Skip to main content

B-155106, DEC. 23, 1964

B-155106 Dec 23, 1964
Jump To:
Skip to Highlights

Highlights

WE HAVE ALSO RECEIVED A COPY OF A LETTER TO YOUR DEPARTMENT FROM DANIELS DATED DECEMBER 4. THE RECORD INDICATES THAT THE SMALL BUSINESS ADMINISTRATION HAS ADVISED YOUR DEPARTMENT THAT DANIELS IS INDEBTED TO SBA FOR $1. DANIELS HAS ALLEGED THAT YOUR DEPARTMENT HAS NO RIGHT TO SET OFF THE INDEBTEDNESS AND YOU HAVE EXPRESSED RELUCTANCE TO HONOR SBA'S REQUEST FOR A SET OFF WITHOUT THE CONSENT OF DANIELS. IN THIS CONNECTION YOU HAVE BROUGHT TO OUR ATTENTION CLAUSES 7 (E) AND 8 (A) OF THE GENERAL PROVISIONS (CONSTRUCTION CONTRACT) OF DANIELS' CONTRACT WHICH PROVIDE: "/E) UPON COMPLETION AND ACCEPTANCE OF ALL WORK. THE AMOUNT DUE THE CONTRACTOR UNDER THIS CONTRACT SHALL BE PAID UPON THE PRESENTATION OF A PROPERLY EXECUTED VOUCHER AND AFTER THE CONTRACTOR SHALL HAVE FURNISHED THE GOVERNMENT WITH A RELEASE.

View Decision

B-155106, DEC. 23, 1964

TO THE HONORABLE, THE SECRETARY OF THE INTERIOR:

WE REFER TO YOUR LETTER DATED SEPTEMBER 2, 1964, FROM THE ASSISTANT SECRETARY OF THE INTERIOR AND SUBSEQUENT CORRESPONDENCE RECEIVED BY OUR OFFICE ON DECEMBER 3, 1964, FROM MR. STEWART MCDONALD, ASSISTANT TO THE DIRECTOR, OFFICE OF SURVEY AND REVIEW, OF YOUR DEPARTMENT, REGARDING THE ALLOCATION OF $1,839.24, RETAINED BY THE NATIONAL PARK SERVICE UNDER CONTRACT NO. 14-10-0131-1128, WITH WARD DANIELS, D/B/A DANIELS BUILDING SUPPLY COMPANY, NAGS HEAD, NORTH CAROLINA, (HEREAFTER REFERRED TO AS DANIELS). WE HAVE ALSO RECEIVED A COPY OF A LETTER TO YOUR DEPARTMENT FROM DANIELS DATED DECEMBER 4, 1964.

THE RECORD INDICATES THAT THE SMALL BUSINESS ADMINISTRATION HAS ADVISED YOUR DEPARTMENT THAT DANIELS IS INDEBTED TO SBA FOR $1,839.24, AND SBA HAS REQUESTED THAT THIS AMOUNT BE SET OFF FROM PAYMENTS DUE TO DANIELS UNDER CONTRACT NO. 14-10-0131-1128, WITH YOUR DEPARTMENT. THE SBA CLAIM AGAINST DANIELS ARISES OUT OF THE ASSIGNMENT TO SBA BY THE WARREN LUMBER COMPANY, INC., AS SECURITY FOR A LOAN, OF AN ACCOUNT RECEIVABLE FROM DANIELS. DANIELS HAS ALLEGED THAT YOUR DEPARTMENT HAS NO RIGHT TO SET OFF THE INDEBTEDNESS AND YOU HAVE EXPRESSED RELUCTANCE TO HONOR SBA'S REQUEST FOR A SET OFF WITHOUT THE CONSENT OF DANIELS. IN THIS CONNECTION YOU HAVE BROUGHT TO OUR ATTENTION CLAUSES 7 (E) AND 8 (A) OF THE GENERAL PROVISIONS (CONSTRUCTION CONTRACT) OF DANIELS' CONTRACT WHICH PROVIDE:

"/E) UPON COMPLETION AND ACCEPTANCE OF ALL WORK, THE AMOUNT DUE THE CONTRACTOR UNDER THIS CONTRACT SHALL BE PAID UPON THE PRESENTATION OF A PROPERLY EXECUTED VOUCHER AND AFTER THE CONTRACTOR SHALL HAVE FURNISHED THE GOVERNMENT WITH A RELEASE, IF REQUIRED, OF ALL CLAIMS AGAINST THE GOVERNMENT ARISING BY VIRTUE OF THIS CONTRACT, OTHER THAN CLAIMS IN STATED AMOUNTS AS MAY BE SPECIFICALLY EXCEPTED BY THE CONTRACTOR FROM THE OPERATION OF THE RELEASE. IF THE CONTRACTOR'S CLAIM TO AMOUNTS PAYABLE UNDER THE CONTRACT HAS BEEN ASSIGNED UNDER THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED (31 U.S.C. 203, 41 U.S.C. 15), A RELEASE MAY ALSO BE REQUIRED OF THE ASSIGNEE.

