B-174410, JUN 30, 1972

B-174410: Jun 30, 1972

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UNDER THE EXPRESS TERMS OF THE CONTRACT THE DISCOUNT WAS PROPERLY TAKEN SO LONG AS PAYMENT WAS MADE WITHIN 20 DAYS FROM THE DATE THE INVOICE WAS RECEIVED BY THE AIR FORCE FINANCE OFFICE. IT APPEARS THAT SIOUX WAS INDUCED TO REASONABLY RELY ON AN IMPLIED WAIVER OF THE PROVISION DESIGNATING THE FINANCE OFFICE AS THE PLACE FOR SUBMISSION OF ITS INVOICE. IT IS RECOMMENDED THAT IN FUTURE PROCUREMENTS. SECRETARY: REFERENCE IS MADE TO LETTERS DATED OCTOBER 21. THE ISSUE PRESENTED IS THE PROPRIETY OF THE PROPOSED REFUND TO SIOUX SUPPLY CORPORATION OF A $627.71 PROMPT PAYMENT DISCOUNT TAKEN IN THE PAYMENT OF AN INVOICE SUBMITTED FOR ITEMS FURNISHED ON DELIVERY ORDER F39601-71 M- 0415 UNDER CONTRACT F39601-70-C-0123.

B-174410, JUN 30, 1972

PROCUREMENT LAW - PROMPT PAYMENT DISCOUNT - PROPRIETY OF REFUND - EQUITABLE ESTUPPEL CONCERNING THE PROPRIETY OF A PROPOSED REFUND TO SIOUX SUPPLY CORP. OF A PROMPT PAYMENT DISCOUNT TAKEN BY ELLSWORTH AFB, SOUTH DAKOTA, UNDER A REQUIREMENTS CONTRACT. UNDER THE EXPRESS TERMS OF THE CONTRACT THE DISCOUNT WAS PROPERLY TAKEN SO LONG AS PAYMENT WAS MADE WITHIN 20 DAYS FROM THE DATE THE INVOICE WAS RECEIVED BY THE AIR FORCE FINANCE OFFICE. HOWEVER, IN VIEW OF THE ACTUAL BILLING PROCEDURE UNDER PARAGRAPH 6A(5) OF SAC REGULATION 70-12 AND THE COMMON PRACTICE OF THE PARTIES, IT APPEARS THAT SIOUX WAS INDUCED TO REASONABLY RELY ON AN IMPLIED WAIVER OF THE PROVISION DESIGNATING THE FINANCE OFFICE AS THE PLACE FOR SUBMISSION OF ITS INVOICE. ACCORDINGLY, THE AIR FORCE SHOULD BE EQUITABLY ESTOPPED FROM INSISTING ON A STRICT APPLICATION OF THE CONTRACT TERMS AND SHOULD REFUND THE UNEARNED DISCOUNT. IT IS RECOMMENDED THAT IN FUTURE PROCUREMENTS, CONTRACT TERMS BE HARMONIZED WITH APPLICABLE SAC REGULATIONS.

TO MR. SECRETARY:

REFERENCE IS MADE TO LETTERS DATED OCTOBER 21, 1971, AND APRIL 4, 1972, FROM THE DIRECTOR OF ACCOUNTING OPERATIONS, HEADQUARTERS, AIR FORCE ACCOUNTING AND FINANCE CENTER, DENVER, CONCERNING THE REQUEST OF THE ACCOUNTING AND FINANCE OFFICER, COMPTROLLER DIVISION, ELLSWORTH AIR FORCE BASE, DATED SEPTEMBER 10, 1971, FOR AN ADVANCE DECISION. THE ISSUE PRESENTED IS THE PROPRIETY OF THE PROPOSED REFUND TO SIOUX SUPPLY CORPORATION OF A $627.71 PROMPT PAYMENT DISCOUNT TAKEN IN THE PAYMENT OF AN INVOICE SUBMITTED FOR ITEMS FURNISHED ON DELIVERY ORDER F39601-71 M- 0415 UNDER CONTRACT F39601-70-C-0123, AWARDED JUNE 12, 1970, PURSUANT TO AN INVITATION FOR BIDS ISSUED BY THE PROCUREMENT DIVISION, ELLSWORTH AIR FORCE BASE, SOUTH DAKOTA.

