tion in the order or contract. MS Comp Gen B-119766, 34 Comp Gen 39. 23 July 1954. VII. MISCELLANEOUS A. IN GENERAL § 139. Contractor's and Bidder's Bonds § 141. - Sureties; Rights and Remedies § 141.1. Generally. After completion of construction of a hospital, the contractor assigned to the sureties on its performance bond, the sums remaining due from the hospital contract in consideration of the sureties' payment of claims of materialmen and subcontractors incurred in performance of the contract. However, the contractor owed the government some unpaid income withholding taxes and the government claimed a lien on the unpaid amount due under the contract superior to the assignment to, or lien of, the sureties. The government also asserted it was entitled to priority in payment over the sureties by reason of the so-called priority statute, sec 3466, R.S., 31 USC § 191. In addition the government claimed the sureties were liable on their performance bond for the amount of unpaid withholding taxes owed by the taxpayer arising from performance of the hospital contract. Held that: upon the sureties' performance under their bond obligation, they acquired an equitable lien against any sum remaining in the hands of the one for whose protection the bond was given. This lien relates back to the date of the contract and is superior to any lien arising thereafter. It is superior to the government's lien for unpaid taxes. (Citing Prairie State Nat. Bank of Chicago v. U. S., 164 US 227, 41 L ed 412, 17 S Ct 142; Henningsen v. U. S. Fidelity & Guaranty Co., 208 US 404, 52 L ed 547, 28 S Ct 389; American Surety Co. of New York v. City of Louisville M. H. Comm., 63 F Supp 486, affd Glenn v. American Surety Co., 160 F2d 977; U. S. Fidelity & Guaranty Co. v. U. S., 201 F2d 118; and other cases.) the government obtains no priority under the priority statute since the statute applies only to cases involving some type of insolvency court proceedings disposing of an insolvent's estate. (Citing Conard v. Atlantic Insurance Co., 1 Pet 386, 7 L ed 189; U. S. v. Oklahoma, 261 US 253, 67 L ed 638, 43 S Ct 295; and other cases.) - the sureties were not liable on their bond for the unpaid taxes arising from the hospital contract. The sums retained by the hospital and assigned by the taxpayer to the sureties were for payment of materialmen and sub-contractors and no part of this sum was used to pay wages of employees of the contractor. But even if the sureties had paid wages owing to the employees of the taxpayer, the sureties still would not be liable for the taxes in this case. (Citing United States Fidelity and Guaranty Co. v. An assignee of monies due under a government contract claimed monies retained under a provision of the contract for retaining a percentage of progress payments until completion of the contract. The contract had been terminated because of default by the contractor and contained a provision that upon termination for default, if the cost of completion, plus all payments otherwise made to the contractor, exceeded the contract price, the excess costs shall be charged to the contractor and the contractor or his surety, if any, shall pay such amount to the government upon demand. Under the terms of the performance bonds there was no obligation on the part of the sureties to complete the contract work; the sureties' obligation under such bonds was only to pay any excess competition costs incurred by the government. The sureties had refused to complete the work and completion of the work under the contract by a replacing contractor would cost more than the contract balance remaining in the hands of the government. Held: If, as the assignee requested, the contract belances were paid to the assignee instead of being applied in reduction of the completion costs, the performance bond sureties would be released from liability for excess completion costs to that extent. Accordingly, the assignee's claim to the contract balances is denied to the extent that such balances are necessary to defray excess completion costs. (Citing Modern Industrial Bank v. U. S., 101 Ct Cl 808; Hardin County Savings Bank v. United States, 106 Ct Cl 577, 596, 65 F Supp 1017.) MS Comp Gen B-120952, 34 Comp Gen 143. 