B-172101, MAR 7, 1974
Highlights
GOVERNMENT IS NOT ENTITLED TO DISCOUNT WHEN PAYMENT IS MADE WITHIN 9 DAYS OF DELIVERY BUT LATER THAN 9 DAYS AFTER DATE OF INVOICE. SINCE INVOICE WAS PAID THE NEXT DAY. GOVERNMENT WAS ENTITLED TO DISCOUNT. THE DELIVERY ORDERS AND THE INVOICES FOR SHIPMENTS MADE IN RESPONSE TO THE DELIVERY ORDERS SPECIFIED DISCOUNT TERMS OF 1 PERCENT IF PAYMENT WAS MADE WITHIN 9 DAYS. TOOK THE DISCOUNTS ON THE BASIS THAT PAYMENTS WERE EFFECTED WITHIN 9 DAYS OF RECEIPT BY THE ACCOUNTING AND FINANCE OFFICE OF PROOF OF DELIVERY. THE CONTRACTORS ASSERT THAT THE DISCOUNTS WERE APPLICABLE ONLY IF PAYMENTS WERE MADE WITHIN 9 DAYS OF THE DATE OF INVOICE. PAYMENT WAS MADE MORE THAN 9 DAYS AFTER THE INVOICE DATE. FURTHER PROVIDED THAT DSA WOULD PUBLISH A SUPPLY BULLETIN "WHICH WILL INFORM PURCHASING ACTIVITIES AS TO AVAILABILITY AND PRICES OF ITEMS COVERED.".
B-172101, MAR 7, 1974
UNDER CONTRACT WHICH ALLOWED GOVERNMENT 1 PERCENT DISCOUNT FROM INVOICE PRICE IF PAID WITHIN 9 DAYS FROM DATE OF INVOICE, GOVERNMENT IS NOT ENTITLED TO DISCOUNT WHEN PAYMENT IS MADE WITHIN 9 DAYS OF DELIVERY BUT LATER THAN 9 DAYS AFTER DATE OF INVOICE. WHERE INVOICE INCORRECTLY BILLS FOR LARGER QUANTITY THAN THAT RECEIVED AND GOVERNMENT MODIFIES DELIVERY ORDER, REDUCING QUANTITIES ORDERED TO THOSE ACTUALLY DELIVERED, INVOICE PROVIDES PROPER BASIS FOR PAYMENT AS OF DATE OF MODIFICATION, AND SINCE INVOICE WAS PAID THE NEXT DAY, GOVERNMENT WAS ENTITLED TO DISCOUNT.
TO AMERICAN BRANDS, INC., PHILIP MORRIS, INC.:
AN ADVANCE DECISION UNDER 31 U.S.C. 74 HAS BEEN REQUESTED BY AN AIR FORCE ACCOUNTING AND FINANCE OFFICER WITH RESPECT TO THE CLAIMS OF AMERICAN BRANDS, INCORPORATED AND PHILIP MORRIS, INCORPORATED, FOR $24.63 AND $71.70, RESPECTIVELY, WHICH SUMS REPRESENT DISCOUNTS TAKEN BY THE AIR FORCE IN PAYMENT OF INVOICES FOR QUANTITIES OF TOBACCO PRODUCTS.
THE DEFENSE SUPPLY AGENCY (DSA) ENTERED INTO CONTRACT NO. DSA13H-7-5 00175 WITH PHILIP MORRIS, INCORPORATED AND CONTRACT NO. DSA13H-70-5 0006 WITH AMERICAN BRANDS, INCORPORATED, PURSUANT TO WHICH THOSE FIRMS AGREED TO FILL DELIVERY ORDERS RECEIVED FROM ELEMENTS OF THE DEPARTMENT OF DEFENSE FOR VARIOUS BRAND NAMES OF CIGARETTES AND OTHER TOBACCO PRODUCTS. THE CLAIMS CONCERN ONE DELIVERY ORDER SENT TO AMERICAN BRANDS AND TWO DELIVERY ORDERS SENT TO PHILIP MORRIS. THE DELIVERY ORDERS AND THE INVOICES FOR SHIPMENTS MADE IN RESPONSE TO THE DELIVERY ORDERS SPECIFIED DISCOUNT TERMS OF 1 PERCENT IF PAYMENT WAS MADE WITHIN 9 DAYS. THE AIR FORCE, RELYING ON ITS ACCOUNTING AND FINANCE MANUAL WHICH GENERALLY REQUIRES DELIVERY PRIOR TO PAYMENT, TOOK THE DISCOUNTS ON THE BASIS THAT PAYMENTS WERE EFFECTED WITHIN 9 DAYS OF RECEIPT BY THE ACCOUNTING AND FINANCE OFFICE OF PROOF OF DELIVERY. THE CONTRACTORS ASSERT THAT THE DISCOUNTS WERE APPLICABLE ONLY IF PAYMENTS WERE MADE WITHIN 9 DAYS OF THE DATE OF INVOICE. IN EACH INSTANCE, PAYMENT WAS MADE MORE THAN 9 DAYS AFTER THE INVOICE DATE.
