B-170877, JAN 22, 1971

B-170877: Jan 22, 1971

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OR FROM THE DATE ON WHICH THE CORRECT INVOICE OR VOUCHER WAS RECEIVED IF LATER THAN DATE OF DELIVERY. INSPECTION AND TESTING BY THE GOVERNMENT DOES NOT JUSTIFY EXTENDING THE DATE OF RECEIPT OF A CORRECT INVOICE WHERE THE CONTRACT IS DEVOID OF A PROVISION ON THE MATTER. THE DISCOUNT PERIOD MUST BE CONSIDERED TO HAVE BEGUN UPON RECEIPT OF THE CONTRACTOR'S INVOICE AND THE PROMPT PAYMENT DISCOUNT WAS IMPROPERLY TAKEN. JOHNSON: REFERENCE IS MADE TO AN ADMINISTRATIVE REPORT DATED NOVEMBER 12. THE CONTRACT PROVIDED FOR A ONE PERCENT PROMPT PAYMENT DISCOUNT FOR PAYMENT BY THE GOVERNMENT WITHIN 20 DAYS FROM DATE OF DELIVERY OR FROM THE DATE ON WHICH THE CORRECT INVOICE OR VOUCHER WAS RECEIVED. IF SUCH DATE WAS LATER THAN DATE OF DELIVERY.

B-170877, JAN 22, 1971

PROMPT PAYMENT DISCOUNT DECISION THAT VETERANS ADMINISTRATION MARKETING CENTER IMPROPERLY TOOK A PROMPT-PAYMENT DISCOUNT OF $102.23 ON A CONTRACT WITH DREW PAPER PRODUCTS CORPORATION. WHERE THE CONTRACT PROVIDED FOR A ONE PERCENT PROMPT-PAYMENT DISCOUNT FOR PAYMENT WITHIN 20 DAYS FROM DATE OF DELIVERY, OR FROM THE DATE ON WHICH THE CORRECT INVOICE OR VOUCHER WAS RECEIVED IF LATER THAN DATE OF DELIVERY, INSPECTION AND TESTING BY THE GOVERNMENT DOES NOT JUSTIFY EXTENDING THE DATE OF RECEIPT OF A CORRECT INVOICE WHERE THE CONTRACT IS DEVOID OF A PROVISION ON THE MATTER. THEREFORE, THE DISCOUNT PERIOD MUST BE CONSIDERED TO HAVE BEGUN UPON RECEIPT OF THE CONTRACTOR'S INVOICE AND THE PROMPT PAYMENT DISCOUNT WAS IMPROPERLY TAKEN.

TO MR. JOHNSON:

REFERENCE IS MADE TO AN ADMINISTRATIVE REPORT DATED NOVEMBER 12, 1970, FROM THE DIRECTOR, SUPPLY SERVICE, CONCERNING THE PROTEST OF DREW PAPER PRODUCTS CORPORATION THAT THE VETERANS ADMINISTRATION (MARKETING CENTER, HINES, ILLINOIS), IMPROPERLY AVAILED ITSELF OF A PROMPT PAYMENT DISCOUNT OF $102.23 UNDER PURCHASE ORDER 70-MC-10793 PURSUANT TO CONTRACT NO. V797P -1982A.

THE CONTRACT PROVIDED FOR A ONE PERCENT PROMPT PAYMENT DISCOUNT FOR PAYMENT BY THE GOVERNMENT WITHIN 20 DAYS FROM DATE OF DELIVERY OR FROM THE DATE ON WHICH THE CORRECT INVOICE OR VOUCHER WAS RECEIVED, IF SUCH DATE WAS LATER THAN DATE OF DELIVERY. THE SHIPMENT IN QUESTION WAS MADE ON AUGUST 6, 1970, AND RECEIVED ON AUGUST 11, 1970. ADDING 20 CALENDAR DAYS TO THE RECEIPT DATE, THE PROMPT PAYMENT DISCOUNT PERIOD WOULD HAVE EXPIRED ON AUGUST 31, 1970. THE CONTRACTOR STATES HIS INVOICE WAS AIR MAILED ON AUGUST 13, 1970. HAVING BEEN RECEIVED IN THE PAYING OFFICE ON AUGUST 17, 1970, THE PROMPT PAYMENT DISCOUNT PERIOD WOULD HAVE EXPIRED SEPTEMBER 6, 1970. ON SEPTEMBER 17, 1970, THE CONTRACTOR RECEIVED A TREASURY CHECK DATED SEPTEMBER 14, 1970, FOR THE CONTRACT PRICE LESS THE SUM OF $102.23 FOR A PROMPT PAYMENT DISCOUNT.