"/A) PURSUANT TO THE PROVISIONS OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED (31 U.S.C. 203, 41 U.S.C. 15), IF THIS CONTRACT PROVIDES FOR PAYMENTS AGGREGATING $1,000 OR MORE, CLAIMS FOR MONEYS DUE OR TO BECOME DUE THE CONTRACTOR FROM THE GOVERNMENT UNDER THIS CONTRACT MAY BE ASSIGNED TO A BANK, TRUST COMPANY, OR OTHER FINANCING INSTITUTION, INCLUDING ANY FEDERAL LENDING AGENCY AND MAY THEREAFTER BE FURTHER ASSIGNED AND REASSIGNED TO ANY SUCH INSTITUTION. ANY SUCH ASSIGNMENT OR REASSIGNMENT SHALL COVER ALL AMOUNTS PAYABLE UNDER THIS CONTRACT AND NOT ALREADY PAID, AND SHALL NOT BE MADE TO MORE THAN ONE PARTY, EXCEPT THAT ANY SUCH ASSIGNMENT OR REASSIGNMENT MAY BE MADE TO ONE PARTY AS AGENT OR TRUSTEE FOR TWO OR MORE PARTIES PARTICIPATING IN SUCH FINANCING. UNLESS OTHERWISE PROVIDED IN THIS CONTRACT, PAYMENTS TO AN ASSIGNEE OF ANY MONEYS DUE OR TO BECOME DUE UNDER THIS CONTRACT SHALL NOT, TO THE EXTENT PROVIDED IN SAID ACT, AS AMENDED, BE SUBJECT TO REDUCTION OR SETOFF. (THE PRECEDING SENTENCE APPLIES ONLY IF THIS CONTRACT IS MADE IN TIME OF WAR OR NATIONAL EMERGENCY AS DEFINED IN SAID ACT AND IS WITH THE DEPARTMENT OF DEFENSE, THE GENERAL SERVICES ADMINISTRATION, THE ATOMIC ENERGY COMMISSION, THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, THE FEDERAL AVIATION AGENCY, OR ANY OTHER DEPARTMENT OR AGENCY OF THE UNITED STATES DESIGNATED BY THE PRESIDENT PURSUANT TO CLAUSE 4 OF THE PROVISO OF SECTION 1 OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED BY THE ACT OF MAY 15, 1951, 65 STAT. 41.)"

YOU HAVE REQUESTED OUR VIEWS ON THE MATTER. SUBSEQUENT TO YOUR SUBMISSION WE WERE ADVISED BY MR. MCDONALD OF YOUR DEPARTMENT THAT ALL ASSIGNMENTS UNDER CONTRACT NO. 14-10-0131-1128, HAVE BEEN PAID. DANIELS' LETTER OF DECEMBER 4, 1964, ALLEGES THAT THE STATED INDEBTEDNESS TO WARREN OF $1,839.24 IS INCORRECT.

IN VIEW OF THE ADVICE FROM YOUR DEPARTMENT THAT ALL ASSIGNMENTS IN THIS CASE HAVE BEEN PAID, THERE WOULD, OF COURSE, BE NO PROHIBITION AGAINST A SET OFF PURSUANT TO THE PROVISIONS OF CLAUSE 7 (E) AND CLAUSE 8 (A) QUOTED ABOVE. SEE 35 COMP. GEN. 104. ALSO APPLICABLE TO THIS CASE WOULD BE THE FOLLOWING STATEMENTS FROM OUR DECISION B 154909, SEPTEMBER 11, 1964, IN WHICH WE CONSIDERED THE EFFECT OF A NO SET OFF PROVISION IN NATIONAL PARK SERVICE CONTRACTS IN A CLAUSE WHICH IS SUBSTANTIALLY THE SAME AS CLAUSE 8 OF DANIELS' CONTRACT:

"THE "NO SETOFF" PROVISION OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, APPROVED OCTOBER 9, 1940, CH. 779, 54 STAT. 1029, AS AMENDED BY THE ACT OF MAY 15, 1951, CH. 75, 65 STAT. 41, 31 U.S.C. 203, 41 U.S.C. 15, READS IN PERTINENT PART AS FOLLOWS:

"ANY CONTRACT OF THE DEPARTMENT OF DEFENSE, THE GENERAL SERVICES ADMINISTRATION, THE ATOMIC ENERGY COMMISSION, OR ANY OTHER DEPARTMENT OR AGENCY OF THE UNITED STATES DESIGNATED BY THE PRESIDENT, * * * MAY * * * PROVIDE THAT PAYMENTS TO BE MADE TO THE ASSIGNEE OF ANY MONEYS DUE OR TO BECOME DUE UNDER SUCH CONTRACT SHALL NOT BE SUBJECT TO REDUCTION OR SET- OFF * * *.'

