B-142272, MAY 3, 1960

B-142272: May 3, 1960

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

DEPARTMENT OF THE ARMY: REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 4. WHEN PROCUREMENT IS MADE FOB ORIGIN. DISCOUNT TIME UNDER 10 DAYS WILL NOT BE CONSIDERED IN DETERMINING LOW BIDS. WHEN PROCUREMENT IS MADE FOB DESTINATION. DISCOUNT TIME UNDER 20 DAYS WILL NOT BE CONSIDERED IN DETERMINING LOW BIDS. TIME WILL BE COMPUTED TO DATE PAYMENTS ARE MAILED TO CONTRACTOR FROM DATE OF DELIVERY OF SUPPLIES TO CARRIER WHEN DELIVERY AND ACCEPTANCE ARE AT POINT OF ORIGIN. OR FROM DATE OF DELIVERY AT DESTINATION OR PORT OF EMBARKATION WHEN DELIVERY AND ACCEPTANCE ARE AT EITHER OF THOSE POINTS. OR FROM DATE CORRECT INVOICE OR VOUCHER (PROPERLY CERTIFIED BY THE CONTRACTOR) IS RECEIVED IN THE OFFICE SPECIFIED BY THE GOVERNMENT IF THE LATTER DATE IS LATER THAN THE DATE OF DELIVERY.

B-142272, MAY 3, 1960

TO LIEUTENANT COLONEL W. E. STIELAU, F.C., FINANCE AND ACCOUNTING OFFICER, DEPARTMENT OF THE ARMY:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 4, 1959, WITH ENCLOSURES, REQUESTING AN ADVANCE DECISION AS TO WHETHER THE ENCLOSED INVOICES DRAWN IN FAVOR OF SOUTHERN ATHLETIC COMPANY, INC., REPRESENTING REFUND OF DISCOUNT TAKEN BY THE GOVERNMENT IN MAKING PAYMENTS UNDER CONTRACTS NOS. DA-36-030-QM-6424 AND 8316, MAY BE PAID.

BOTH CONTRACTS CONTAINED THE FOLLOWING PROVISION RESPECTING DISCOUNTS AND THE COMPUTATION OF TIME TO DETERMINE THE ALLOWABILITY OF DISCOUNT:

"21. OFFERS OF DISCOUNT. WHEN PROCUREMENT IS MADE FOB ORIGIN, DISCOUNT TIME UNDER 10 DAYS WILL NOT BE CONSIDERED IN DETERMINING LOW BIDS. WHEN PROCUREMENT IS MADE FOB DESTINATION, DISCOUNT TIME UNDER 20 DAYS WILL NOT BE CONSIDERED IN DETERMINING LOW BIDS. DISCOUNT OF LESS THAN 1 PERCENT SHOULD BE EXPRESSED IN FRACTIONS AND NOT IN DECIMALS. TIME WILL BE COMPUTED TO DATE PAYMENTS ARE MAILED TO CONTRACTOR FROM DATE OF DELIVERY OF SUPPLIES TO CARRIER WHEN DELIVERY AND ACCEPTANCE ARE AT POINT OF ORIGIN, OR FROM DATE OF DELIVERY AT DESTINATION OR PORT OF EMBARKATION WHEN DELIVERY AND ACCEPTANCE ARE AT EITHER OF THOSE POINTS, OR FROM DATE CORRECT INVOICE OR VOUCHER (PROPERLY CERTIFIED BY THE CONTRACTOR) IS RECEIVED IN THE OFFICE SPECIFIED BY THE GOVERNMENT IF THE LATTER DATE IS LATER THAN THE DATE OF DELIVERY, OR FROM DATE OF ACCEPTANCE OF SUPPLIES WHERE SUMS HAVE BEEN SHIPPED AT CONTRACTOR'S OWN RISK AND ARE ACCEPTED SUBSEQUENT TO DELIVERY.'

