In this final decision and order we affirm the ALJ's conclusions and order but supplement the legal principles and authority he cited.

   The Board has jurisdiction to hear and decide appeals taken from ALJs' decisions and orders concerning questions of law and fact arising under the DBA and the numerous related Acts which incorporate DBA prevailing wage requirements. See 29 C.F.R. § 5.1; 29 C.F.R. § 6.34; 29 C.F.R. § 7.1(b).

   In reviewing an ALJ's decision, the Board acts with "all the powers [the Secretary of Labor] would have in making the initial decision. . . ." 5 U.S.C.A. § 557(b) (West 1996). See also 29 C.F.R. § 7.1(d) ("In considering the matters within the scope of its jurisdiction the Board shall act as the authorized representative of the Secretary of Labor. The Board shall act as fully and finally as might the Secretary of Labor concerning such matters.") Thus, "the Board reviews the ALJ's findings de novo." Lloyd T. Griffin, Jr., et al., ARB Nos. 00-32, -33, ALJ No. 91-DBA-94, slip op. at 2 (ARB May 30, 2003); Thomas & Sons Bldg. Contractors, Inc., et al., ARB No. 00-050, ALJ No. 1996-DBA-37, slip op. at 4 (ARB Aug. 27, 2001). See also Sundex, Ltd. and Joseph J. Bonavire, ARB No. 98-130, ALJ No.1994-DBA-58, slip op. at 4 and cases cited therein (ARB Dec. 30, 1999).

   I. Factual History

   The parties reached an agreement concerning the material facts. See "Partial Consent Findings." Reference in this decision to these consent findings or the accompanying attached exhibits areas follows: "PCF at __, para. __" and "Ex. __." The ALJ adopted these consent findings in toto. D. & O. at 2-4.

   In short, this dispute arose as follows. On September 26, 1996, the Coast Guard awarded a Federal construction contract in the amount of $5,224,600 to Brunoli for renovations to Chase Hall, a Coast Guard Academy food services facility located in New London, Connecticut. Id. at 2. The contract was subject to and contained the labor standards provisions of the Act. Ex. 1 at C-1(m). Attached to the contract was the applicable DBA wage determination specifying the prevailing wage rates required to be paid all laborers and mechanics working on the Chase Hall renovation project. D. & O. at 2, para. 3. As the prime contractor on the project, Brunoli was obligated under the Act and the terms of the contract to make or ensure proper payment of the prevailing wages to employees of all subcontractors, as well as its own employees. Ex. 1 at C-1(m).

   The Takeover Agreement recites that the Coast Guard requested Liberty Mutual "under its Performance Bond to assist in the completion of the work remaining to be performed under the Contract." Id. at Ex. 5, p. 4. The Takeover Agreement further noted that Liberty Mutual "is interested in completing the Contract in order to avoid the delay and inconvenience of re-letting by the [Coast Guard] and based on assurances that in doing so it will receive the contract and retainage payments as hereafter set forth . . . ." Id. Liberty Mutual agreed to "arrange for completion of the work required of the Original Contractor [Brunoli] under the Contract (and modifications thereof) in accordance with the terms and conditions of the Contract." Ex. 5 at 5, ¶ 1 (emphasis added). Further, the Takeover Agreement expressly incorporated all documents that were part of the original Coast Guard/Brunoli contract for the renovation of Chase Hall. As noted above, the original contract between the Coast Guard and Brunoli specifically incorporated the DBA prevailing wage labor standards provisions and the applicable wage determination.

   In exchange for completing the contract, Liberty Mutual was to receive all remaining undisbursed contract funds (including any amounts withheld from Brunoli) up to the amount of contract completion costs it incurred. Ex. 5 at 6, para. 4(a). The Takeover Agreement also provided that the monies payable to Liberty Mutual "are not subject to reduction or set-off for any liability that the Original Contractor [Brunoli] may have to the Government and which is not or may not be covered by the performance bond." Ex. 5 at p. 6, para. 4(b) (emphasis added).

   After execution of the Takeover Agreement, the Wage and Hour Division reported to the Coast Guard the results of its DBA compliance investigation of Brunoli's performance. On June 29, 1998, the Wage and Hour Division requested the Coast Guard withhold $83,400.30 in contract funds to cover the amount of prevailing back wages it found to be owed to 28 of Brunoli's employees. PCF at para. 7. In a letter dated July 6, 1998, the Coast Guard confirmed withholding that amount. Id. at para 10.

   Pursuant to routine DBA enforcement procedures, the Wage and Hour Division issued charging letters to both Brunoli and Liberty Mutual, alleging that Brunoli committed DBA prevailing wage violations in performance of the project. By these charging letters, Liberty Mutual and Brunoli were offered the opportunity to request an administrative hearing to contest the allegations of the investigation and the contract withholding action. Brunoli failed to request the proffered administrative hearing opportunity. Id. at para. 11. Accordingly, the violations as alleged in the charging letter became final as to Brunoli. 29 C.F.R. § 5.11(d).

