B-163212, MAY 6, 1968

B-163212: May 6, 1968

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FARINHOLT: FURTHER REFERENCE IS MADE TO YOUR REQUEST OF JANUARY 2. THE RECORD SHOWS THAT IN ACCORDANCE WITH THE TERMS PRINTED ON VENDOR'S INVOICES A DISCOUNT WAS DEDUCTED FROM PAYMENTS DUE THE CONTRACTOR. SUCH ACTION WAS TAKEN PURSUANT TO PARAGRAPH 5-8. THE EVIDENCE OF RECORD INDICATES THAT THE DISCOUNT TERMS SHOWN ON THE VENDOR'S INVOICES CORRESPONDED WITH A DISCOUNT PROVISION WHICH WAS SUBSEQUENTLY DETERMINED TO HAVE BEEN ERRONEOUSLY WRITTEN INTO THE REFERENCED CONTRACT. THE ERROR WAS BROUGHT TO THE ARMY'S ATTENTION IN A LETTER FROM AMB DATED MARCH 10. THESE INVOICES WERE PREPARED BETWEEN THE DATES OF MARCH 23. DETERMINATION TO MODIFY THE CONTRACT TO DELETE THE DISCOUNT PROVISION WAS MADE BY THE HEAD OF THE PROCURING ACTIVITY ON MAY 2.

B-163212, MAY 6, 1968

TO MR. W. N. FARINHOLT:

FURTHER REFERENCE IS MADE TO YOUR REQUEST OF JANUARY 2, 1968, FOR AN ADVANCE DECISION RELATIVE TO THE REQUEST BY THE AUSTRALIAN MEAT BOARD (AMB) FOR REIMBURSEMENT OF DISCOUNTS DEDUCTED BY THE ARMY FINANCE AND ACCOUNTING OFFICE, JAPAN, FROM PAYMENTS ON INVOICES NUMBERS ONE THROUGH TWENTY-FOUR SUBMITTED BY AMB UNDER CONTRACT DAJB17 67-D-0407.

THE RECORD SHOWS THAT IN ACCORDANCE WITH THE TERMS PRINTED ON VENDOR'S INVOICES A DISCOUNT WAS DEDUCTED FROM PAYMENTS DUE THE CONTRACTOR. SUCH ACTION WAS TAKEN PURSUANT TO PARAGRAPH 5-8, ARMY REGULATION 37-107, WHICH REQUIRES THAT DISCOUNTS APPEARING ON VENDORS' INVOICES BE CONSIDERED AS AUTHORIZING A DEDUCTION IF EARNED.

HOWEVER, THE EVIDENCE OF RECORD INDICATES THAT THE DISCOUNT TERMS SHOWN ON THE VENDOR'S INVOICES CORRESPONDED WITH A DISCOUNT PROVISION WHICH WAS SUBSEQUENTLY DETERMINED TO HAVE BEEN ERRONEOUSLY WRITTEN INTO THE REFERENCED CONTRACT. THE ERROR WAS BROUGHT TO THE ARMY'S ATTENTION IN A LETTER FROM AMB DATED MARCH 10, 1967, PRIOR TO THE SUBMISSION OF ANY INVOICES. THEREIN AMB REQUESTED ARMY TO ACKNOWLEDGE THE ERROR AND TO CONFIRM THAT THE PROVISION WOULD BE CONSIDERED INAPPLICABLE. WHILE ARMY DELIBERATED ITS POSITION IN THIS MATTER AMB PROCEEDED TO SUBMIT THE FIRST 24 INVOICES FOR PAYMENT UNDER THE CONTRACT WITH PRINTED DISCOUNT TERMS IN ACCORDANCE WITH THE CONTRACT AS WRITTEN. THESE INVOICES WERE PREPARED BETWEEN THE DATES OF MARCH 23, 1967, AND APRIL 28, 1967. DETERMINATION TO MODIFY THE CONTRACT TO DELETE THE DISCOUNT PROVISION WAS MADE BY THE HEAD OF THE PROCURING ACTIVITY ON MAY 2, 1967, PURSUANT TO ASPR 17-204.3 AND 17 -203 PRESCRIBING PROCEDURES FOR EXERCISING THE EXTRAORDINARY EMERGENCY AUTHORITY GRANTED BY PUB. L. 85-804 AND E. O. NO. 10789, DATED NOVEMBER 14, 1958, AND A FORMAL MODIFICATION WAS EXECUTED ON MAY 16, 1967, DELETING THE ERRONEOUS DISCOUNT TERM WITH RETROACTIVE EFFECT TO DECEMBER 16, 1966, THE INITIAL DATE OF EXECUTION OF THE CONTRACT. BY LETTER OF JULY 20, 1967, AMB REQUESTED REIMBURSEMENT FOR THE DISCOUNTS TAKEN BY ARMY PRIOR TO THE MODIFICATION OF THE CONTRACT.

IN YOUR SUBMISSION YOU CONTEND THAT THE CONTRACTOR IS NOT ENTITLED TO THE REFUND BECAUSE THE DISCOUNT WAS PROPERLY TAKEN UNDER A R 37 107, 5-8. HOWEVER, SINCE THE EXTRAORDINARY AUTHORITY DELEGATED BY ASPR 17-203 INCLUDES AUTHORITY TO "MODIFY, RELEASE, RESCIND, OR CANCEL OBLIGATIONS OF ANY SORT," AND THE DETERMINATION WAS TO DELETE THE DISCOUNT PROVISION RETROACTIVELY TO THE DATE OF THE CONTRACT, IT IS OUR OPINION THAT REFUND OF DISCOUNTS COLLECTED DURING THE PERIOD REQUIRED FOR CONSIDERATION OF THE CONTRACTOR'S REQUEST FOR REFORMATION IS AUTHORIZED THEREBY. IN THE CIRCUMSTANCES OF THIS CASE THE INCLUSION ON THE INVOICES OF A DISCOUNT PROVISION CANNOT PROPERLY BE CONSIDERED AS A VOLUNTARY OFFER BY THE CONTRACTOR OF A DISCOUNT NOT REQUIRED BY THE CONTRACT, AND SINCE THE CONTRACTUAL BASIS FOR THE DISCOUNT HAS BEEN COMPLETELY REMOVED BY THE MODIFICATION THERE REMAINS NO BASIS FOR RETENTION OF THE AMOUNT COLLECTED.

PAYMENT ON THE VOUCHER, WHICH IS RETURNED HEREWITH, IS THEREFORE AUTHORIZED.