THE CONTRACTS PROVIDED FOR BASE PRICES AND FOR INCREASES AND DECREASES OF THOSE PRICES, AND FURTHER PROVIDED THAT DSA WOULD PUBLISH A SUPPLY BULLETIN "WHICH WILL INFORM PURCHASING ACTIVITIES AS TO AVAILABILITY AND PRICES OF ITEMS COVERED." PARAGRAPH 31 OF THE CONTRACTS PROVIDED THAT "UNLESS OTHERWISE SPECIFIED IN THE CONTRACT," THE DISCOUNT PERIOD WILL BE COMPUTED FROM THE DATE OF DELIVERY OR FROM THE DATE A CORRECT INVOICE IS RECEIVED IN THE OFFICE SPECIFIED BY THE GOVERNMENT. HOWEVER, THE APPLICABLE SUPPLY BULLETINS SPECIFIED THAT 1 PERCENT DISCOUNT WAS AVAILABLE IF PAYMENT WAS MADE WITHIN 9 DAYS OF THE DATE OF INVOICE. ARE INFORMED BY DSA THAT THE PRICES AND DISCOUNT TERMS APPEARING IN THE SUPPLY BULLETINS WERE SUPPLIED BY THE VENDORS AND ARE REGARDED AS PART OF THE CONTRACT. ACCORDINGLY, IT APPEARS THAT THE CONTRACTS PERMITTED THE GOVERNMENT TO TAKE THE DISCOUNT ONLY IF THE INVOICES WERE PAID WITHIN 9 DAYS OF THE INVOICE DATE, NOTWITHSTANDING ANY OTHER GOVERNMENT MANUALS WHICH MAY HAVE CONTEMPLATED THE RUNNING OF THE DISCOUNT PERIOD FROM THE TIME STATED IN PARAGRAPH 31.
THE RECORD FURNISHED BY THE AIR FORCE SHOWS THAT CORRECT PHILIP MORRIS INVOICES FOR SHIPMENTS MADE PURSUANT TO DELIVERY ORDERS F08637 71-M-6447 AND F08637-71-M-6158 WERE PAID MORE THAN 9 DAYS AFTER THE INVOICE DATES. THEREFORE, THE GOVERNMENT WAS NOT ENTITLED TO THE DISCOUNT ON THOSE INVOICES.
HOWEVER, THE INVOICE SUBMITTED BY AMERICAN BRANDS FOR PRODUCTS SHIPPED IN RESPONSE TO DELIVERY ORDER F08637-71-M-6580, WHILE CONSISTENT WITH QUANTITIES OF ITEMS ORDERED, DID NOT REFLECT THE ACTUAL QUANTITIES RECEIVED. THE INVOICE, DATED NOVEMBER 30, 1970, WAS FOR $2,583; THE CONTRACT PRICE FOR THE PRODUCTS SHIPPED AND RECEIVED (ON DECEMBER 11, 1970) WAS $2,462.52. THERE IS NO INDICATION IN THE RECORD THAT A CORRECTED INVOICE WAS REQUESTED OR OBTAINED BY THE AIR FORCE, INSTEAD, ON DECEMBER 21, 1970, THE AIR FORCE ISSUED A MODIFICATION TO THE DELIVERY ORDER, CHANGING THE TOTAL AMOUNT OF THE ORDER TO THE AMOUNT ACTUALLY RECEIVED. PAYMENT FOR THIS REDUCED QUANTITY, LESS THE DISCOUNT, WAS MADE ON THE FOLLOWING DAY.
UNDER THESE CIRCUMSTANCES, THE DISCOUNT MUST BE VIEWED AS PROPERLY TAKEN. IT SEEMS REASONABLE TO CONCLUDE THAT THE PARTIES CONTEMPLATED THE FURNISHING OF AN INVOICE THAT ACCURATELY REFLECTED THE CONTRACTOR'S ENTITLEMENT TO PAYMENT. HERE IT IS CLEAR THAT THE INVOICE DATED NOVEMBER 30, 1970 DID NOT PROVIDE AN ACCURATE BASIS FOR A GOVERNMENT DISBURSEMENT. SINCE A CORRECTED INVOICE WAS NOT ISSUED BY THE CONTRACTOR, WE THINK THE APPROPRIATE DATE FOR STARTING THE RUNNING OF THE DISCOUNT PERIOD WAS DECEMBER 21, 1970, THE DATE ON WHICH THE DELIVERY ORDER WAS MODIFIED. THAT MODIFICATION HAD THE EFFECT OF MAKING THE INVOICE CORRECT AS OF THAT DATE. INASMUCH AS THE INVOICE WAS PAID ON DECEMBER 22, 1970, THE GOVERNMENT WAS ENTITLED TO THE DISCOUNT.