27 September 1954. The surety on bonds guaranteeing performance of two construction contracts completed both contracts after the contractors defaulted but not until after the completion date in each contract. The government assessed against the surety not only the excess cost to the government incident to the contractors' default, but also liquidated damages for the delay in completion. The contracts provided for the payment of both the excess cost of completion and also for the payment of liquidated damages for delay. However, in this respect the contracts differed from the standard form of government construction contract. Section 54.1 of the Rules and Regulations relative to Public Contracts, Title 41 USCA Appx provides in part that except as otherwise authorized certain standard form contracts should be used without deviation. Held: The surety cannot avoid liability for liquidated damages for delay in completion on the ground that the contracts deviated from the standard form. The regulations requiring the use of standard form contracts were for the benefit of the government and a third party cannot complain of any deviation therefrom. If a contracting officer had failed to comply with the regulations, the government might escape liability on the ground that he was not authorized to enter into a contract not conforming to them. But, since the regulations were promulgated for the benefit of the government, and not for the benefit of anyone else, the other party to the contract cannot complain that the regulations were not complied with. Moreover, it must be presumed that when the surety executed its performance bonds it was aware of the terms of the contract and was thus aware that the contracts provided not only for the assessment of excess costs for the default of the contractors, but also for the assessment of liquidated damages. The surety having executed the bonds with knowledge of the contracts, and having received the premiums for the execution of the bonds, it is estopped to assert that the contracts were executed without authority and were not binding. Moreover, after default by the original contractors, supplemental contracts were entered into between the government and the surety which provided that additional time would not be allowed and that no change would be made in the contract amount and that all other terms and conditions of the contract should remain the same. So, whether the surety had actual knowledge of the terms of the original contracts at the time it executed its performance bonds, it certainly had knowledge of them at the time it entered into the supplemental agreements and they provided, in effect, that the contract provisions authorizing the assessment of both excess costs and liquidated damages should remain in full force and effect. (Citing U. S. v. American Surety Co., 322 US 96, 88 L ed 1158, 64 S Ct 866; U. S. v. New York & Porto Rico S. S. Co., 239 US 88, 60 L ed 161, 36 S Ct 41; Perkins v. Lukens Steel Co., 310 US 113, 84 L ed 1108, 60 S Ct 869.) Hartford Accident & Indemnity Co. v. U. S. (Ct Cl Nos. 49844, 49845) 127 F Supp 565. In an application for performance and payment bonds, a contractor agreed to indemnify his surety against all losses sustained by reason of the execution of the bonds and assigned to the surety certain sums to become due under the contract. After the contract had been performed, the surety was called upon to pay claims for labor and materials. Before any payments had been made by the surety the United States filed notices of tax liens against the contractor. Subsequently the contractor was adjudicated bankrupt. A check for the balance due under the contract was delivered to the trustee in bankruptcy. Both the government, by reason of its tax liens, and the surety, by reason of its payments under the bond, filed claims with the trustee. Held: The government's tax claims had priority. Under sec 571 of the Bankruptcy Act, 11 USCA § 931, the surety was limited to a right of subrogation to the position of the creditors of the debtor to the extent that the surety paid the creditors. The laborers and materialmen paid by the surety had no enforceable lien. The best position of any of the creditors paid by the surety to which it might be subrogated was a right to priority by sec 64 of the Act. The government was the holder of valid, perfected tax liens. Such a lien claimant has a position in bankruptcy superior to priority claimants whose claims are unsupported by perfected liens. Phoenix Indemnity Co. v. Earle (CA Ore, 1955) 218 F2d 645. B. EMPLOYEES OF CONTRACTORS; HOURS OF LABOR § 149. In General § 149.35. Wages, generally. The specifications of a construction contract set forth $2.85 as the minimum hourly rate of wages for carpenters, which figure had been determined by the Department of Labor as the prevailing rate prior to the time the contract was awarded. The same specifications also provided that while the wage rates given were the minimum rates required by the specifications to be paid during the life of the contract, it was the responsibility of bidders to inform themselves as to local labor conditions and prospective changes or adjustment of wage rates and that no increase in the contract price would be allowed or authorized on account of payment of wages in excess of those listed. Based upon the latter provision, the contractor contacted the local union and ascertained that notwithstanding the minimum wage rate of $2.85 set forth in the contract, the actual rate being paid at the site was $2.75 per hour, which fact was confirmed by the Construction Industry Stabilization Commission. Also, the Department of Labor formally acknowledged that due to inadvertence the rate of $2.85 was in error and that it should have been shown as $2.75. Held: While technically there was a violation of the terms of the contract specifications with regard to the amount of wages agreed upon for carpenters, the wages paid were actually the prevailing wages, as contemplated by the Davis-Bacon Act, and subsequently confirmed by the Department of Labor. Thus, there would not be any requirement for collection against the contractor for the benefit of its employees. Furthermore, there is no legal basis for requiring an equitable adjustment in the contract price. MS Comp Gen B-119373. 