B-234178, Apr 20, 1989, 89-1 CPD

B-234178: Apr 20, 1989

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FAR case No. 88-69 is a proposed rule that would implement the Prompt Payment Act Amendments of 1988. The purpose of the Prompt Payment Act is to ensure that the government pays its bills on time. The due date for payment on the corrected invoice "will be adjusted by the number of days taken beyond the prescribed notification of defects period.". We suggest that in order to clarify how such adjustments are to be made. For automatic payment of an interest penalty if certain conditions were met. One of which is that "there was no disagreement over quantity. The "disagreement" would have to relate to work for which the invoice was submitted. As opposed to an earlier disagreement that may have been resolved.

B-234178, Apr 20, 1989, 89-1 CPD

PROCUREMENT - Sealed Bidding - Federal procurement regulations/laws - Revision - Bid guarantees DIGEST: 1. General Accounting Office has no objection to Federal Acquisition Regulation (FAR) case No. 88-61, a proposal to revise FAR section 28.101-1 concerning the requirement for bid guarantees. PROCUREMENT - Federal procurement regulations/laws - Revision - Payment procedures 2. General Accounting Office (GAO) comments on Federal Acquisition Regulation (FAR) case No. 88-69, a proposal to revise FAR Subpart 32.9, and to revise several contract clauses in FAR Part 52 and add others, to implement the Prompt Payment Act Amendments of 1988, Pub.L. 100 496. GAO suggests changes relating to adjustments to the payment due date, disagreements over invoices, and Office of Management and Budget Circular A-125. PROCUREMENT - Socio-Economic Policies - Preferred products/services Domestic products - Federal procurement regulations/laws - Revision 3. General Accounting Office has no objection to Federal Acquisition Circular 84-41, an interim rule revising Federal Acquisition Regulation (FAR) Part 25 and the contract clause at FAR section 52.225-3 to implement the United States - Canada Free - Trade Agreement and the United States - Canada Free - Trade Agreeement Implementation Act of 1988, Pub.L. 100-449.

Margaret A. Willis

FAR Secretariat

General Services Administration:

This responds to your request for our comments on Federal Acquisition Regulation (FAR) case Nos. 88-61 and 88-69, and Federal Acquisition Circular (FAC) 84-41. Our only comments concern FAR case No. 88-69.

FAR case No. 88-69 is a proposed rule that would implement the Prompt Payment Act Amendments of 1988, Pub.L. 100-496. The purpose of the Prompt Payment Act is to ensure that the government pays its bills on time, or pays an interest penalty when it does not. We suggest changes in the following areas:

1. Subsection 32.905(e) of the proposed regulations provides that if an invoice received from a contractor does not comply with all of the requirements of that subsection, the agency must notify the contractor of the deficiences within 7 days (3 or 5 days for certain perishables). Under subsection 32.907-1(b), if the government fails to notify the contractor of deficiencies in an invoice within the prescribed period, the due date for payment on the corrected invoice "will be adjusted by the number of days taken beyond the prescribed notification of defects period." We suggest that in order to clarify how such adjustments are to be made, this phrase should read: "adjusted by subtracting the number of days taken. ..."

2. The proposed rule would add a number of contract clauses to implement prompt payment requirements. Each of the clauses would provide, at different placed in each clause, for automatic payment of an interest penalty if certain conditions were met, one of which is that "there was no disagreement over quantity, quality or contractor compliance with any contract term or condition. ..." As we read this condition, the "disagreement" would have to relate to work for which the invoice was submitted, as opposed to an earlier disagreement that may have been resolved. For clarity on this point, we suggest adding the phrase "with respect to that invoice" after the word "disagreement."

3. Finally, the proposed regulation provides at section 32.903 that if an interest penalty is not paid within 10 days after it is due, and the contractor makes a written demand for payment within 40 days after payment of the principal amount was due, the agency is required to pay an additional penalty. We understand that the Office of Management and Budget (OMB) is revising OMB Circular A-125 to provide guidance concerning the calculation of this additional penalty. We suggest adding a cross reference in proposed FAR section 32.903 to OMB Circular A-125 when the revisions to the circular are made.

FAC 84-41 (FAR case No. 88-70) is an interim rule intended to implement the procurement provisions of the United States-Canada Free Trade Agreement and the United States-Canada Free-Trade Agreement Implementation Act of 1988, Pub.L. 100-449. Essentially, the revisions to FAR Subpart 25.4, FAR sections 25.101 and 25.105, and the clause at FAR section 52.225 -3, treat Canadian end products and components as domestic for purposes of the Buy American Act and the Balance of Payments program for acquisitions in excess of $25,000. We have no objection to these FAR revisions.

FAR case 88-61 is a proposed rule intended to clarify existing policy concerning the use of bid guarantees. The rule would revise paragraph (a) of FAR section 28.101-1 to state that a contracting officer should not require a bid guarantee unless either a performance bond or a performance and payment bond also is required. Paragraph (c) would allow the contracting officer to waive the requirement for a bid guarantee when such bonds are required, if it is in the best interest of the government to do so. We have no objection to these changes.