THE SUBJECT AWARD WAS A REQUIREMENTS CONTRACT FOR THE SUPPLY OF AUTOMOTIVE AND RELATED VEHICLE PARTS AND ACCESSORIES. THE SUPPLIES TO BE FURNISHED UNDER THIS CONTRACT WERE TO BE SPECIFIED IN VARIOUS DELIVERY ORDERS TO BE ISSUED BY THE PROCUREMENT DIVISION.

THE CONTRACT STIPULATED PROMPT PAYMENT DISCOUNT TERMS OF 10 PERCENT - 20 DAYS, AND THESE TERMS WERE SET FORTH IN BLOCK 12 ON DELIVERY ORDER F39601- 71-M-0415, DATED AUGUST 13, 1970, WHICH ENCOMPASSED THE PERIOD OF AUGUST 1 THROUGH 31, 1970. PARAGRAPH 8 OF THE CONTRACT'S SOLICITATION INSTRUCTIONS AND CONDITIONS SF 33A (CONTINUED) STATES, IN PERTINENT PART, THAT THE DISCOUNT PERIOD WILL BE COMPUTED FROM THE DATE ON WHICH A CORRECT INVOICE IS RECEIVED IN THE OFFICE SPECIFIED BY THE GOVERNMENT.

BLOCK 27 OF THE AWARD DOCUMENT (STANDARD FORM 33) AND BLOCK 15 OF THE SUBJECT DELIVERY ORDER DESIGNATE THE ACCOUNTING AND FINANCE OFFICER, ELLSWORTH AIR FORCE BASE, SOUTH DAKOTA, AS THE PAYING OFFICER, AND BLOCK 13 OF THE DELIVERY ORDER AND BLOCK 24 OF THE AWARD DOCUMENT CLEARLY PROVIDE THAT INVOICES SHOULD BE MAILED OR SUBMITTED TO THAT OFFICER.

THE INVOICE ISSUED FOR THE AUGUST DELIVERIES WAS DATED SEPTEMBER 1, 1970, AND REQUESTED PAYMENT ON A SUM WHICH INCLUDED $6,277.12 SUBJECT TO THE 10 PERCENT - 20 DAYS DISCOUNT ($627.71).

ONE STATEMENT IN THE RECORD ADVISES THAT THE SUBJECT INVOICE WAS TAKEN FROM THE CONTRACTOR BY SGT. HOLTZ OF THE PROCUREMENT OFFICE ON OR ABOUT SEPTEMBER 3, 1970, WHILE ANOTHER STATEMENT RELATES THAT THE SUBJECT INVOICE WAS SUBMITTED TO THE PROCUREMENT OFFICE ON OR ABOUT SEPTEMBER 1, 1970. OUR PERUSAL OF THE RECORD INDICATES THAT IT WAS COMMON PRACTICE FOR THE CONTRACTOR TO SUBMIT HIS INVOICE TO THE PROCUREMENT OFFICE FOR APPROVAL, AND FOR THAT OFFICE TO CONVEY THE INVOICES TO THE ACCOUNTING AND FINANCE OFFICER FOR PAYMENT. THE RECORD STATES THAT THE CLAIMANT RELIED UPON THIS PROCEDURE ON THE BASIS OF PAST CONDUCT OF OFFICIALS AT THE BASE.

THE RECORD ALSO ADVISES THAT THE PROCUREMENT OFFICE INITIALLY REFUSED TO CERTIFY THE REFERENCED INVOICE DUE TO RESERVATIONS REGARDING THE BILLING FOR SOME ITEMS, BUT THAT IT AUTHORIZED PAYMENT OF THE SUBJECT INVOICE DURING THE SECOND WEEK OF OCTOBER, AND FORWARDED THE INVOICE ON OCTOBER 13, 1970, TO THE ACCOUNTING AND FINANCE OFFICER FOR PAYMENT. THE RECORD INDICATES THAT PAYMENT THEREON WAS MADE ON OCTOBER 21, 1970, AND THE 10 PERCENT DISCOUNT OF $627.71 WAS TAKEN.