CONTRACT CONDITION 9, SF-33A, ENTITLED "DISCOUNTS," SPECIFIES THAT:

"(B) *** TIME WILL BE COMPUTED FROM DATE OF DELIVERY *** AT DESTINATION *** OR FROM THE DATE CORRECT INVOICE OR VOUCHER IS RECEIVED IN THE OFFICE SPECIFIED BY THE GOVERNMENT, IF THE LATTER DATE IS LATER THAN THE DATE OF DELIVERY. PAYMENT IS DEEMED TO BE MADE FOR THE PURPOSE OF EARNING THE DISCOUNT ON THE DATE OF MAILING OF THE GOVERNMENT CHECK."

BASED ON THE FOREGOING STIPULATION, THE PROMPT PAYMENT DISCOUNT WAS IMPROPERLY TAKEN. THE CERTIFYING OFFICER, HOWEVER, RELIES UPON STANDARD FORM 32, PARAGRAPH 5(A), SUBJECTING SUPPLIES 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 ACCEPTANCE." THIS CLAUSE, HE CONTENDS, JUSTIFIED THE TAKING OF THE DISCOUNT, SINCE INSPECTION AND ACCEPTANCE WAS NOT COMPLETED UNTIL SEPTEMBER 2, 1970, AND THE DISCOUNT WAS PROPERLY EARNED BY PAYMENT WITHIN 20 DAYS FROM SEPTEMBER 2.

THE CONTRACT CONTAINS NO SPECIAL PROVISION CONSTRUING THE DELIVERY DATE AS THE DATE OF INSPECTION AND ACCEPTANCE FOR THE PURPOSE OF TAKING A PROMPT PAYMENT DISCOUNT. THE PURPOSE OF THE INSPECTION CLAUSE IS TO PROTECT THE GOVERNMENT FROM LIABILITY FOR DEFECTIVE GOODS, AND IT MUST THEREFORE BE READ INDEPENDENTLY FROM THE PROMPT PAYMENT DISCOUNT CLAUSE OF SF 33A, SET FORTH ABOVE, IN THE ABSENCE OF ANY SPECIAL PROVISION TO THE CONTRARY. CF. 47 COMP. GEN. 765 (1968) IN WHICH THE CONTRACT EXPRESSLY PROVIDED THAT AT TIME OF DELIVERY THE CONTRACTOR MUST FURNISH THE GOVERNMENT WITH A SIGNED MATERIAL INSPECTION AND RECEIVING REPORT, WITHOUT WHICH THE INVOICE REFERRED TO IN SF-33A WAS NOT A CORRECT INVOICE. CONSEQUENTLY, THE DISCOUNT PERIOD IN THAT CASE DID NOT COMMENCE TO RUN UNTIL THE SIGNED INSPECTION FORM WAS RECEIVED NOTWITHSTANDING EARLIER RECEIPT OF THE ORIGINAL INVOICE ITSELF. INASMUCH AS THE PRESENT CONTRACT IS DEVOID OF ANY SUCH SPECIAL PROVISION, THE DISCOUNT PERIOD MUST BE CONSIDERED TO HAVE BEGUN UPON RECEIPT OF THE CONTRACTOR'S INVOICE ON AUGUST 17, 1970.

ACCORDINGLY, THE PROMPT PAYMENT DISCOUNT WAS IMPROPERLY TAKEN AND A SUPPLEMENTAL PAYMENT SHOULD BE MADE TO THE CONTRACTOR IN THE AMOUNT OF $102.23.

THE FILE SUBMITTED WITH THE REPORT DATED NOVEMBER 12 IS RETURNED.