"BY EXEC. ORDER NO. 10824, MAY 29, 1959, 24 FED.REG. 4447 AND EXEC. ORDER NO. 10840, SEPTEMBER 30, 1959, 24 FED.REG. 7939, THE PRESIDENT DESIGNATED THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION AND THE FEDERAL AVIATION AGENCY AS AGENCIES TO WHICH THE QUOTED LANGUAGE SHOULD APPLY. THE PRESIDENT HAS MADE NO OTHER SUCH DESIGNATIONS. IN THIS REGARD, SUBSECTION 8 (A) OF STANDARD FORM 32 OF THE FEDERAL PROCUREMENT REGULATIONS (FPR CIRC. 21, OCTOBER 1961) SPECIFICALLY PROVIDES IN PERTINENT PART:

"/THE PRECEDING SENTENCE (PROVIDING FOR NO REDUCTION OR SETOFF) APPLIES ONLY IF THIS CONTRACT * * * IS WITH THE DEPARTMENT OF DEFENSE, THE GENERAL SERVICES ADMINISTRATION, THE ATOMIC ENERGY COMMISSION, THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, THE FEDERAL AVIATION AGENCY, OR ANY OTHER DEPARTMENT OR AGENCY OF THE UNITED STATES DESIGNATED BY THE PRESIDENT PURSUANT TO CLAUSE 4 OF THE PROVISO OF SECTION 1 OF THE ASSIGNMENT OF CLAIMS ACT OF 1940, AS AMENDED * * *).'

"THE ABOVE-QUOTED LANGUAGE WAS INCLUDED IN CLAUSE 8 OF THE GENERAL PROVISIONS OF CONTRACT 14-10-0131-1155.

"THEREFORE, THE RESTRICTION AGAINST SETOFF HAS NO APPLICATION TO NATIONAL PARK SERVICE CONTRACTS * * *.'

THE RECORD BEFORE US IS NOT ADEQUATE TO PERMIT A FINAL DETERMINATION AS TO WHETHER DANIELS IS IN FACT INDEBTED TO SBA AT THIS TIME. WE NOTE THAT A MEMORANDUM PREPARED BY MR. JAMES B. MYERS, SUPERINTENDENT, CAPE HATTERAS NATIONAL SEASHORE, MANTEO, NORTH CAROLINA, INDICATES THAT DANIELS HAS ADMITTED THE INDEBTEDNESS TO SBA AND THAT DANIELS PROPOSED TO PAY THE SBA INDEBTEDNESS IN MONTHLY INSTALLMENTS. HOWEVER, THERE MAY BE SOME CONDITIONS IN THE AGREEMENT BETWEEN SBA AND WARREN AS TO WHEN THE SECURITY PLEDGED BY WARREN COULD BE APPLIED BY SBA IN SATISFACTION OF WARREN'S DEBT. IN THE ABSENCE OF ANY SPECIAL AGREEMENT BETWEEN WARREN AND SBA AS TO WHEN WARREN'S SECURITY FOR THE LOAN COULD BE USED, SBA APPEARS TO BE ENTITLED, IN VIEW OF WARREN'S DELINQUENCY IN PAYMENTS ON THE SBA LOAN, TO LOOK TO THE SECURITY PLEDGED BY WARREN AND IN THAT SITUATION DANIELS WOULD BE INDEBTED TO THE GOVERNMENT. ASSUMING DANIELS IS INDEBTED TO THE GOVERNMENT AT THIS TIME, YOUR DEPARTMENT WOULD HAVE THE RIGHT TO SET OFF THIS INDEBTEDNESS AGAINST THE $1,839.24, DUE DANIELS UNDER CONTRACT NO. 14 -10-0131-1128. SEE GRATIOT V. UNITED STATES, 40 U.S. 336 (1841); MCKNIGHT V. UNITED STATES, 98 U.S. 179 (1878); BARRY V. UNITED STATES, 229 U.S. 47 (1913). SEE ALSO GENERALLY 41 COMP. GEN. 178. WE WILL LEAVE FOR YOUR DETERMINATION WHETHER THERE ARE ANY SPECIAL CONDITIONS ATTACHED TO THE USE BY SBA OF THE SECURITY PLEDGED BY WARREN AND WHETHER IN VIEW OF DANIELS' LETTER OF DECEMBER 4, 1964, DANIELS IS INDEBTED TO SBA FOR $1,839.24.

GAO Contacts

Office of Public Affairs