REGARDLESS OF THE INITIAL RESERVATIONS AS TO THE INVOICE'S ACCURACY, THE FACT THAT IT WAS CERTIFIED FOR PAYMENT MUST BE CONSIDERED EVIDENCE THAT THE PROCURING ACTIVITY CONSIDERED IT PROPERLY PAYABLE. THE DETERMINATIVE ISSUE, THEREFORE, IS WHETHER THE INVOICE WAS PAID WITHIN 20 DAYS FROM SUBMISSION TO THE OFFICE SPECIFIED BY THE GOVERNMENT SO AS TO ENTITLE THE GOVERNMENT TO THE DISCOUNT TAKEN.

AS NOTED ABOVE, BOTH THE CONTRACT AND THE DELIVERY ORDER REQUIRED THE SUBMISSION OF INVOICES TO THE ACCOUNTING AND FINANCE OFFICER. IN VIEW THEREOF, AND OF THE FACT THAT THAT OFFICER TENDERED PAYMENT ON THE SUBJECT INVOICE EIGHT DAYS FOLLOWING HIS RECEIPT THEREOF FROM THE PROCUREMENT OFFICE, IT WOULD APPEAR THAT THE DISCOUNT WAS PROPERLY TAKEN UNDER THE APPLICABLE PROVISIONS OF THE CONTRACT NOTWITHSTANDING THE FACT THAT THE INVOICE WAS NOT PAID UNTIL THE EXPIRATION OF APPROXIMATELY 50 DAYS FROM THE DATE UPON WHICH THE CLAIMANT SUBMITTED IT TO THE PROCUREMENT OFFICE.

ATTACHED TO THE SUPPLEMENTAL REPORT DATED APRIL 4, 1972, FROM YOUR ACCOUNTING AND FINANCE CENTER TO THIS OFFICE, IS A REPLY FROM THE CONTRACTING OFFICER, DATED MARCH 24, 1972, TO OUR LETTER OF MARCH 7, 1972, WHICH REQUESTED ADVICE AS TO WHETHER THERE WAS AN EXPRESS WAIVER AND IF SO, BY WHOM, OF THE DELIVERY ORDER AND CONTRACTUAL PROVISIONS REQUIRING THE CONTRACTOR TO SUBMIT ITS INVOICES TO THE ACCOUNTING AND FINANCE OFFICER. THE CONTRACTING OFFICER, IN HIS STATEMENT OF MARCH 24, STIPULATED THAT HE HAD NOT PROFFERED ANY EXPRESS WAIVER, AND THAT "THE GOVERNMENT REPRESENTATIVE (WHO ADVISED THE CONTRACTOR TO SUBMIT HIS INVOICES TO THE PROCUREMENT OFFICE) HAD NO AUTHORITY TO AMEND THE PROVISIONS OF THE CONTRACT."

HOWEVER, THAT STATEMENT ALSO ADVISES THAT THE INTERNAL PROCEDURES APPLICABLE TO THE RECEIPT, PROCESSING AND PAYMENT OF INVOICES ARE SET FORTH IN PARAGRAPH 6A(5) OF SAC REGULATION 70-12. THAT PARAGRAPH REQUIRES THE PROCUREMENT DIVISION TO RECEIVE THE MONTHLY INVOICE WITH THE ORIGINAL COPY OF THE SALES SLIPS AND SUPPORTING DOCUMENTATION FROM THE CONTRACTOR, AUDIT THE SALES SLIPS, AND FORWARD THE INVOICE, SALES SLIPS, AND DOCUMENTATION TO THE FINANCE OFFICER FOR PAYMENT.

