B-13016, OCTOBER 31, 1940, 20 COMP. GEN. 230

B-13016: Oct 31, 1940

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CONTRACTS - PAYMENTS - ADVANCE WHERE A SUPPLY CONTRACT PROVIDES FOR PAYMENT "FOR ARTICLES DELIVERED AND ACCEPTED" AND THAT THE CONTRACTOR SHALL BE RESPONSIBLE FOR THE SUPPLIES OR MATERIALS "UNTIL THEY ARE ACTUALLY IN THE POSSESSION OF A GOVERNMENT REPRESENTATIVE AT DESTINATION. 1940: I HAVE YOUR LETTER OF OCTOBER 19. WHICH TUBES WERE SHIPPED TO VARIOUS POINTS IN ALASKA. IT IS IMPOSSIBLE TO PROCESS VOUCHERS OF THIS NATURE IN SUFFICIENT TIME TO TAKE ADVANTAGE OF THE DISCOUNT OFFERED. YOUR DECISION IS RESPECTFULLY REQUESTED CONCERNING WHETHER PAYMENTS MAY BE MADE TO THE CONTRACTOR ON THE BASIS OF THE RAILWAY EXPRESS RECEIPT OR OTHER MEMORANDA OF SHIPMENT. WAS MADE A PART OF THE CONTRACT. SUBJECT TO THE FOLLOWING CONDITION: * * * (TIME WILL COMPUTED FROM DATE OF THE DELIVERY OF THE SUPPLIES TO CARRIER WHEN FINAL INSPECTION AND ACCEPTANCE ARE AT POINT OF ORIGIN.

B-13016, OCTOBER 31, 1940, 20 COMP. GEN. 230

CONTRACTS - PAYMENTS - ADVANCE WHERE A SUPPLY CONTRACT PROVIDES FOR PAYMENT "FOR ARTICLES DELIVERED AND ACCEPTED" AND THAT THE CONTRACTOR SHALL BE RESPONSIBLE FOR THE SUPPLIES OR MATERIALS "UNTIL THEY ARE ACTUALLY IN THE POSSESSION OF A GOVERNMENT REPRESENTATIVE AT DESTINATION," PAYMENTS THEREUNDER UPON THE BASIS OF VOUCHERS OR INVOICES SUPPORTED BY EVIDENCE OF SHIPMENT, ONLY, WITHOUT EVIDENCE OF ARRIVAL OF THE SUPPLIES AT DESTINATION AND WITHOUT ASSURANCE OF RECEIPT OR ACCEPTANCE OF SUCH SUPPLIES BY THE GOVERNMENT, WOULD BE UNAUTHORIZED.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF COMMERCE, OCTOBER 31, 1940:

I HAVE YOUR LETTER OF OCTOBER 19, 1940, AS FOLLOWS:

THERE HAS BEEN RECEIVED IN THE CIVIL AERONAUTICS ADMINISTRATION VOUCHERS FROM THE UNITED ELECTRONICS COMPANY, NEWARK, NEW JERSEY, COVERING RADIO TUBES PURCHASED BY THE ADMINISTRATION UNDER CONTRACT TPS-35550, WHICH TUBES WERE SHIPPED TO VARIOUS POINTS IN ALASKA. THE CONTRACT PROVIDES THAT VOUCHERS OR CERTIFIED INVOICES SHALL BE ACCOMPANIED BY MEMORANDA OF SHIPMENT, AND IF SHIPPED BY EXPRESS, BY THE RAILWAY EXPRESS RECEIPT. THE CONTRACT FURTHER PROVIDES FOR DISCOUNT OF THREE PERCENT--- TWENTY DAYS. IN VIEW OF THE TIME REQUIRED TO OBTAIN A CERTIFICATE OF DELIVERY FROM THE VARIOUS CONSIGNEES IN ALASKA AND ALSO IN THE CONTINENTAL UNITED STATES AND THE HAWAIIAN ISLANDS, IT IS IMPOSSIBLE TO PROCESS VOUCHERS OF THIS NATURE IN SUFFICIENT TIME TO TAKE ADVANTAGE OF THE DISCOUNT OFFERED.

