B-164171, JUNE 21, 1968, 47 COMP. GEN. 765

B-164171: Jun 21, 1968

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THE GOVERNMENT IS NOT REQUIRED TO REFUND THE PROMPT PAYMENT DISCOUNT TAKEN. EVEN THOUGH THE ORIGINAL VOUCHER WAS RECEIVED MORE THAN 20 DAYS PRIOR TO PAYMENT. AS DELIVERY OF THE SUPPLIES WAS NOT COMPLETED UNTIL THE REQUIRED INFORMATION WAS DOCUMENTED. THE DETERMINATION BY THE CONTRACTING OFFICER THAT THE DISCOUNT WAS NOT EARNED IS ONE OF FACT AND IS NOT DETERMINATIVE OF AN ISSUE THAT REQUIRES LEGAL INTERPRETATION OF THE TERMS AND CONDITIONS OF THE CONTRACT. WHEREIN AN ADVANCE DECISION IS REQUESTED WITH RESPECT TO A VOUCHER STATED IN FAVOR OF THE HARRINGTON SHIRT CORPORATION IN THE AMOUNT OF $5. THE CIRCUMSTANCES PERTAINING TO PARTIAL SHIPMENT NO. 22 UNDER CONTRACT NO.-1779 ARE REPORTED AS FOLLOWS: A.

B-164171, JUNE 21, 1968, 47 COMP. GEN. 765

CONTRACTS - DISCOUNTS - COMMENCEMENT OF DISCOUNT PERIOD THE PAYMENT BY THE GOVERNMENT OF A VOUCHER FOR SUPPLIES HAVING BEEN MADE WITHIN 20 DAYS OF EVIDENCE OF INSPECTION AND ACCEPTANCE OF THE SUPPLIES ON DD FORM 250 IN ACCORDANCE WITH THE TERMS OF THE CONTRACT, THE GOVERNMENT IS NOT REQUIRED TO REFUND THE PROMPT PAYMENT DISCOUNT TAKEN, EVEN THOUGH THE ORIGINAL VOUCHER WAS RECEIVED MORE THAN 20 DAYS PRIOR TO PAYMENT, AS DELIVERY OF THE SUPPLIES WAS NOT COMPLETED UNTIL THE REQUIRED INFORMATION WAS DOCUMENTED, AT WHICH TIME THE DISCOUNT PERIOD COMMENCED. THE DETERMINATION BY THE CONTRACTING OFFICER THAT THE DISCOUNT WAS NOT EARNED IS ONE OF FACT AND IS NOT DETERMINATIVE OF AN ISSUE THAT REQUIRES LEGAL INTERPRETATION OF THE TERMS AND CONDITIONS OF THE CONTRACT.

TO CAPTAIN A. G. METCALFE, DEFENSE SUPPLY AGENCY, JUNE 21, 1968:

BY LETTER DATED APRIL 26, 1968 (DSAH-CFF), THE CHIEF, ACCOUNTING AND FINANCE DIVISION, OFFICE OF THE COMPTROLLER, TRANSMITTED YOUR UNDATED LETTER (DCRN-FO), WITH ENCLOSURES, WHEREIN AN ADVANCE DECISION IS REQUESTED WITH RESPECT TO A VOUCHER STATED IN FAVOR OF THE HARRINGTON SHIRT CORPORATION IN THE AMOUNT OF $5,574.24, REPRESENTING REFUND OF THE PROMPT PAYMENT DISCOUNT (8 PERCENT, 20 DAYS) TAKEN BY THE GOVERNMENT ON PARTIAL SHIPMENT NO. 22 (PARTIAL PAYMENT NO. 20) UNDER CONTRACT NO. DSA100 -1779.

THE CIRCUMSTANCES PERTAINING TO PARTIAL SHIPMENT NO. 22 UNDER CONTRACT NO.-1779 ARE REPORTED AS FOLLOWS:

A. SUPPLIES WERE INSPECTED ON 29 JUNE 1966 AND SHIPPED THE SAME DAY.

B. THE INVOICE DD 250 FOR THE QUESTIONED SHIPMENT WAS RECEIVED AT THE OFFICE DESIGNATED FOR PAYMENT BY THE GOVERNMENT 30 JUNE 1966.

