B-28298, OCTOBER 5, 1944, 24 COMP. GEN. 277

B-28298: Oct 5, 1944

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CONTRACTS - COST-PLUS - SUBCONTRACTS - TRADE CUSTOMS WHILE TRADE OR COMMERCIAL CUSTOM IS NOT ACCEPTED AS CONCLUSIVE IN THE INTERPRETATION OF GOVERNMENT CONTRACTS GENERALLY. WHERE LUMBER PURCHASES BY A COST-PLUS-A-FIXED-FEE CONTRACTOR WERE CONSUMMATED UNDER AGREEMENTS TO WHICH THE UNITED STATES WAS NOT A PARTY. INCLUSIVE OF FREIGHT AS IS THE RULE WITH RESPECT TO GOVERNMENT PURCHASES. WILL BE OBJECTED TO BY THIS OFFICE. THERE WAS REFERRED TO THIS OFFICE FOR AN ADVANCE DECISION YOUR LETTER OF MARCH 23. FORWARDED HEREWITH FOR REFERRAL TO THE GENERAL ACCOUNTING OFFICE FOR DIRECT SETTLEMENT IS BUREAU VOUCHER 4297 STATED TO FORD J. ALSO SUBMITTED HEREWITH ARE NOTICES OF EXCEPTION. AS WILL BE NOTED IN THE ATTACHED CORRESPONDENCE.

B-28298, OCTOBER 5, 1944, 24 COMP. GEN. 277

CONTRACTS - COST-PLUS - SUBCONTRACTS - TRADE CUSTOMS WHILE TRADE OR COMMERCIAL CUSTOM IS NOT ACCEPTED AS CONCLUSIVE IN THE INTERPRETATION OF GOVERNMENT CONTRACTS GENERALLY, WHERE LUMBER PURCHASES BY A COST-PLUS-A-FIXED-FEE CONTRACTOR WERE CONSUMMATED UNDER AGREEMENTS TO WHICH THE UNITED STATES WAS NOT A PARTY, THE CONTRACTOR'S METHOD OF COMPUTING THE VENDOR'S OFFERED DISCOUNT ON THE NET INVOICE PRICE, EXCLUSIVE OF FREIGHT, IN ACCORDANCE WITH THE PREVAILING COMMERCIAL CUSTOM OF THE LUMBER INDUSTRY IN THAT PARTICULAR LOCALITY, RATHER THAN ON THE CONTRACT OR DELIVERED PRICE, INCLUSIVE OF FREIGHT AS IS THE RULE WITH RESPECT TO GOVERNMENT PURCHASES, WILL BE OBJECTED TO BY THIS OFFICE. COMP. GEN. 868, DISTINGUISHED.

COMPTROLLER GENERAL WARREN TO COL. R. H. BRADSHAW, U.S. ARMY, OCTOBER 5, 1944:

BY 7TH INDORSEMENT OF JULY 29, 1944, FROM THE FISCAL DIRECTOR, HEADQUARTERS, ARMY SERVICE FORCES, THERE WAS REFERRED TO THIS OFFICE FOR AN ADVANCE DECISION YOUR LETTER OF MARCH 23, 1944, FILE 132.6, AS FOLLOWS:

1. FORWARDED HEREWITH FOR REFERRAL TO THE GENERAL ACCOUNTING OFFICE FOR DIRECT SETTLEMENT IS BUREAU VOUCHER 4297 STATED TO FORD J. TWAITS CO. AND MORRISON-KNUDSEN CO., INC., IN AMOUNT OF $23,767.81AS FINAL PAYMENT OF THE CONTRACTOR'S FIXED FEE UNDER THE SUBJECT CONTRACT.

2. ALSO SUBMITTED HEREWITH ARE NOTICES OF EXCEPTION, STANDARD FORM NO. 1100, PERTAINING TO THE FOLLOWING REIMBURSEMENT VOUCHERS UNDER THE ABOVE CONTRACT. D.O. VOU. NO.: DATE C.O. VOU. NO.: DATE

1781----------------1JAN. 1941 3793------------1JAN. 1941

1783----------------1JAN. 1941 3794------------1JAN. 1941

2594----------------1JAN. 1941 3798------------1JAN. 1941

2595----------------1JAN. 1941 9147------------1JAN. 1941

2859----------------1JAN. 1941 943------------1FEB. 1941

3129----------------1JAN. 1941 1991------------1FEB. 1941

3130----------------1JAN. 1941 4364------------1FEB. 1941

3131----------------1JAN. 1941 4365------------1FEB. 1941

3132----------------1JAN. 1941 5285------------1FEB. 1941

3263----------------1JAN. 1941 6313------------1APR. 1941

3792----------------1JAN. 1941

ACCOUNTS OF E. F. ELY, COL., F.D. (DECEASED).