IN ORDER TO TAKE ADVANTAGE OF THE DISCOUNT OFFERED, THE CIVIL AERONAUTICS ADMINISTRATION SHOULD BE PERMITTED TO MAKE PAYMENT TO THE CONTRACTOR ON THE BASIS OF THE RAILWAY EXPRESS RECEIPTS OR OTHER MEMORANDA OF SHIPMENT.

SHOULD PAYMENT BE MADE ON THE BASIS OF THE RAILWAY EXPRESS RECEIPT, OR OTHER INFORMATION INDICATING SHIPMENT IN LIEU OF THE CONSIGNEE'S CERTIFICATE OF DELIVERY, IT WOULD NOT, IN THE OPINION OF THIS OFFICE, RELIEVE THE CONTRACTOR OF ANY RESPONSIBILITY OF SHORTAGE OR DAMAGE IN SHIPMENT. IN THE EVENT ANY SHORTAGE OR DAMAGE IN SHIPMENT OCCURRED, THE ADMINISTRATION WOULD DIRECT THE CONTRACTOR TO MAKE IMMEDIATE REPLACEMENT, AND UPON REPLACEMENT RETURN TO THE CONTRACTOR THE RAILWAY EXPRESS RECEIPT, OR OTHER NOTICE OF SHIPMENT, TO PERMIT THE CONTRACTOR TO FILE CLAIM AGAINST THE CARRIER.

IN VIEW OF THE FACT THAT THE CONSTRUCTION PROGRAM OF THE CIVIL AERONAUTICS ADMINISTRATION CONTEMPLATES SHIPMENT TO REMOTE POINTS IN THE CONTINENTAL LIMITS OF THE UNITED STATES, AS WELL AS TO HAWAII AND ALASKA, YOUR DECISION IS RESPECTFULLY REQUESTED CONCERNING WHETHER PAYMENTS MAY BE MADE TO THE CONTRACTOR ON THE BASIS OF THE RAILWAY EXPRESS RECEIPT OR OTHER MEMORANDA OF SHIPMENT.

UNDER THE TERMS OF ITS CONTRACT, DATED JUNE 15, 1940, THE UNITED ELECTRONICS CO. AGREED TO FURNISH AND DELIVER TO THE CIVIL AERONAUTICS AUTHORITY CERTAIN RADIO TUBES, IN STRICT ACCORDANCE WITH SPECIFICATIONS, SCHEDULES, AND DRAWINGS MADE A PART OF THE CONTRACT. THE CONTRACTOR'S ACCEPTED BID--- WHICH, ALSO, WAS MADE A PART OF THE CONTRACT--- OFFERS A DISCOUNT OF THREE PERCENT FROM THE BID PRICES FOR PAYMENT WITHIN TWENTY CALENDAR DAYS, SUBJECT TO THE FOLLOWING CONDITION:

* * * (TIME WILL COMPUTED FROM DATE OF THE DELIVERY OF THE SUPPLIES TO CARRIER WHEN FINAL INSPECTION AND ACCEPTANCE ARE AT POINT OF ORIGIN, OR FROM DATE OF DELIVERY AT DESTINATION OR PORT OF EMBARKATION WHEN FINAL INSPECTION AND ACCEPTANCE ARE AT THOSE POINTS, OR FROM DATE CORRECT BILL OR VOUCHER PROPERLY CERTIFIED BY THE CONTRACTOR IS RECEIVED IF THE LATTER DATE IS LATER THAN THE DATE OF DELIVERY.)

PARAGRAPH 2 (C) OF THE " SPECIAL CONDITIONS" OF THE SPECIFICATIONS PROVIDES AS FOLLOWS:

SHIPMENTS SHALL BE MADE BY EXPRESS; HOWEVER, MAILING OF THE SMALLER TUBES WILL BE PERMISSIBLE. IN EITHER CASE, THE CONTRACTOR SHALL BE RESPONSIBLE FOR THE TUBES UNTIL THEY ARE ACTUALLY IN THE POSSESSION OF A GOVERNMENT REPRESENTATIVE AT DESTINATION. ( ITALICS SUPPLIED.)