C. THE SUPPLIES WERE INCHECKED AT LACKLAND AIR FORCE BASE (DESTINATION) 15 JULY 1966.

D. THE SIGNED SOURCE INSPECTION COPY OF DD 250 WAS NOT RECEIVED AT LACKLAND AIR FORCE BASE UNTIL 5 AUGUST 1966.

E. ACCEPTANCE OF THE SUPPLIES WAS MADE ON 8 AUGUST 1966.

F. PAYMENT WAS MADE ON 18 AUGUST (230) AND A DISCOUNT OF $5,574.24 WHICH WAS 8 PERCENT OF THE INVOICED AMOUNT WAS TAKEN.

HOWEVER, DOUBT ARISES AS TO THE PROPRIETY OF REFUND OF THE DISCOUNT TAKEN SINCE THE CONTRACTOR HAS ARGUED THAT MORE THAN 20 DAYS HAD ELAPSED SINCE RECEIPT OF THE ORIGINAL INVOICE. IT IS YOUR RECOMMENDATION THAT REFUND SHOULD NOT BE MADE BECAUSE THE DISCOUNT WAS PROPERLY EARNED BY THE GOVERNMENT. THE BASES FOR YOUR POSITION ARE STATED BY YOU AS FOLLOWS:

A. THE MATERIAL INSPECTION AND RECEIVING REPORT (DD FORM 250) WAS REQUIRED BY THE CONTRACT. THIS REQUIREMENT APPEARS ON PAGE 1 OF THE CHANGE ORDER (DD FORM 1319) EXECUTED ON 3 JANUARY 1966, (003) (THE CONTRACT WAS ALSO EXECUTED ON 3 JANUARY 1966 (003) "MATERIAL INSPECTION AND RECEIVING REPORT (DD FORM 250)" (SEE ARTICLE 33, DSA FORM 222, "ADDITIONAL PROVISIONS AND ALTERATIONS TO GENERAL PROVISIONS, STANDARD FORM 32, JUNE 1964 EDITION, SUPPLY CONTRACT" (INCORPORATED BY REFERENCE)

B. DSA FORM 222 ARTICLE 33 "MATERIAL INSPECTION AND RECEIVING REPORT (JULY 1958).' AT THE TIME OF EACH DELIVERY UNDER THIS CONTRACT THE CONTRACTOR SHALL PREPARE AND FURNISH TO THE GOVERNMENT, IN THE MANNER AND TO THE EXTENT REQUIRED BY THE CONTRACTING OFFICER, A MATERIAL INSPECTION REPORT (DD FORM 250). THE GOVERNMENT SHALL FURNISH THE REQUIRED FORMS TO THE CONTRACTOR UPON REQUEST. (ASPR 7 105.7).

C. THE DD FORM 1319 ALSO PLACES THE BURDEN OF DISTRIBUTION OF COMPLETELY EXECUTED DD FORMS 250 UPON THE CONTRACTOR AS PER THE INSTRUCTIONS OF THE CONTRACTING OFFICER.

D. DCRSC FORM 525.1A CONTAINS THE "INSTRUCTIONS OF CONTRACTOR FOR DISTRIBUTION OF MATERIAL INSPECTION AND RECEIVING REPORT (DD FORM 250) DOMESTIC" WHICH WERE GIVEN BY THE CONTRACTING OFFICER TO THE CONTRACTOR APPLICABLE TO THIS CONTRACT.

E. THESE "INSTRUCTIONS" CLEARLY REQUIRE A DD FORM 250 WHICH HAS BEEN SIGNED BY THE QUALITY CONTROL REPRESENTATIVE OF THE GOVERNMENT TO BE SHIPPED WITH THE GOODS TO THE CONSIGNEE.

F. THE CONTRACTOR DID NOT COMPLY WITH REQUIREMENTS OF THE CONTRACT IN THAT HE DID NOT FOLLOW THE INSTRUCTIONS OF THE CONTRACTING OFFICER REGARDING THE DISTRIBUTION OF THE SIGNED INSPECTION COPY OF THE DD 250. THIS IS EVIDENCED BY THE DD 250 FOR PARTIAL SHIPMENT NO. 22 CONTAINED IN THE FILE WHICH INDICATED THAT A SIGNED SOURCE INSPECTION COPY OF THE DD 250 WAS NOT RECEIVED BY THE CONSIGNEE UNTIL 5 AUGUST 1966 (217).