3. AS WILL BE NOTED IN THE ATTACHED CORRESPONDENCE, THE CONTRACTOR REFUSES TO RECOGNIZE THE DECISION OF THE COMPTROLLER GENERAL (5 CG 868) AS REPRESENTING A SUFFICIENT BASIS UPON WHICH THE GOVERNMENT MAY PROPERLY CLAIM REFUNDMENT OF THE SUM SUSPENDED. THE ARGUMENT ADVANCED BY THE CONTRACTOR BEING THAT IT IS AN ACCEPTED TRADE PRACTICE TO ALLOW DISCOUNT ONLY AFTER DEDUCTING FREIGHT AND HAS SUPPLIED IN SUPPORT OF THIS CONTENTION A PUBLICATION OF THE WEST COAST LUMBERMAN'S ASSOCIATION (SEE ARTICLES VII AND IX). IN ADDITION THERETO THERE HAS BEEN FURNISHED COPIES OF CORRESPONDENCE FROM THE CONSTRUCTING QUARTERMASTER QUOTING A DIRECTIVE OF THE QUARTERMASTER GENERAL CONFIRMING THIS PRACTICE.

4. HOWEVER, IN VIEW OF THE FACT THAT THE CONTENTION OF THE CONTRACTOR IN THE PRESENT INSTANCE IS IDENTICAL TO THAT CONSIDERED BY THE COMPTROLLER IN HIS DECISION CITED ABOVE AND SINCE THE CONTRACTOR STATES THAT DISCOUNTS AMOUNTING TO $5,905.35 ARE INVOLVED UNDER THIS CONTRACT IT IS DEEMED ADVISABLE THAT SETTLEMENT OF THE CONTRACTOR'S FIXED FEE PAYMENT BE MADE BY THE GENERAL ACCOUNTING OFFICE AFTER WITHHOLDING SUFFICIENT BALANCE TO SATISFY THE ATTACHED SUSPENSIONS AND OTHERS NOT YET PRESENTED TO THIS OFFICE.

APPARENTLY, THERE IS NO QUESTION CONCERNING THE PAYMENT PROPOSED TO BE MADE ON THE ATTACHED BUREAU VOUCHER NO. 4297, FOR $23,767.81, REPRESENTING THE BALANCE OF THE FIXED FEE DUE THE PRIME CONTRACTOR UNDER COST-PLUS-A- FIXED-FEE CONTRACT NO. W-6976-QM-2, DATED NOVEMBER 2, 1940, YOUR SUBMISSION BEING CONCERNED PRIMARILY WITH THE PROPRIETY OF DEDUCTING FROM THE PROCEEDS OF SAID VOUCHER CERTAIN AMOUNTS, REPORTEDLY AGGREGATING $585.74, SUSPENDED IN THE AUDIT OF THE NUMEROUS VOUCHERS LISTED WHICH WERE TRANSMITTED IN THE JANUARY, FEBRUARY AND APRIL, 1941, ACCOUNTS OF COLONEL E. F. ELY.

REFERENCE TO THE VARIOUS VOUCHERS CITED IN YOUR SUBMISSION ABOVE DISCLOSES THAT, WITH THE EXCEPTION OF VOUCHERS NOS. 943, 1991, 4364 AND 4365, ON WHICH NOTICES OF EXCEPTION AGGREGATING $102.66 WERE ISSUED BECAUSE OF OVERPAYMENTS OF FREIGHT CHARGES ON THE SHIPMENTS INVOLVED, ALL OF THE OTHER EXCEPTIONS LISTED BY YOU WERE BASED UPON THE PRIME CONTRACTOR'S PRACTICE OF COMPUTING AND DEDUCTING THE DISCOUNT OFFERED IN CONNECTION WITH PURCHASES OF LUMBER UPON THE NET OR MILL PRICE OF THE MATERIALS, AFTER DEDUCTING FREIGHT, RATHER THAN UPON THE CONTRACT OR DELIVERED PRICE THEREOF, INCLUSIVE OF FREIGHT, AS QUOTED IN THE APPLICABLE PURCHASE ORDERS. AS AUTHORITY FOR ISSUANCE OF THE AFORESAID SUSPENSIONS, THERE WAS CITED IN THE VARIOUS NOTICES OF EXCEPTION ATTACHED TO THE SAID VOUCHERS A DECISION OF THIS OFFICE PUBLISHED IN 5 COMP. GEN. 868, WHICH HOLDS, IN SUBSTANCE, THAT WHERE THE CONTRACT PROVIDES FOR THE ALLOWANCE OF A CASH OR PROMPT PAYMENT DISCOUNT FOR PAYMENT WITHIN A SPECIFIED PERIOD OF TIME THE AMOUNT TO BE DEDUCTED AS DISCOUNT SHOULD BE BASED ON THE PRICE FIXED IN THE CONTRACT, NOTWITHSTANDING SUCH PRICE MAY BE INCLUSIVE OF THE AMOUNT PAID BY THE VENDOR AS FREIGHT ON THE MATERIALS TO POINT OF DESTINATION. ALSO, SEE 17 COMP. GEN. 580; ID. 1030.