CONTRACT NO. 6424 WAS AWARDED ON OCTOBER 24, 1955, AND PROVIDED FOR DELIVERY OF THE CONTRACT SUPPLIES ON AN F.O.B. ORIGIN BASIS, INSPECTION AND SHIPPING POINT TO BE CONTRACTOR'S PLANT IN KNOXVILLE, TENNESSEE, AND PAYMENT WAS TO BE MADE ON THE BASIS OF A 5 PERCENT DISCOUNT FOR PAYMENT WITHIN 10 DAYS OR ON THE BASIS OF 1 PERCENT DISCOUNT FOR PAYMENT WITHIN 20 DAYS. THE CONTRACTING OFFICER STATES THAT PARTIAL SHIPMENTS NOS. 4, 5, 6 AND 7 INVOLVED DEVIATIONS FROM THE CONTRACT SPECIFICATIONS, AND THAT, ACCORDINGLY, THE CONTRACTOR REQUESTED WAIVER OF THE DEVIATIONS BY LETTER RECEIVED AT THE PHILADELPHIA QUARTERMASTER DEPOT ON APRIL 5, 1956. THE REQUEST FOR WAIVER WAS SUBMITTED BY THE CONTRACTING OFFICER TO THE DEVIATION REVIEW BOARD ON APRIL 26, 1956, AND WAS APPROVED BY THE BOARD ON APRIL 25, 1956, WITH NO CHANGE IN THE CONTRACT PRICE. THE LETTER OF ACCEPTANCE OF THE DEVIATIONS WAS SENT TO THE CONTRACTOR ON MAY 1, 1956. PARTIAL SHIPMENTS NOS. 14 AND 15 ALSO INVOLVED DEVIATIONS, AND IT IS REPORTED THAT THE CONTRACTOR'S LETTERS REQUESTING WAIVER WERE RECEIVED BY THE ADMINISTRATIVE OFFICE BETWEEN MAY 2 AND 9, 1956, AND THAT ALL DEVIATIONS WERE WAIVED ON JULY 2, 1956.

AS TO THOSE PARTIAL SHIPMENTS, THE RECORD REVEALS THE FOLLOWING INFORMATION:

TABLE

DATE OF DELIVERY "SHIPMENT NO. OF SUPPLIES TO CARRIER DATE INVOICE RECEIVED

4 2 APR 1956 5 APR 1956

5 6 APR 1956 10 APR 1956

6 13 APR 195616 APR 1956

7 19 APR 1956 23 APR 1956

14 31 MAY 1956 4 JUNE 1956

15 7 JUNE 1956 11 JUNE 1956"

PAYMENT FOR PARTIAL SHIPMENTS NOS. 4, 5, 6 AND 7 WAS MADE WITHIN THE 10- DAY DISCOUNT PERIOD FROM THE DATE OF THE ACCEPTANCE OF THE SUPPLIES ON VOUCHER NO. 26816 DATED MAY 10, 1956. PARTIAL SHIPMENTS NOS. 14 AND 15 WERE PAID WITHIN THE DISCOUNT PERIOD COMPUTED FROM THE DATE OF THE ACCEPTANCE OF THE SUPPLIES ON VOUCHER 281 DATED JULY 6, 1956.

THE CONTRACTING OFFICER HAS DETERMINED, IN EFFECT, THAT APPROVAL OF THE DEVIATIONS WAS PRO FORMA; THAT THE TOTAL ELAPSED TIME INVOLVED IN THE APPROVAL OF THE DEVIATIONS WAS UNREASONABLE (26 TO 56 DAYS); AND THAT THE DISCOUNTS TAKEN UNDER THESE SHIPMENTS WERE UNEARNED EVEN THOUGH THE INVOICES WERE PAID WITHIN 10 DAYS AFTER THE NON-CONFORMING SUPPLIES WERE ACCEPTED.

WE AGREE THAT DISCOUNTS COMPUTED AT THE RATE OF 5 PERCENT TOTALING $7,514.44 DEDUCTED BY THE GOVERNMENT IN MAKING PAYMENT FOR THESE PARTIAL SHIPMENTS WERE UNEARNED AND THAT A REFUND IS PROPERLY DUE THE CONTRACTOR. THE CONTRACTOR IS NOT ENTITLED TO REFUND OF THE ENTIRE AMOUNT, HOWEVER, SINCE PARTIAL SHIPMENT NO. 7 WAS PAID WITHIN 20 DAYS FROM THE DATE OF RECEIPT OF THE INVOICE WHICH, UNDER THE TERMS OF THE CONTRACT, WOULD ENTITLE THE GOVERNMENT TO A DISCOUNT OF 1 PERCENT FOR THAT SHIPMENT. THIS WOULD SEEM TO BE ESPECIALLY TRUE, WHERE, AS HERE, THE DELAYS IN APPROVING THE DEVIATIONS COULD NOT BE ATTRIBUTABLE TO THE CONTRACTOR. MOREOVER, THERE WAS NO CONTRACTUAL RELATIONSHIP BETWEEN THE CONTRACT DISCOUNT PROVISIONS AND THE ADMINISTRATIVE PROCEDURES FOR CONSIDERING DEVIATIONS IN THAT SUCH PROCEDURE COULD NOT HAVE EFFECTED THE GOVERNMENT'S RIGHT TO DISCOUNT PROVIDED PAYMENT FOR THE NON-CONFORMING SUPPLIES WAS MADE WITHIN THE STIPULATED PERIOD.