G. SINCE A SIGNED INSPECTION COPY OF THE DD 250 WAS REQUIRED TO BE DELIVERED WITH THE GOODS TO THE CONSIGNEE, DELIVERY COULD NOT BE COMPLETE WITHOUT IT. DELIVERY WAS COMPLETE UPON RECEIPT OF THE SIGNED INSPECTION COPY OF THE DD 250 BY THE CONSIGNEE ON 5 AUGUST 1966 (217).

4. THE ADMINISTRATION CONTRACTING OFFICER, MR. PETER CONTE, MADE A FINDING OF FACT AND DETERMINATION PURSUANT TO THE DISPUTES ARTICLE OF THE CONTRACT ON 30 AUGUST 1967 (ATTACHED EXHIBIT "C"). THIS FINDING OF FACT AND DETERMINATION WAS IN FAVOR OF THE CONTRACTOR AND STATED THE QUESTIONED DISCOUNT WAS NOT EARNED BY THE GOVERNMENT AND THEREFORE SHOULD BE REFUNDED TO THE CONTRACTOR. THE ACO PREDICATED HIS DECISION UPON VOLUME III, SUPPLY OPERATORS MANUAL, DSAM 4140.2, PARAGRAPH 303111 WHICH IS AN INTERNAL REGULATION PRESCRIBING THE COURSE OF ACTION TO BE TAKEN WHEN MATERIAL IS RECEIVED BY DESTINATION WITHOUT ACCOMPANYING DOCUMENTATION. (THE TEXT OF THE ABOVE CITED REGULATION IS RECITED IN ATTACHED FINDING OF FACT AND DETERMINATION MARKED EXHIBIT "C".)

THE CONTRACTING OFFICER MADE A FINDING OF FACT UNDER THE CONTRACT DISPUTES CLAUSE WHEN THE CONTRACTOR CLAIMED REFUND OF THE DISCOUNT TAKEN. HE DETERMINED THAT THE DISCOUNT WAS NOT EARNED BY THE GOVERNMENT AND THEREFORE SHOULD BE REFUNDED. THE DECISION WAS PREDICATED ON VOLUME III, SUPPLY OPERATORS MANUAL, DSAM 4140.2, PARAGRAPH 303111, WHICH IS AN INTERNAL REGULATION PRESCRIBING THE ACTION TO BE TAKEN WHEN MATERIAL IS RECEIVED AT DESTINATION WITHOUT ACCOMPANYING DOCUMENTATION, SUCH AS AN EXECUTED DD FORM 250.

THE CONTRACT REQUIRED DESTINATION DELIVERIES WITH INSPECTION AT ORIGIN AND ACCEPTANCE AT DESTINATION. CONCERNING DISCOUNTS, THE CONTRACT PROVIDED THAT TIME WOULD BE COMPUTED FROM DATE OF DELIVERY AT DESTINATION OR DATE A CORRECT INVOICE IS RECEIVED IN THE OFFICE SPECIFIED BY THE GOVERNMENT, WHICHEVER IS LATER.

PARAGRAPH 7 OF THE GENERAL PROVISIONS, INCORPORATED BY REFERENCE INTO THE CONTRACT, PROVIDES, IN PERTINENT PART, AS FOLLOWS:

THE CONTRACTOR SHALL BE PAID, UPON THE SUBMISSION OF PROPERLY CERTIFIED INVOICES OR VOUCHERS, THE PRICES STIPULATED HEREIN FOR SUPPLIES DELIVERED AND ACCEPTED OR SERVICES RENDERED AND ACCEPTED, LESS DEDUCTIONS, IF ANY, AS HEREIN PROVIDED. * * *

IN ADDITION TO THE ABOVE, ARTICLE 5 (A) PROVIDES:

(A) ALL SUPPLIES (WHICH TERM THROUGHOUT THIS CLAUSE INCLUDES WITHOUT LIMITATION RAW MATERIALS, COMPONENTS, INTERMEDIATE ASSEMBLIES, AND END PRODUCTS) SHALL BE SUBJECT TO INSPECTION AND TEST BY THE GOVERNMENT, TO THE EXTENT PRACTICABLE AT ALL TIMES AND PLACES INCLUDING THE PERIOD OF MANUFACTURE, AND IN ANY EVENT PRIOR TO FINAL ACCEPTANCE.

