B-123987, FEB. 13, 1956

B-123987, FEB. 13, 1956

TO BASSONS INDUSTRIES CORPORATION:

WE REFER TO YOUR LETTER OF DECEMBER 14, 1955, REQUESTING RECONSIDERATION OF OUR DECISION OF DECEMBER 12, 1955, WHICH AGAIN SUSTAINED THE PRIOR ACTION IN DEDUCTING CASH DISCOUNTS OF ONE PERCENT ON ADVANCES PAID TO YOU UNDER CHANGE ORDERS NOS. 4 AND 8, DATED SEPTEMBER 17, 1951, AND JANUARY 21, 1953, RESPECTIVELY, TO CONTRACT NO. AF (038/-25672, DATED JUNE 1, 1951, WITH THE DEPARTMENT OF THE AIR FORCE.

YOUR LETTER INDICATES THAT YOUR DISAGREEMENT WITH OUR CONCLUSION THAT THE GOVERNMENT WAS ENTITLED TO TAKE THE PROMPT-PAYMENT DISCOUNT OF ONE PERCENT IS BASED UPON THE FACT THAT THE CHANGE ORDERS ISSUED UNDER THE CONTRACT AUTHORIZED A REDUCTION OF ONE QUARTER OF ONE PERCENT IN THE CONTRACT PRICE AS COMPENSATION FOR, OR IN CONSIDERATION OF, FUNDS BEING ADVANCED TO YOU BY THE GOVERNMENT PRIOR TO THE DELIVERIES BEING MADE UNDER THE CONTRACT. THUS, YOU SAY,"IT WAS FELT BY THE CONTRACTING OFFICER, THAT THE 1/4 OF 1 PERCENT WAS AMPLE COMPENSATION FOR THE GOVERNMENT TO OFFER US THE ADVANTAGE OF THE USE OF THEIR FUNDS. IT IS, THEREFORE, COMPLETELY UNFAIR TO TAKE ANOTHER 1 PERCENT AS A DISCOUNT. * * * THE CHANGE ORDER ALLOWING PARTIAL PAYMENT WAS COMPENSATED FOR COMPLETELY BY OUR PAYING 1/4 OF 1 PERCENT OF THE TOTAL CONTRACT. THERE CAN BE NO OTHER COMPENSATION TO THE GOVERNMENT BECAUSE OF THIS CHANGE OR BECAUSE OF PAYING A PARTIAL PAYMENT.'

YOUR ARGUMENT IN THIS REGARD OVERLOOKS THE FACT THAT THERE COULD HAVE BEEN NO LOGICAL REASON FOR THE GOVERNMENT TO HAVE RELINQUISHED THE RIGHT TO TAKE A ONE-PERCENT DISCOUNT, FOR THE RIGHT TO TAKE ONLY A QUARTER OF ONE-PERCENT DISCOUNT, WHILE AT THE SAME TIME ASSUMING THE ADDITIONAL OBLIGATION OF HAVING NO ADVANCE FUNDS PRIOR TO THE TIME PAYMENTS OTHERWISE WOULD HAVE BECOME DUE AND PAYABLE UNDER THE CONTRACT. IF THIS HAD BEEN THE ARRANGEMENT INTENDED, THE NET RESULT WOULD BE THAT, INSTEAD OF GAINING THE RIGHT TO TAKE ONE-QUARTER OF ONE PERCENT DISCOUNT AS ADDITIONAL COMPENSATION, THE GOVERNMENT WOULD HAVE SUFFERED A LOSS OF THREE-QUARTERS OF ONE PERCENT FOR HAVING MADE THE ADVANCES. OF COURSE, SUCH AN ILLOGICAL AND UNREASONABLE RESULT COULD NOT HAVE BEEN INTENDED AND, IN FACT, WAS NOT INTENDED SINCE THE CHANGE ORDERS INVOLVED EXPRESSLY PROVIDED THAT, EXCEPT AS CHANGED, ALL TERMS OF THE CONTRACT WOULD CONTINUE IN FULL FORCE AND EFFECT, AND NO CHANGE WAS MADE IN THE ORDERS WITH RESPECT TO THE GOVERNMENT'S RIGHT UNDER THE CONTRACT TO TAKE ONE-PERCENT DISCOUNT FOR PAYMENT MADE WITHIN TEN DAYS AFTER DELIVERY.

THE AMOUNTS HERE IN QUESTION WERE PAID OVER TO YOU EVEN BEFORE DELIVERY. THEREFORE, IN OUR VIEW, THERE CAN BE NO OTHER CONCLUSION THAN THAT THE PROMPT PAYMENT DISCOUNT WAS PROPERLY TAKEN.

IN RESPONSE TO YOUR INQUIRY AS TO WHAT OTHER RECOURSE YOU MAY HAVE IN THIS MATTER, YOU ARE, OF COURSE, FREE TO INSTITUTE LEGAL PROCEEDINGS EITHER IN THE UNITED STATES COURT OF CLAIMS OR THE APPROPRIATE UNITED STATES DISTRICT COURT.