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B-186206 1 (1976-07-01)

handle is hein.gao/gaobaddbx0001 and id is 1 raw text is: THE COMPTROLLER GENERAL OF THE UNITED STATES WASH INGTON. D.C. 20548 FILE: B-186206 DATE: July 1, 1976 MATTER OF: Request by United States Department of Agriculture (Forest Service) for collection action against Capitol Indemnity Corporation DIGEST: Where notice of contractor's default is received by contracting officer prior to receipt of IRS setoff request and performance bond surety's refusal to enter into takeover agreement is based on refusal by Forest Service to make available, free from setoff, funds retained under defaulted contract, surety may not be subsequently proceeded against in debt collection action. Department of Agriculture's (Forest Service) request that our Office institute debt collection action on a defaulted contract presents the issue of whether performance bond surety should be proceeded against where: 1. Surety's refusal to enter into a takeover agreement is based on the Government's refusal to make available, free from setoff by the IRS, funds retained under the defaulted contract; 2. Notice of contractor's default is received by the contracting officer prior to his receipt of IRS setoff request. Contract 01-2370 (Brush Creek Road No. 1417) called for construction of 2.03 miles of roadway in the Chequamegon National Forest, approximately 16 miles northwest of Medford, Wisconsin. The contract was awarded by the United States Forest Service on May 3, 1971, in the amount of $85,307.20 to the Midwestern Pacific Corporation (Midwestern). On August 22, 1972, Midwestern declared itself in default and requested that the unpaid balance of the contract (retainage) be paid to its payment and performance bond surety, Capitol Indemnity - 1 -

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