   The ALJ concluded that Liberty was not entitled to the contract funds under a theory of subrogation, since it did not pay the prevailing wage obligations owed by Brunoli. If Liberty had satisfied the prevailing wage claims, it would have been entitled by subrogation to the withheld amounts in the absence of any other claims by the government. But since the prevailing wages remained unpaid, the ALJ found that awarding the funds to Liberty Mutual "would result in a situation where the Surety has priority to withheld funds that Brunoli, itself, did not have." D. & O. at 8. In so finding, the ALJ adopted the reasoning of the Supreme Court:

From Prairie State Nat. Bank of Chicago v. United States . . . to American Surety Co. v. Sampsell . . . , we have recognized the peculiarly equitable claim of those responsible for the physical completion of building contracts to be paid from available moneys ahead of others whose claims come from the advance of money.

United States v. Munsey Trust Co., 332 U.S. 234, 240 (1947) (citations omitted) (Federal government entitled to set off against contract funds withheld from surety a contractor's debt to government arising from another, unrelated contract). The ALJ also relied upon Pearlman v. Reliance Ins. Co., 371 U.S. 132 (1962) (government has right to apply withheld funds to pay laborers and materialmen and they in turn had a right to be paid from the withheld funds). Accordingly, the ALJ held that the Administrator, not Liberty Mutual, was entitled to the withheld contract funds.

   In discussing Liberty Mutual's Petition for Review we first address the statutory and regulatory bases underlying the Administrator's directive that the Coast Guard withhold the contract funds. Then we consider Liberty Mutual's arguments as to why it is entitled to the withheld contract monies.

   I. The Legal Framework and The Parties' Arguments

      A. The Miller Act

   All Federal construction contracts that are subject to the DBA are also governed by the Miller Act, which requires that prior to the award of Federal construction contracts to a bidder:

[S]uch person shall furnish to the United States the following bonds, which shall become binding upon the award of the contract to such person, who is hereinafter designated as "contractor": (1) A performance bond with a surety or sureties satisfactory to the officer awarding such contract, and in such amount as he shall deem adequate, for the protection of the United States. (2) A payment bond with a surety or sureties satisfactory to such officer for the protection of all persons supplying labor and material in the prosecution of the work provided for in said contract for the use of each such person.

40 U.S.C.A. § 270a(a). Here, Liberty Mutual was both the payment and the performance bond surety for the Coast Guard's construction project. In short, the purpose of a payment bond is to ensure that subcontractors, employees of the prime contractor and subcontractors, and materialmen have an avenue to seek restitution in the event they are not paid by a prime contractor on a Federal construction project. These persons and entities do not have privity of contract with the Federal government and therefore could not make direct claims against the government for alleged losses.

   On the other hand, a performance bond surety is required to ensure that all of the Federal government's contract requirements are performed to completion. This includes, of course, completion costs of a Federal construction project where the prime contractor has been defaulted and does not complete the project. The Administrator argues that Liberty Mutual (as performance bond surety), in addition to its responsibility to see project construction through to completion, is further liable for completing all of the other terms of the Federal contract. This responsibility includes complying with DBA contract provisions that required Brunoli to pay prevailing rates to the laborers and mechanics employed on the project. See Stmt. of the Adm. in Response to Pet. for Rev. at 8-10; Adm. Supp. Brief at 7-8.

      B. The DBA's "Accrued Payments" Clause

   In the event that prevailing wage violations are committed under a covered contract, the Act provides that:

[T]here may be withheld from the contractor so much of accrued payments as may be considered necessary by the contracting officer to pay to laborers and mechanics employed by the contractor or any subcontractor on the work the difference between the rates of wages required by the contract to be paid laborers and mechanics on the work and the rates of wages received by such laborers and mechanics and not refunded to the contractor, subcontractors, or their agents.

   Our foregoing conclusions mirror the overarching Congressional concern evidenced in the Act's 1935 amendments, which included the withholding clause. Congress sought to ensure that laborers and mechanics on Federal construction projects would be paid prevailing wages. See S. Rep. No. 1155, Comm. on Ed. and Lab. to accompany S. 3303 at 3 (Aug. 9, 1935) (withholding provision "also provides for laborers or mechanics aggrieved by failure to pay the required rates of wages or by the kick-back by including a stipulation permitting a contracting officer to withhold from money otherwise due the contractor such amounts as he considers necessary to reimburse such employees."). Thus, neither the DBA's terms nor the legislative history indicate Congress's intention to limit the Administrator's withholding authority to the detriment of the laborers and mechanics that are the intended beneficiaries of the Act.

   II. The Westchester Case is Controlling

      A. Westchester and Liberty Mutual's Arguments

   The facts in Westchester Fire Ins. Co. v. United States, 52 Fed. Cl. 567 (2002) (Westchester) are almost entirely on point with the operative facts in this matter. Indeed, we conclude that the holding in Westchester disposes of all Liberty Mutual's arguments.

