Propriety of Making Payment

The Defense Logistics Agency (DLA) requested an advance decision concerning reimbursement to a contractor for an amount claimed on the grounds that DLA improperly computed prompt payment discounts on the adjusted invoice price instead of on the lower original bid price. The contractor contended that the Armed Services Board of Contract Appeals decided in a previous case that, under a contract with a price adjustment clause, a prompt payment discount should be taken on the lower original contract price rather than on the contract price as adjusted to compensate for a federally mandated wage increase. GAO agreed with DLA that the facts in the previous case were not similar to the facts in this case. It was held that where, as here, a contractor is compensated not only for its increased costs but also is allowed to obtain additional profit based on those increased costs, application of the prompt payment discount against the adjusted contract price would not be inconsistent with the price adjustment clause and would therefore not appear to be inconsistent with the intention of the parties. Therefore, the contractor was not entitled to the reimbursement.