B203993 July 12, 1982

B-203993: Jul 12, 1982

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This is in response to your memorandum in which you asked whether it would be legally permissible for OFM to establish limits for the payment of vendor invoices which are greater than the related purchase orders. To pay up to these amounts without obtaining additonal authority from Procurement (that is. You request our opinion on the legality of: "OFM establishing limits for payment of vendor invoices which are greater than the related purchase orders. When the excess is due to addition of freight charges and: "1. The purchase orders do not indicate whether transportation charges are f.o.b. origin or destinations. When the 'excess' amounts are due to something not readily evident from the invoices themselves.".

B203993 July 12, 1982

TO: Director, OFM

FROM: Acting General Counsel - Harry R. Van Cleve

SUBJECT: Legality of Paying Invoices in Excess of Related Purchase Orders - B-203993-O.M.

This is in response to your memorandum in which you asked whether it would be legally permissible for OFM to establish limits for the payment of vendor invoices which are greater than the related purchase orders, and to pay up to these amounts without obtaining additonal authority from Procurement (that is, without verifying the amount which properly should be paid). Specifically, you request our opinion on the legality of:

"OFM establishing limits for payment of vendor invoices which are greater than the related purchase orders, and paying up to those amounts, without additonal authority obtained from Procurement, when the excess is due to addition of freight charges and:

"1. The purchase orders provide for an unspecified amount of transportation charges, f.o.b. origin, or

"2. The purchase orders do not indicate whether transportation charges are f.o.b. origin or destinations.

"FOM establishing limits and paying, as above, when the 'excess' amounts are due to something not readily evident from the invoices themselves."

Except for situations involving differences attibutable solely to transportation cost variations on orders which are f.o.b. origin, we find that the proposed procedure is legally impermissible.

As we understand it, the reason for making this proposal is purely economic in nature. It has been indicated that recomputation of the purchase order price estimate frequently can take in excess of 30 days. This occasionally results in our failing to take advantage of prompt payment discounts by vendors. Thus if criteria can be established that permit payments to be certified when based upon the amount shown in the invoice rather than the amount shown in the purchase order, we could better take advantage of prompt payment discounts offered by the vendor.

We have recently considered the issue posed in your inquiry, that is, whether when on the basis of the voucher and the invoice it is clear that a discrepancy exists as to the proper amount to be paid a vendor, the certifying officer may elect to pay the greater of the two amounts shown prior to ascertaining the coreectness of the amount paid. In our decision in the matter of the Veterans Administration--Payment of vouchers under $30 price variances, B-205851, June 17, 1982, we disapproved a proposal by VA discrepancies between purchase order and invoice amount of under $30 that are not covered by contract would be paid at the invoiced amount without further inquiry since it was without statutory basis. There, too, the argument of economic savings was insufficient basis for authorizing the proposed action.

However, we note that with regard to payments for transportation services, 31 U.S.C. Sec. 244(c) (Supp. III 1979) provides that:

"Pursuant to regulations prescribed by the head of a Government agency or his designee and in conformity with such standards as shall be promulgated jointly by the Secretary of the Treasury and the Comptroller General of the United States, bills for passenger or freight transportation services to be furnished the United States by any carrier or forwarder may be paid in advance of completion of the services, without regard to section 529 of this title: Provided, That such carrier or forwarder has issued the usual ticket, receipt, bill of lading, or equivalent document covering the service involved, subject to later recovery by deduction or otherwise of any payments made for any services not received as ordered by the United States."

It is clear that this Office is a "Government agency" within the scope of this provision since:

"The term 'head of a Government agency' means any individual or group of individuals having final decision-making responsibility for any department, commission, board, service, Government corporation, instrumentality, or other establishment or body in the United States Government." 31 U.S.C. Sec. 244(d) (Supp. III 1979).

Therefore, it is clear that based upon this provision a pre-audit determination of the correctness of the vendor's invoice amount would not be required, since post audit and adjustment of accounts are contemplated. Therefore, if the goods are shipped f.o.b. origin and the difference between the estimated price in the purchase order and the amount shown on the invoice is based solely upon transportation costs, then the invoice amount may be certified for payment. However, payment is not authorized if the items are shipped f.o.b. destination since transportation costs are included as part of the overall purchase price. Thus variation intransportation costs should not affect the agreed to amount. See our decision in the matter of the United States Coast Guard, B-200217, October 14, 1980. Finally, where the purchase order does not indicate whether it is f.o.b. origin or f.o.b. destination, we see nothing wrong with this information being obtained informally.

We have been informally advised that this procedure will address a substantial portionof the instances where the problem exists in our Office. If this is the case then it may be possible for Procurement to provide some form of priority handling to the remaining cases in order to assure our taking advantage or prompt payment discounts.