THE CONTRACTOR'S INVOICE ON PARTIAL SHIPMENT NO. 16 WAS MAILED FROM KNOXVILLE ON JULY 25, 1956, AND RECEIVED AT THE PHILADELPHIA QUARTERMASTER DEPOT ON JULY 30, 1956. THE INVOICE WAS PAID ON AUGUST 8, 1956, WITH DISCOUNT CONSIDERED AS EARNED AT THE RATE OF 5 PERCENT FOR PAYMENT WITHIN 10 DAYS. HOWEVER, IT IS ADMITTED BY THE DEPOT THAT THE CONTRACTOR'S INVOICES WERE CONSISTENTLY SENT VIA AIRMAIL AND THAT 2 DAYS WOULD SUFFICE FOR AIRMAIL LETTERS TO REACH PHILADELPHIA FROM KNOXVILLE. THE UNIFORM PRACTICE OF THE PHILADELPHIA MAIN POST OFFICE WAS TO SET ASIDE MAIL ADDRESSED TO THE DEPOT FOR PICKUP BY ITS EMPLOYEES. IN THAT CONNECTION, IT IS REPORTED THAT MAIL WAS PICKED UP AT THE POST OFFICE FOUR TIMES EACH DAY, EXCEPT FOR SATURDAYS AND SUNDAYS, AND THAT NO MAIL WAS DELIVERED TO THE DEPOT BY THE POST OFFICE EXCEPT SPECIAL DELIVERY MAIL. WE AGREE THAT THE CONSTRUCTIVE RECEIPT OF THE CONTRACTOR'S INVOICE ON JULY 27 IN THE MAIN POST OFFICE WAS IN FACT DELIVERY TO THE DEPOT. IN THE CASE OF LEVY V. MASSACHUSETTS ACC. CO. 2 A.2D 341, 346, IT WAS STATED:

"THE COMPANY FOR ITS OWN PURPOSES AND CONVENIENCE ESTABLISHED THAT BOX (PRIVATE POST OFFICE BOX) FOR THE DELIVERY TO IT THEREIN OF THE INCOMING MAIL ADDRESSED TO IT AT ITS HOME OFFICE. SUCH MAIL SO PLACED THEREIN BY THE POSTAL OFFICIALS IS THEREBY DELIVERED TO THE COMPANY. THE TRANSPORTATION FROM THAT BOX TO SOME ROOM IN THE COMPANY'S OFFICE BUILDING IS BY THE COMPANY, BY MEANS OF ITS OWN MESSENGER AND AGENT, AND IS NO DIFFERENT IN NATURE OR EFFECT THAN A TRANSPORTATION FROM ONE ROOM IN ITS OFFICE BUILDING TO ANOTHER.'

HENCE, IN COMPUTING THE DISCOUNT PERIOD UNDER THE INSTANT INVOICE, IT MUST BE HELD THAT TIME BEGAN TO RUN 2 DAYS AFTER DATE OF MAILING (I.E., DATE THE SUPPLIES WERE SHIPPED), OR JULY 27, 1956. SINCE THE INVOICE WAS PAID 12 DAYS LATER, THE DISCOUNT AT THE RATE OF 5 PERCENT FOR PAYMENT WITHIN 10 DAYS WAS NOT EARNED. HOWEVER, AS THE CONTRACTOR ALSO OFFERED A DISCOUNT OF 1 PERCENT FOR PAYMENT WITHIN 20 DAYS, IT APPEARS THAT THE GOVERNMENT WOULD BE ENTITLED TO THAT DISCOUNT. ACCORDINGLY, THE VOUCHER COVERING THE REFUND OF DISCOUNT UNDER CONTRACT NO. 6424 SHOULD BE ADJUSTED TO REFLECT CREDIT FOR SUCH DISCOUNT.

WHAT WAS STATED IMMEDIATELY ABOVE, IS EQUALLY FOR APPLICATION WITH RESPECT TO THE DISCOUNTS TAKEN BUT NOT EARNED ON PARTIAL SHIPMENTS NOS. 33 AND 34 UNDER CONTRACT NO. 8316. THE DISCOUNT OF 2 PERCENT FOR PAYMENT WITHIN 40 DAYS WAS NOT EARNED BY THE GOVERNMENT UNDER THE INVOICES MAILED ON MARCH 5, 1957, AND RECEIVED AT THE DEPOT ON MARCH 11, 1957, SINCE THEY WERE CONSTRUCTIVELY RECEIVED AT THE DEPOT ON MARCH 9, 1957, AND NOT PAID UNTIL MARCH 20, 1957. HENCE, THE DISCOUNT THUS DEDUCTED IN THE AMOUNT OF $1,371.64 SHOULD BE REFUNDED BY THE GOVERNMENT.

THE VOUCHERS ARE RETURNED HEREWITH AND THEY MAY BE PROCESSED FOR PAYMENT IN ACCORDANCE WITH THIS DECISION.