ARTICLE 8 OF THE CONTRACT IS, IN PERTINENT PART, AS FOLLOWS:

PAYMENTS.--- THE CONTRACTOR SHALL BE PAID, UPON THE SUBMISSION OF PROPERLY CERTIFIED INVOICES OR VOUCHERS, THE PRICES STIPULATED HEREIN FOR ARTICLES DELIVERED AND ACCEPTED OR SERVICES RENDERED, LESS DEDUCTIONS, IF ANY, AS HEREIN PROVIDED. * * * ( ITALICS SUPPLIED.)

IT IS CLEAR FROM THE ABOVE-QUOTED PROVISIONS OF THE CONTRACT THAT THE CONTRACTOR'S OBLIGATION TO "FURNISH AND DELIVER" RADIO TUBES IS NOT COMPLETED UNTIL ACTUAL PHYSICAL TRANSFER OF SUCH TUBES TO THE GOVERNMENT. FURTHER, TITLE TO THE SUPPLIES DOES NOT VEST IN THE GOVERNMENT UNTIL DELIVERY IS MADE, 19 COMP. GEN. 198, AND THE CONTRACTOR IS NOT ENTITLED TO ANY PAYMENT UNDER THE CONTRACT PRIOR TO RECEIPT AND ACCEPTANCE OF THE SUPPLIES BY THE GOVERNMENT.

APPARENTLY, YOUR SUBMISSION CONTEMPLATES PAYMENTS TO THE CONTRACTOR UPON THE BASIS OF VOUCHERS OR INVOICES SUPPORTED BY EVIDENCE OF SHIPMENT, ONLY, OF THE SUPPLIES INVOICED, WITHOUT EVIDENCE OF ARRIVAL OF SUCH SUPPLIES AT DESTINATION AND WITHOUT ASSURANCE OF RECEIPT OR ACCEPTANCE OF SUCH SUPPLIES BY THE GOVERNMENT. ASSUMING, FOR THE PURPOSE OF DISCUSSION THAT THE FACT OF PAYMENT WOULD NOT RELIEVE THE CONTRACTOR OF ITS OBLIGATION TO REPLACE SUPPLIES LOST OR DAMAGED IN SHIPMENT OR FOUND DEFECTIVE UPON INSPECTION, IT WOULD SEEM THAT THE GOVERNMENT'S POSITION WITH RESPECT TO LOST, DAMAGED, OR DEFECTIVE SUPPLIES WOULD BE DISTINCTLY LESS ADVANTAGEOUS AFTER PAYMENT THAN BEFORE.

ASIDE FROM THE OBVIOUS IMPROPRIETY OF MAKING PAYMENTS UNDER A CONTRACT BEFORE ASCERTAINMENT OF FACTS NECESSARY TO ESTABLISH THAT SUCH PAYMENTS ARE DUE UNDER THE TERMS THEREOF, AND APART FROM AND DIFFICULTIES WHICH MIGHT BE ENCOUNTERED IN SECURING REPLACEMENT OF SHIPMENTS FOR WHICH THE CONTRACTOR HAD BEEN PAID IN FULL, THE CONTEMPLATED PAYMENT PROCEDURE LIKELY WOULD RESULT IN VIOLATIONS OF SECTION 3648, REVISED STATUTES, WHICH PROVIDES, IN PERTINENT PART, AS FOLLOWS:

NO ADVANCE OF PUBLIC MONEYS SHALL BE MADE IN ANY CASE WHATEVER. AND IN ALL CASES OF CONTRACTS FOR THE PERFORMANCE OF ANY SERVICE, OR THE DELIVERY OF ARTICLES OF ANY DESCRIPTION, FOR THE USE OF THE UNITED STATES, PAYMENT SHALL NOT EXCEED THE VALUE OF THE SERVICE RENDERED, OR OF THE ARTICLES DELIVERED PREVIOUSLY TO SUCH PAYMENT. * * * ( ITALICS SUPPLIED.)

