Request for Reconsideration

A firm requested reconsideration of a previous declination by GAO to consider a request for an advance decision made in connection with a claim for refund of allegedly unearned prompt-payment discounts, plus interest, taken by the Government. The record showed that an Army command awarded the claimant a contract which contained a 50-percent, 20-day prompt-payment discount provision. Approximately 2 months later, the Department of Labor requested that future payments under the contract be withheld since a labor standards compliance investigation had disclosed that the claimant had underpaid its workers on contracts with two Air Force bases. At the conclusion of the investigation, the Army command was instructed to retain a portion of the payment, and the remainder was to be returned to the claimant. Although the claimant acknowledged receipt of the check, it filed suit against Labor to reverse the decision and further claimed improprieties by all agencies involved in the withholding of funds. GAO was then asked whether: (1) the actual withholding by the command was correct; (2) the 20-day prompt-payment discount was proper when the check was prepared within 20 days but retained at Labor's direction, and when the check was prepared more than 20 days after receipt of the invoice but payment was withheld at Labor's direction; and (3) payment of interest at the rates established in the contract was required for funds withheld at Labor's direction. GAO held that it had previously declined to consider the claim on the basis that the issues presented in the claim were before a court of competent jurisdiction; however, since the matters were no longer before the court, GAO would review the request but would confine its response to questions of law. Therefore, GAO held that: (1) the Government is entitled to withhold prompt-payment discounts where the failure of the Government to pay the contractor within the required discount period is due to the contractor's failure to pay workers the proper wage rate under the Service Contract Act; (2) the Government is not entitled to discounts on the amount withheld which is in excess of the amount owed workers or where the courts hold that the Service Contract Act is not applicable to the contract; and (3) interest is not required to be paid on the amount withheld at Labor's discretion since neither the law nor the contract provides for payment of interest.