WHILE WE ACCEPT THE ASSERTION OF THE CONTRACTING OFFICER THAT THERE WAS NO EXPRESS WAIVER OF THE REFERENCED PROVISIONS, IT IS WELL ESTABLISHED AS A MATTER OF LAW THAT A WAIVER MAY BE INFERRED FROM CONDUCT AND, AS SUCH, IS A QUESTION OF FACT. COURTS HAVE INFERRED A WAIVER FROM CONDUCT OF A PARTY WHICH IS INCONSISTENT WITH THE ASSERTION OR RETENTION OF HIS RIGHT TO DEMAND STRICT ADHERENCE TO EXPRESS CONTRACTUAL TERMS; ALBERT V. JORALEMON, 271 F.2D 236, 240.

IN THE INSTANT CASE, NOT ONLY DOES THE RECORD ADMIT THAT IT WAS CUSTOMARY PROCEDURE, IN PAST DEALINGS, FOR THE CLAIMANT TO SUBMIT HIS INVOICES TO THE PROCUREMENT OFFICE, BUT THE INSTRUCTIONS IN SAC REGULATION 70-12 ALSO APPEAR TO CONTEMPLATE THAT THE PROCUREMENT DIVISION WILL RECEIVE THE INVOICES DIRECTLY FROM THE CONTRACTOR. IN VIEW THEREOF, THE ONLY REASONABLE CONCLUSION WE CAN DERIVE FROM THE FOREGOING IS THAT PARAGRAPH 6A(5) PRESCRIBED A COURSE OF CONDUCT FOR PROCUREMENT DIVISION PERSONNEL WITH WHICH THEY EVIDENTLY COMPLIED, AND UPON WHICH THE CLAIMANT WAS ACCUSTOMED TO RELY IN HIS PRIOR DEALINGS. ACCORDINGLY, WE FIND SUCH CONDUCT, UNDER THE FACTS PRESENTED BY THE RECORD, SO INCONSISTENT WITH THE CONTRACTUAL RIGHT TO RECEIVE INVOICES AT THE FINANCE OFFICE AS TO CONSTITUTE A WAIVER OF THAT EXPRESS CONTRACTUAL PROVISION.

THE DOCTRINE OF EQUITABLE ESTOPPEL HOLDS THAT A PARTY WHICH, BY ITS STATEMENTS OR CONDUCT, HAS INDUCED ANOTHER PARTY TO ACT UPON A REASONABLE BELIEF THAT CERTAIN RIGHTS HAVE BEEN WAIVED, WILL BE ESTOPPED TO INSIST UPON THE EXERCISE OF THOSE RIGHTS TO THE PREJUDICE OF THE PARTY MISLED; UNITED STATES, FOR USE AND BENEFIT OF NOLAND CO; INC. V. WOOD, ET AL, 99 F.2D 80, 82-83. IN VIEW THEREOF, AND OF THE MODUS OPERANDI OF THE PROCUREMENT DIVISION WHICH WE FEEL WAS SUFFICIENT TO FOSTER THE CLAIMANT'S BELIEF THAT INVOICES SHOULD PROPERLY BE SUBMITTED TO THE PROCUREMENT DIVISION, IT IS OUR CONCLUSION THAT THE GOVERNMENT IS ESTOPPED TO CLAIM THAT THE DISCOUNT PERIOD COMMENCED TO RUN ONLY FROM THE DATE UPON WHICH THE ACCOUNTING AND FINANCE OFFICER RECEIVED THE INVOICE. TO THE CONTRARY, WE CONSIDER THE DISCOUNT PERIOD TO HAVE COMMENCED APPROXIMATELY SEPTEMBER 1-3, 1970, AND SINCE PAYMENT WAS NOT MADE UNTIL SOME 50 DAYS LATER, THE DISCOUNT WAS UNEARNED AND SHOULD THEREFORE BE REFUNDED.

IN ORDER THAT PROBLEMS OF THIS NATURE MIGHT BE AVERTED IN THE FUTURE, IT IS SUGGESTED THAT THE OFFICE SPECIFIED IN FUTURE CONTRACTS AS THE OFFICE FOR INVOICE SUBMISSION BE HARMONIZED WITH THAT SET FORTH IN YOUR SAC REGULATIONS, OR THAT THE REGULATIONS BE REVISED TO CLEARLY INDICATE THAT THE PROCUREMENT DIVISION IS TO RECEIVE THE INVOICES FROM THE FINANCE OFFICER.