balance was claimed by a payment bond surety, the Department of Labor, and a trustee in bankruptcy. GAO determined that Labor's claim for the benefit of unpaid workers prevailed, since laborers have the right to recover unpaid wages from the surety, while the claim of the trustee was subordinate to both. Accordingly, the unpaid wages' claim may be paid in full and the remaining balance may be paid to the surety. With respect to the other contract balance, GAO held that the Forest Service's claim for excess reprocurement costs had priority over the Internal Revenue Service's (IRS) tax claim, the payment bond surety's claim, and the claim of the trustee in bankruptcy. Accordingly, the claim for excess reprocurement costs under the second contract may be paid in full to the Forest Service. GAO also found that the tax claim had priority over other claims; therefore, the remaining balance may be paid to IRS.