B-130542, FEB 15, 1957

B-130542: Feb 15, 1957

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INDEPENDENT ESTABLISHMENTS AND OTHERS CONCERNED: IT HAS COME TO OUR ATTENTION THAT IN MANY INSTANCES DEDUCTIONS ARE BEING MADE FOR TIME OR CASH DISCOUNTS OFFERED IN CONNECTION WITH GOVERNMENTAL PROCUREMENTS. IRRESPECTIVE OF WHETHER PAYMENT IS MADE WITHIN THE DISCOUNT PERIOD OFFERED BY THE VENDORS. IT IS TO BE NOTED THAT UNDER THE STANDARD FORM OF GOVERNMENT SUPPLY CONTRACT NOW IN USE THE DISCOUNTS OFFERED BY VENDORS FOR PROMPT PAYMENT PROPERLY MAY BE TAKEN ONLY WHEN PAYMENT IS MADE WITHIN A SPECIFIED NUMBER OF DAYS. WHICHEVER IS LATER. ALSO UNDER THE TERMS OF THIS FORM PAYMENT IS CONSIDERED TO HAVE BEEN MADE AS OF THE DATE OF MAILING OF THE GOVERNMENT'S CHECK IN PAYMENT FOR THE SERVICES.

B-130542, FEB 15, 1957

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HEADS OF DEPARTMENTS, INDEPENDENT ESTABLISHMENTS AND OTHERS CONCERNED:

IT HAS COME TO OUR ATTENTION THAT IN MANY INSTANCES DEDUCTIONS ARE BEING MADE FOR TIME OR CASH DISCOUNTS OFFERED IN CONNECTION WITH GOVERNMENTAL PROCUREMENTS, EITHER BY FORMAL OR INFORMAL CONTRACT, IRRESPECTIVE OF WHETHER PAYMENT IS MADE WITHIN THE DISCOUNT PERIOD OFFERED BY THE VENDORS.

IT IS TO BE NOTED THAT UNDER THE STANDARD FORM OF GOVERNMENT SUPPLY CONTRACT NOW IN USE THE DISCOUNTS OFFERED BY VENDORS FOR PROMPT PAYMENT PROPERLY MAY BE TAKEN ONLY WHEN PAYMENT IS MADE WITHIN A SPECIFIED NUMBER OF DAYS, COMMENCING EITHER FROM THE DATE OF DELIVERY OF THE SUPPLIES, OR FROM DATE OF RECEIPT IN THE OFFICE SPECIFIED BY THE GOVERNMENT OF A CORRECT VENDOR'S INVOICE, WHICHEVER IS LATER. ALSO UNDER THE TERMS OF THIS FORM PAYMENT IS CONSIDERED TO HAVE BEEN MADE AS OF THE DATE OF MAILING OF THE GOVERNMENT'S CHECK IN PAYMENT FOR THE SERVICES, SUPPLIES OR EQUIPMENT FURNISHED. IT IS UNDERSTOOD, OF COURSE, THAT DISCOUNT TERMS MAY VARY ACCORDING TO THE FORM OF CONTRACT UTILIZED, AND THE SPECIFIC TERMS UPON WHICH SUCH DISCOUNTS MAY BE OFFERED BY GOVERNMENT CONTRACTORS OR SUPPLIERS, BUT IT IS ESSENTIAL IN THE INTERESTS OF THE GOVERNMENT THAT PROMPT PAYMENT DISCOUNTS BE DEDUCTED ONLY ON THE BASIS AUTHORIZED BY THE CONTRACTORS OR SUPPLIERS.

THE UNAUTHORIZED TAKING OF DISCOUNTS IS OBJECTIONABLE BECAUSE SUCH ACTION RESULTS IN EXTRA COSTS AND WORKING TIME REQUIRED FOR PROCESSING VENDORS' CLAIMS FOR REFUNDS OF AMOUNTS ERRONEOUSLY DEDUCTED. MOREOVER, THE TAKING OF UNEARNED DISCOUNTS TENDS TO AFFECT ADVERSELY THE GOOD BUSINESS AND CUSTOMER RELATIONSHIP WHICH SHOULD EXIST BETWEEN THE UNITED STATES GOVERNMENT AND ITS CONTRACTORS AND SUPPLIERS. SUCH PRACTICE MAY ALSO ENCOURAGE BIDDERS UNDER GOVERNMENT INVITATIONS TO INFLATE THEIR BID PRICES TO COMPENSATE FOR THE LOSS OF UNEARNED DISCOUNTS.

THEREFORE, WHILE EVERY REASONABLE EFFORT SHOULD BE MADE TO PROCESS EACH INVOICE FOR PAYMENT WITHIN THE DISCOUNT PERIOD OFFERED, IN THE BEST INTERESTS OF THE GOVERNMENT IT IS REQUESTED THAT APPROPRIATE INSTRUCTIONS BE ISSUED WITH A VIEW TOWARD DISCONTINUING THE TAKING OF DISCOUNTS ON INVOICES WHICH ARE NOT PAID WITHIN THE DISCOUNT PERIODS OFFERED.