MOREOVER, CONTRACT MODIFICATION NO. 1, DATED JANUARY 3, 1966, INCORPORATED ARTICLE 33 OF THE GENERAL PROVISIONS (SUPPLY CONTRACT) (JUNE 1964 EDITION), WHICH READS IN PART:

AT THE TIME OF EACH DELIVERY UNDER THIS CONTRACT THE CONTRACTOR SHALL PREPARE AND FURNISH TO THE GOVERNMENT, IN THE MANNER AND TO EXTENT REQUIRED BY THE CONTRACTING OFFICER, A MATERIAL INSPECTION AND RECEIVING REPORT (DD FORM 250 OR COMPARABLE FORM). THE GOVERNMENT SHALL FURNISH THE REQUIRED FORMS TO THE CONTRACTOR UPON REQUEST. (ASPR 7-105.7)

THE MODIFICATION FURTHER PROVIDED WITH REFERENCE TO THE USE OF DD FORM 250 THAT:

EFFECTIVE 3 JANUARY 1966, THE CONTRACTOR, UNDER THE GUIDANCE AND INSTRUCTIONS OF THE QUALITY ASSURANCE REPRESENTATIVE OF THE APPLICABLE DCAS ACTIVITY CITED IN THE CONTRACT, SHALL BE RESPONSIBLE FOR THE COMPLETE EXECUTION AND DISTRIBUTION OF DD FORMS 250. ALL INQUIRIES RELATIVE TO THE FORMS WILL BE DIRECTED TO THE DCAS ACTIVITY. YOU MAY HAVE IN YOUR POSSESSION SETS OF DD FORMS 250, TOGETHER WITH INSTRUCTIONS FOR COMPLETION AND DISTRIBUTION, WHICH WERE FURNISHED BY THIS CENTER. THESE FORMS AND INSTRUCTIONS ARE TO BE USED TO THE MAXIMUM EXTENT PRACTICABLE EXCEPT WHERE A SHIPMENT IS AUTHORIZED TO BE MADE IN ACCORDANCE WITH ARTICLE 43C ENTITLED "SHIPMENT, PRIOR AUTHORIZATION," OF THE "SUPPLEMENTAL GENERAL PROVISIONS," DPSC FORM 502-3; WHEN USED, CONTRACTOR SHALL ASSURE THAT THE PROPER "INVOICE ROUTING" OFFICE IS REFLECTED IN BLOCK 33 OF THE FORMS.

SHIPMENT, PRIOR AUTHORIZATION THE FOLLOWING IS ADDED TO ARTICLE 43C OF "SUPPLEMENTAL GENERAL PROVISIONS," DPSC FORM 502-3: IN THE EVENT SHIPMENT IS AUTHORIZED BY THE CONTRACTING OFFICER, THE CONTRACTOR SHALL ATTACH TO HIS INVOICE OR INVOICE COPIES OF DD FORM 250, A COPY OF THE APPLICABLE SATISFACTORY TEST REPORT/S) EVIDENCING COMPLETION OF TESTING REQUIREMENTS PRIOR TO SUBMISSION TO THE "INVOICE ROUTING" OFFICE FOR PAYMENT. * * *

UNDER THESE PROVISIONS, PAYMENT IS NOT AUTHORIZED TO BE MADE UNTIL THE SUPPLIES HAVE BEEN INSPECTED AND ACCEPTED AS CONFORMING TO THE CONTRACT. HENCE, THE INVOICE REQUESTING PAYMENT ON PARTIAL SHIPMENT NO. 22 SHOULD NOT HAVE BEEN SUBMITTED ON DD FORM 250 UNTIL THAT FORM HAD BEEN PROPERLY EXECUTED TO EVIDENCE CONTRACT COMPLIANCE WITH THE ABOVE-QUOTED PROVISIONS.