HOWEVER, IT IS THE CONTRACTOR'S POSITION IN THE MATTER THAT IT IS THE ACCEPTED COMMERCIAL OR TRADE PRACTICE IN THE LUMBER INDUSTRY, WHEN PAYING FOR LUMBER PURCHASED IN CARLOAD LOTS, TO COMPUTE THE CASH DISCOUNTS ON THE NET AMOUNT OF THE INVOICE, AFTER DEDUCTING FREIGHT, AND, IN CORROBORATION OF SUCH CONTENTION, THERE HAVE BEEN FURNISHED A COPY OF A DIRECTIVE OF THE QUARTERMASTER GENERAL ISSUED TO THE CONTRACTOR UNDER DATE OF FEBRUARY 25, 1941, WHEREIN IT WAS STATED: " IT IS A GENERAL PUBLIC POLICY TO COMPUTE DISCOUNT ON NET BILLING AFTER DEDUCTION OF FREIGHT," AND, ALSO, A COPY OF A PUBLICATION ENTITLED " OFFICIAL WEST COAST STANDARD SALES AND SHIPPING PRACTICES," ISSUED OCTOBER 15, 1940, THE PERTINENT SECTIONS OF WHICH ARE AS FOLLOWS:

VII. DELIVERY - RAIL SHIPMENTS:

(A) ALL SALES OF WEST COAST STOCK, WHERE PRICES INCLUDE COST OF DELIVERY, ARE MADE F.O.B. CARS MILL BASIS, PLUS ESTIMATED FREIGHT TO DESTINATION OR RATE AGREED UPON; ACTUAL FREIGHT TO BE PAID BY THE BUYER AND UPON SURRENDER OF THE ORIGINAL FREIGHT BILL TO THE SELLER, SHALL BE CONSIDERED AS PAYMENT ON INVOICE.

IX. TERMS OF PAYMENT:

(A) RAIL DIRECT TO TRADE: CASH, LESS 2 PERCENT OF INVOICE AMOUNT (AFTER DEDUCTING ACTUAL FREIGHT PAID AS SHOWN BY ORIGINAL FREIGHT BILL) IF MAILED WITHIN FIVE (5) DAYS AFTER ARRIVAL OF CAR; OR FULL AMOUNT OF INVOICE LESS ACTUAL FREIGHT PAID TO BE MAILED WITHIN SIXTY (60) DAYS FROM INVOICE DATE. (RECEIPTED FREIGHT BILL TO ACCOMPANY SETTLEMENT.)

IT THUS APPEARS TO BE THE PREVAILING COMMERCIAL CUSTOM IN THE PARTICULAR LOCALITY IN WHICH THE PRESENT TRANSACTIONS TOOK PLACE TO SELL LUMBER IN CARLOAD LOTS UPON A NET OR F.O.B. MILL BASIS, AND TO COMPUTE THE DISCOUNT OFFERED ON THE NET INVOICE PRICE, EXCLUSIVE OF FREIGHT, AND SO FAR AS THE RECORD SHOWS THE LUMBER WAS PURCHASED ON THIS BASIS; AND, WHILE TRADE OR COMMERCIAL CUSTOM IS NOT ACCEPTED AS CONCLUSIVE IN THE INTERPRETATION OF GOVERNMENT CONTRACTS GENERALLY, SINCE THE PURCHASES HERE INVOLVED WERE CONSUMMATED UNDER CONTRACTS OR PURCHASE ORDERS TO WHICH THE UNITED STATES WAS NOT A PARTY, BUT UNDER AGREEMENTS ENTERED INTO SOLELY BETWEEN THE PRIME CONTRACTOR AND ITS VENDORS, THIS OFFICE IS NOT REQUIRED TO OFFER FURTHER OBJECTIONS TO THE METHOD ADOPTED BY THE SAID CONTRACTOR IN COMPUTING THE DISCOUNTS DEDUCTED ON THESE AND SIMILAR VOUCHERS. SEE VULCANITE PORTLAND CEMENT COMPANY V. UNITED STATES, 74 C.1CLS. 692, 715; THOMAS H. LYONS V. UNITED STATES, 30 ID. 352, 361, AND CASES THERE CITED; THOMPSON V. RIGGS, 5 WALL. 663, 679.

ACCORDINGLY, EXCEPT FOR THE APPARENT OVERPAYMENTS AGGREGATING $102.66 NOTED ON THE FOUR VOUCHERS REFERRED TO ABOVE, THE VOUCHER COVERING THE BALANCE OF THE CONTRACTOR'S FIXED FEE APPEARS PROPER FOR PAYMENT, IF OTHERWISE CORRECT.

BUREAU VOUCHER NO. 4297, SUPRA, AND RELATED PAPERS, ARE RETURNED HEREWITH.