   In Westchester, the Court of Federal Claims, which has jurisdiction inter alia to decide claims arising under contracts to which the United States is a party, was presented with the scenario of a prime contractor that had been defaulted by the contracting agency (coincidentally, the Coast Guard). Because the prime contractor (Zanis) had been defaulted, no accrued funds were due and owing it. However, no takeover agreement was involved in Westchester; the Coast Guard, rather than the performance bond surety, assumed the obligations of completing the contract. The Administrator alleged that one of prime contractor Zanis's subcontractors had committed prevailing wage violations of nearly $70,000, and he requested that the Coast Guard withhold that amount. Eventually, the Coast Guard claimed excess costs for contract completion against Westchester, the payment and performance bond surety. These costs included the alleged back wage liability.

   Westchester filed a complaint in the United States Court of Federal Claims arguing that since it did not commit the wage violations, it was entitled to the entire unpaid balance of Zanis's contract without any offset for the prevailing wage violations. Rejecting the surety's arguments, the Westchester court held that "contractual obligations" the surety undertook in the performance bond "preclude it from asserting a superior right to the contract funds withheld by the Coast Guard to recompense [the subcontractor's] workers for Davis-Bacon . . . violations. By law and contract, the claims of the subcontractor's workers to the subject funds took priority over Westchester's claim thereto as the performance bond surety." Id. at 583 (emphasis added).

   The court also made special note that the outcome would not have been different had a takeover agreement been in effect:

Had Westchester entered into a surety takeover agreement with the Coast Guard, it could not have avoided using the funds to pay [the subcontractor's] workers in any event because the amount represented an outstanding legal and contractual obligation of the prime contractor. . . . Westchester cannot achieve a result in this litigation that it had no legal grounds to demand from the Coast Guard [at the time of the prime contractor's default and the commission of the violations].

Westchester, supra at 583 (emphasis added).

   The clear import of the Westchester decision is that the Administrator's DBA wage claims take priority over the rights of a performance bond surety that, like Liberty Mutual here, has not satisfied all of the bonded contractor's obligations, including the obligation to ensure the payment of prevailing wages. As discussed below, the Board rejects Liberty Mutual's arguments that attempt to distinguish the facts in this matter from those in Westchester.

   First, Liberty Mutual asserts that the Takeover Agreement obligated the Coast Guard to give "all of the Undisbursed Contract Funds for the completion of the Project" to Liberty, and that, therefore, this case is distinguishable from Westchester. This argument has no merit for two reasons. As noted above, the Westchester court opined that even had a takeover agreement existed, the surety still would have been liable. Furthermore, as we earlier concluded, "completion" of the "contract" included not only renovation of the Coast Guard facility, but also payment of Brunoli's prevailing wage liability.

Westchester, supra, at 583. Thus, just as the Administrator (on behalf of the subcontractor's employees) in Westchester had a superior right to the contract funds, similarly, we conclude that the Administrator's claim to the withheld contract funds on behalf of Brunoli's employees takes priority over Liberty Mutual's claim.

      B. Westchester and Quincy Housing

   Quincy Housing, supra, concerned a labor standards dispute in which the Administrator and the petitioner (a housing authority constructing federally assisted residential units) vied for priority to withheld contract funds. There, the WAB rejected an argument similar to that which Liberty makes concerning unaccrued funds. It held:

[T]he Department of Labor has priority rights to all funds remaining to be paid on a federal or federally-assisted contract, to the extent necessary to pay laborers and mechanics employed by contractors and subcontractors under such contract the full amount of wages required by federal labor standards laws and the contract . . . .

Quincy Housing, slip op. at 6-7 (emphasis added). The WAB did not explain what it meant by "funds remaining to be paid" within the context of the "accrued funds" language of the Act. But earlier in the decision the WAB referenced the fact that some of the disputed contract funds had not been earned by the construction contractor. These monies would have been "unaccrued funds" and, under Liberty Mutual's theory, unreachable by the withholding clause. However, the WAB approved the Administrator's withholding in Quincy Housing, implicitly rejecting Liberty's argument here. We therefore reject this argument.

   Liberty Mutual was obligated to complete the entire Coast Guard contract, including the responsibility to ensure the payment of prevailing wages. And although Liberty did not violate the Act, nevertheless as the completing surety here, it is also the "contractor" from whom "accrued payments" may be withheld. Therefore, whether the funds are deemed "accrued" or "unaccrued," and notwithstanding the terms of a takeover agreement to the contrary, the Administrator properly

withheld contact monies from Liberty to pay prevailing back wages to the Brunoli laborers and mechanics. Moreover, the Administrator may also rely on recoupment or setoff to claim the funds on behalf of the Brunoli employees. Accordingly, the Administrative Law Judge's Decision and Order dated November 4, 1999, is AFFIRMED as supplemented by the reasoning herein and the Petition for Review is DENIED.

   SO ORDERED.

      OLIVER M. TRANSUE
      Administrative Appeals Judge

      WAYNE C. BEYER
      Administrative Appeals Judge