THE QUESTION WHETHER THE CONTRACTOR, UNDER THESE CIRCUMSTANCES, IS ENTITLED TO REFUND OF DISCOUNT IS ONE INVOLVING THE LEGAL INTERPRETATION OF THE TERMS AND CONDITIONS OF THE CONTRACT AND, AS SUCH, INVOLVES A MATTER OF LAW RATHER THAN OF FACT. CROWDER V UNITED STATES, 255 F.SUPP. 873 (1964), AFFIRMED 362 F.2D 1011. 41 U.S.C. 322. IN THIS RESPECT, THE CONTRACTING OFFICER HIMSELF POINTED OUT IN HIS FINDINGS OF FACT,WHICH HELD THAT THE DISCOUNT WAS UNEARNED BY THE GOVERNMENT, THAT THERE IS NO CONTROVERSY AS TO THE DATE THE SUPPLIES ARRIVED AT DESTINATION. WE FIND NOTHING IN HIS DETERMINATION DEALING WITH ANY DISPUTE AS TO FACT BETWEEN THE CONTRACTING OFFICER AND THE CONTRACTOR. THEREFORE, WE AGREE WITH YOUR VIEW THAT THE CONTRACTING OFFICER'S DETERMINATION THAT THE CONTRACTOR IS ENTITLED TO REFUND OF THE DISCOUNT IS NOT DETERMINATIVE OF THE LEGAL ISSUE IN THIS CASE.

GENERALLY, AND IN THE ABSENCE OF SPECIFIC STIPULATIONS OTHERWISE, A DISCOUNT PERIOD IS TO BE CONSIDERED AS BEGINNING TO RUN FROM DATE THE ARTICLES ARE IN FACT DELIVERED TO THE PURCHASE. 30 COMP. GEN. 10. HOWEVER, IN A SITUATION, AS HERE, WHERE SPECIFIC CONTRACT STIPULATIONS REQUIRE THAT A CORRECT INVOICE MUST BE RECEIVED BY THE DESIGNATED GOVERNMENT ACTIVITY, PAYMENT IS NOT AUTHORIZED TO BE MADE FOR SUPPLIES DELIVERED TO THE GOVERNMENT UNTIL SUCH CORRECT INVOICE IS RECEIVED ON DD FORM 250 PROPERLY EXECUTED. UNDER THE TERMS AND CONDITIONS OF THE CONTRACT, A ,CORRECT INVOICE" WHICH MAY BE PROPERLY PROCESSED FOR PAYMENT IS ONE WHICH EVIDENCES ACCEPTANCE OF THE SUPPLIES AS CONFORMING BY MEANS OF DD FORM 250. IN 17 COMP. GEN. 470 (QUOTING THE SYLLABUS) WE HELD AS FOLLOWS:

WHERE CONTRACT PROVIDED FOR DISCOUNT FOR PAYMENT WITHIN A SPECIFIED NUMBER OF DAYS FROM DATE OF INVOICE, AND PAYMENT WAS MADE WITHIN THE SPECIFIED NUMBER OF DAYS AFTER RECEIPT OF A PROPER INVOICE, REFUND OF THE DISCOUNT DEDUCTED IS UNAUTHORIZED, NOTWITHSTANDING THE PAYMENT AS MADE WAS NOT WITHIN THE SPECIFIED NUMBER OF DAYS AFTER DATE OF ORIGINAL INVOICE, THE INVOICE HAVING BEEN PROPERLY AND TIMELY RETURNED BY THE GOVERNMENT FOR CERTIFICATION BY THE CONTRACTOR IN THE MANNER REQUIRED BY THE CONTRACT. SEE, ALSO, THOS. SOMERVILLE COMPANY V UNITED STATES, 99 CT. CL. 329.

ACCORDINGLY, WE CONCLUDE THAT THE DISCOUNT WAS PROPERLY EARNED SINCE THE CORRECT INVOICE ON THE PROPERLY EXECUTED DD FORM 250 WAS PAID WITHIN THE 20-DAY DISCOUNT PERIOD SPECIFIED IN THE CONTRACT. THEREFORE, PAYMENT OF THE VOUCHER, WHICH IS BEING RETAINED IN OUR OFFICE, IS NOT AUTHORIZED. SEE B-118449, JUNE 23, 1954, AND B-162605, OCTOBER 30, 1967.