Disposition of Retainage Remaining as the Final Balance Due under a Contract in View of Three Conflicting Claims

The Authorized Certifying Officer for the Rocky Mountain Regional Office of the National Park Service requested a decision as to the disposition that should be made of the retainage remaining as the final balance due under a contract in view of three conflicting claims. The Miller Act surety who completed the contract upon the default of the contractor was entitled to reimbursement, free from setoff, of the withholding taxes for which the performance bond was liable. The claim based on expenditures under the payment bond was subject to the Government's right of setoff for debts of the contractor. The Internal Revenue Service's request for offset should be given priority over the indebtedness to the Small Business Administration on the basis of perfected security interest in the contractor's receivables.