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[Decision on Proper Distribution of Proceeds Under Contract Between VA and SBA and Subcontract Between SBA and Firm]

B-225115 Feb 20, 1987
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Highlights

The Veterans Administration (VA) requested a decision on the proper distribution of proceeds under a contract between VA and the Small Business Administration (SBA) and on the subcontract between SBA and a prime contractor for the development of gravesites. GAO noted that the surety completed the contract performance requirements when the contract between SBA and the subcontractor was terminated for default. Accordingly, GAO found that VA should distribute the proceeds to the: (1) performance bond surety for the amount of its costs and expenses in completing the contract; and (2) Army Corps of Engineers in full or partial setoff of the debt the prime contractor owed the Corps on another contract. GAO recommended that future agreements: (1) state that payments to the surety in completing a contract under a performance bond not exceed the costs the surety incurred; and (2) include a provision indicating that the surety has priority to contract proceeds for its costs.

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