CONCEIVABLY, UNDER THE PROCEDURE PROPOSED BY YOU, THE ARTICLES MIGHT IN SOME INSTANCES BE DELIVERED AND ACCEPTED AT DESTINATION BEFORE PAYMENT, BUT THE PAYMENT WOULD BE MADE WITHOUT DEFINITE PROOF OF SUCH FACTS AND IN DISREGARD OF THE PLAIN TERMS OF THE QUOTED PORTION OF THE STATUTE. MOREOVER, THE PROPOSED PROCEDURE NECESSARILY WOULD RESULT IN THE COMMISSION OF ONE OF TWO EQUALLY UNDESIRABLE AND ILLEGAL ACTS, IN THAT EITHER THE DISBURSING OFFICER WOULD MAKE PAYMENTS AS FOR ARTICLES FURNISHED AND DELIVERED, WITHOUT EVIDENCE AS TO WHETHER DELIVERY HAD IN FACT BEEN MADE, OR THE CERTIFYING OFFICER WOULD CERTIFY THAT THE ARTICLES HAD BEEN DELIVERED, WITHOUT KNOWING WHETHER HIS CERTIFICATION WAS CORRECT IN POINT OF FACT.

IN VIEW OF THE FOREGOING, YOUR QUESTION MUST BE ANSWERED IN THE NEGATIVE.

IN CONNECTION WITH THE MATTER OF DISCOUNTS FOR PROMPT PAYMENT UNDER CIRCUMSTANCES SUCH AS ARE RELATED IN YOUR LETTER, YOUR ATTENTION IS INVITED TO PARAGRAPH 12 OF THE " DIRECTIONS FOR PREPARATION OF CONTRACT" APPEARING ON PAGE 6 OF U.S. STANDARD FORM NO. 32 ( REVISED JUNE 18, 1935), UPON WHICH THE INSTANT CONTRACT IS DRAWN. SAID PARAGRAPH AS FOLLOWS:

IF IT IS DEFINITELY KNOWN THAT FINAL ACCEPTANCE CANNOT BE ACCOMPLISHED WITHIN 10 OR 20 DAYS FROM DATE OF DELIVERY, DUE TO NECESSITY FOR TESTS OR ANALYSES WHICH CANNOT BE ACCOMPLISHED WITHIN THAT TIME, DELETE FROM U.S. STANDARD FORM 31, BEFORE ISSUANCE, THE DISCOUNT PROVISION RELATING TO 10 CALENDAR DAYS OR TO BOTH 10 AND 20 CALENDAR DAYS. THE PROVISION RELATING TO DISCOUNTS MAY ALSO BE DELETED WHEN FUNDS DO NOT BECOME AVAILABLE SO THAT PAYMENT MAY BE MADE WITHIN SUCH TIME LIMITS. IT IS SUGGESTED THAT NOTICE OF THE TIME WITHIN WHICH PAYMENTS REASONABLY MAY BE EXPECTED BE FURNISHED THE PROCUREMENT DIVISION OF THE TREASURY DEPARTMENT WHEN REQUISITIONS ARE MADE, IN ORDER THAT APPROPRIATE NOTATIONS MAY BE MADE ON THE BID FORM BEFORE BIDS ARE INVITED, THUS ASSURING THAT THE GOVERNMENT WILL BE ABLE TO AVAIL ITSELF OF ANY TIME DISCOUNT WHICH MAY BE OFFERED BY THE SUCCESSFUL BIDDER AND THAT NO BIDDER WILL SECURE AWARD BY OFFERING A DISCOUNT WHICH BRINGS ITS BID BELOW OTHERS, ONLY TO RECEIVE THE FULL GROSS PRICE BECAUSE THE GOVERNMENT MAY, IN PARTICULAR INSTANCES, BE UNABLE TO MAKE PAYMENT WITHIN THE DISCOUNT PERIOD.