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A contracting officer requested a decision regarding the disbursement priority of funds withheld under an Army contract. The Department of Labor requested that sufficient funds be withheld to cover back wage deficiencies because the contractor had failed to pay wages and overtime in violation of the law. The Internal Revenue Service (IRS) subsequently requested a sum from the Army to satisfy the contractor's tax liability, and the payment bond surety also requested that the Army reimburse the surety for the contractor's bond. GAO stated that available funds should be applied first to the wage underpayments; when Labor's claim is fully paid; IRS should be fully paid; and any remaining funds should go toward payment of the surety if otherwise proper.


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