27 July 1954. § 149.37. Withholding of payments under contracts to insure payment of wages. The provisions of construction contracts (U. S. Standard Form Nos. 23 and 23A, as revised by General Regulations Nos. 9 and 13 of 24 July 1951 and 19 March 1953) authorize the contracting officer to withhold from the contractor so much of the accrued payments or advances as may be considered necessary to pay laborers and mechanics "the full amount of wages required by the contract." A decision was requested as to the proper disposition of funds so withheld. Held: There is no question that the contract language would vest in the contracting officer a legal, valid right, independent of statute, to withhold monies due a contractor in any instance where there is a clear failure to pay laborers and mechanics the full amount of wages required by the contract. However, that fact alone does not cloak withholdings with a Davis-Bacon Act character so as to permit their distribution to aggrieved laborers and mechanics by the General Accounting Office under the direct payment provisions of sec 2 of that act. Express statutory authority must exist for the release of such withheld monies by the government directly to laborers and mechanics who have failed to receive the full amount of their wages. Construing sec 1 of the Davis-Bacon Act which provides for withholding of the difference between the rates of wages required by the contract and those received, together with sec 2 of the act, which directs the Comptroller General to pay directly from such withholdings any wages found due, it is concluded that any amounts withheld from accrued payments or advances, whether they represent wage underpayments, or the nonpayment of any wages, are to be handled as trust funds in accordance with procedures prescribed by Circular Letter A-34106, 28 Feb 1936. (To the extent that the decision in 21 Comp Gen 197 is inconsistent it should no longer be followed.) Held also: With respect to the employment of contractors' employees in excess of eight hours per day, the Eight-Hour Law, 40 USC 324–326, does not require the payment of time and one-half but merely permits the employment of laborers and mechanics in excess of eight hours per day upon the condition that one and onehalf times the regular wage rate be paid. While the employment of workers in excess of eight hours per day is precluded by the act, no remedy is provided the government other than the imposition. of the statutory penalty unless overtime for excess work is paid. The Eight-Hour Law imposes no obligation on the government to distribute earned monies of contractors to aggrieved workers for failure to pay overtime compensation. Thus, there is no legal basis for considering overtime pay contemplated by the Eight-Hour Law as an extension of the prevailing wage rate under the Davis-Bacon Act, especially since the two acts are not in pari materia or coextensive. While, as a matter of contract, there may be withheld from monies due a contractor amounts representing nonpayments of overtime compensation since there is clearly a failure of consideration under the contract, there is no authority of law whereby the Comptroller General or any other agency of the government could distribute such withholdings to workers who have not been paid overtime for work in excess of eight hours per day. (Citing 20 Comp Gen 233.) MC Comp Gen B-117954, 33 Comp Gen 496. 20 April 1954. § 149.39. Overtime wages. See MS Comp Gen B-117954, 33 Comp Gen 496, supra § 149.37. § 149.57. Hospitals, medical and dental treatment. There is no legal objection to the Coast Guard requesting the Public Health Service to furnish such medical services as are necessary for the treatment of civilian employees of a cost-plus-a-fixed-fee contractor, the contract being performed in a foreign country. From the viewpoint of economy, this would appear to be particularly desirable if Public Health Service facilities or doctors are reasonably available. If no Public Health Service facilities or doctors are available in the vicinity of the project, and none are being furnished to treat Coast Guard personnel at such projects, it might not be economical for the government to assign Public Health Service doctors to the project specifically for the purpose of treatment of contractors' employees. In the event that such facilities or doctors are |