[Request for Reconsideration of Decision Concerning Payment of Withheld Contract Funds]

An insurance company requested reconsideration of a decision in which GAO held that payment of withheld contract funds which were claimed by a payment bond surety, the Department of Labor, and the Internal Revenue Service (IRS) were payable first to Labor, then to IRS, and finally to the surety. The insurance company, which was the surety, asserted that GAO overlooked certain court decisions which indicate that the surety should get priority over Labor and IRS. GAO found that the Government's right to set off against payments withheld by it and due to the contractor on a construction contract as a result of a separate and independent transaction is superior to all claims of payment bond sureties, no matter when the sureties' claims arose. Accordingly, the prior decision was affirmed.