B-141143, DEC. 8, 1960

B-141143, DEC. 8, 1960

TO MARYLAND CASUALTY COMPANY:

WE REFER AGAIN TO YOUR LETTER OF OCTOBER 13, 1960, WITH ENCLOSURES, AND TO YOUR LETTERS OF NOVEMBER 22 AND 29, WITH ENCLOSURES, CONCERNING YOUR CLAIM AS COMPLETING SURETY IN CONNECTION WITH THE ABOVE-CAPTIONED MATTER.

CONTRACT NO. 14-20-600-4215 WAS AWARDED ON APRIL 9, 1958, TO HUGH AND PHILIP N. RICHEY, D/B/A RICHEY CONSTRUCTION COMPANY, BY THE BUREAU OF INDIAN AFFAIRS, FOR CERTAIN ROAD CONSTRUCTION AND RELATED WORK. YOUR FIRM WAS THE SURETY ON THE PERFORMANCE AND PAYMENT BONDS FURNISHED BY THE CONTRACTOR IN ACCORDANCE WITH THE REQUIREMENTS OF THE CONTRACT.

THE CONTRACTOR'S RIGHT TO PROCEED WAS TERMINATED FOR DEFAULT ON NOVEMBER 15, 1958. ON THE SAME DAY AN AGREEMENT WAS ENTERED INTO UNDER WHICH THE SURETY UNDERTOOK TO HAVE THE CONTRACT WORK SATISFACTORILY COMPLETED AND THE GOVERNMENT AGREED TO MAKE PAYMENT IN ACCORDANCE WITH THE FOLLOWING:

"C. CONTRACT FUND. THE GOVERNMENT AGREES THAT IT WILL PAY DIRECTLY TO THE SURETY THE COST INCURRED BY THE SURETY IN COMPLETING THE WORK UNDER THE CONTRACT AND IN PAYING BILLS FOR MATERIALS, LABOR, RENTAL ON EQUIPMENT, ETC. ON THE CONTRACT LEFT UNPAID BY THE CONTRACTOR AT TIME OF DEFAULT, AND INCLUDING ALL CORRECTIVE AND FINISHING WORK LEFT UNDONE, FROM ANY AMOUNT REMAINING IN THE CONTRACT FUND AFTER DEDUCTING THE AMOUNT OF ANY DAMAGES SUFFERED BY THE GOVERNMENT AS A RESULT OF THE CONTRACTOR'S DEFAULT AND THE COMPLETION OF THE WORK BY THE SURETY. * * * ANY BALANCE REMAINING IN THE CONTRACT FUND, AFTER DEDUCTING THE AMOUNT OF DAMAGES SUFFERED BY THE GOVERNMENT AND THE AMOUNT PAID TO THE SURETY AS STATED ABOVE, SHALL BE PAID TO THE CONTRACTOR. * * *.'

AFTER SATISFACTORY COMPLETION OF THE CONTRACT WORK AND SOME PAYMENTS TO THE SURETY PURSUANT TO THE COMPLETION AGREEMENT, THERE REMAINS IN THE CONTRACT FUND, EXCLUDING AMOUNTS CLAIMED BY THE GOVERNMENT FOR LIQUIDATED DAMAGES AND UNPAID TELEPHONE SERVICES WHICH THE SURETY HAS AGREED MAY BE DEDUCTED, THE SUM OF $14,903.88. IT IS OUR UNDERSTANDING THAT THE BUREAU OF INDIAN AFFAIRS HAS OFFERED TO RELEASE TO THE SURETY IN FULL AND FINAL SETTLEMENT $8,123.91 OF THAT AMOUNT, THE REMAINDER TO BE APPLIED TO A TAX LEVY AND AN UNSETTLED LABOR CLAIM AGAINST THE ORIGINAL CONTRACTOR. IT IS YOUR POSITION, HOWEVER, THAT UNDER THE CLEAR LANGUAGE OF THE COMPLETION AGREEMENT QUOTED ABOVE YOU ARE ENTITLED TO THE $14,903.88.

WE DO NOT CONTEST THE RIGHT OF THE COMPLETING SURETY TO ANY AMOUNT REMAINING IN THE CONTRACT FUND UP TO THE COST OF COMPLETION, NOTWITHSTANDING ANY OUTSTANDING TAX OR LABOR CLAIMS AGAINST THE ORIGINAL CONTRACTOR. WE SHALL BE GLAD TO CONSIDER ANY FURTHER CLAIMS ON THIS BASIS WHEN PROPERLY PRESENTED. IT REMAINS OUR POSITION, HOWEVER, ASSTATED IN OUR DECISION B-141143, AUGUST 10, 1960 (40 COMP. GEN. 85), A COPY OF WHICH WAS FORWARDED TO YOU BY LETTER OF OCTOBER 7, 1960, THAT ANY CLAIM WHICH THE SURETY MAY HAVE AS A RESULT OF EXPENDITURES UNDER THE PAYMENT BOND AGAINST UNDISTRIBUTED CONTRACT FUNDS REPRESENTING RETAINED PERCENTAGES OR EARNINGS WITHHELD AGAINST THE ORIGINAL CONTRACTOR ARE SUBJECT TO THE CLAIMS OF THE UNITED STATES. FURTHER, AS STATED IN THE CITED DECISION, WE CONTEND THAT THE FOREGOING RULE IS FOR APPLICATION EVEN IN THE FACE OF AN APPARENT AGREEMENT BY THE ADMINISTRATIVE AGENCY TO THE CONTRARY.

IN VIEW OF THE FOREGOING, WE MUST, EXCEPT TO THE EXTENT THAT THE CLAIM IN EXCESS OF $8,123.91 DERIVES SOLELY FROM COSTS INCURRED BY THE SURETY UNDER THE PERFORMANCE BOND, MAINTAIN THE POSITION THAT YOUR CLAIM TO THE $14,903.88 IS SUBJECT TO THE SET OFFS PROPOSED BY THE BUREAU OF INDIAN AFFAIRS.