Claims for Payment of Balance Due Under Exterior Painting Contract

The final payment of a contract was withheld by the Air Force pending the resolution of conflicting demands for payment. Four parties submitted claims for the amount withheld, including: (1) the bank that was assigned monies due or to become due under the contract; (2) the Internal Revenue Service to cover the contractor's tax indebtedness for failure to pay federal taxes withheld from employees' wages; (3) the Department of Labor for Davis-Bacon Act underpayments; and (4) the surety on the payment bond under the contract for payments made to subcontractors and suppliers and for administrative and legal expenses. Court decisions conflict as to whether the rights of a bank as a contractor's assignee are superior to those of a contractor's payment surety. Without a resolution of the priority between the assignee-bank and the payment surety, none of the other claimants' priorities can be determined since their rights depend on whether the bank or the surety is determined to have priority. GAO was not warranted in rendering a decision authorizing payment since the conflicting court decisions precluded administrative resolution. GAO believed that payment should be withheld pending judicial determination of the rights of the claimants.