Liability for Debts Incurred by Contractor

B-192132: Jul 23, 1979

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Shirley Jones
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The former Commissioner of Indian Affairs requested an opinion on whether the Bureau of Indian Affairs (BIA) was liable for various debts incurred by a general contractor of the BIA. BIA had entered into a cost reimbursable contract with the contractor by which the firm agreed to conduct the educational program for Navajo children at Rough Rock Demonstration School in Chinle, Arizona. The contractor incurred obligations in excess of the amounts of its contract, and became heavily indebted to several creditors. The contractor became insolvent and BIA was concerned about the possible liability for the firm's debts. BIA was not responsible for debts to private creditors incurred by its contractor, when there was no express commitment by BIA to guarantee payment of the contractor's debts.