B-149537, AUG. 20, 1962

B-149537, AUG. 20, 1962

TO CAPTAIN J. H. PETERSON:

YOUR LETTER OF JUNE 28, 1962 (GDSUK-FA-E), PRESENTS FOR ADVANCE DECISION TWO QUESTIONS CONCERNING DISCOUNTS TAKEN UNDER CONTRACT NO. DA-04-468-QM- 1844, O.I. 15592-1C, DATED APRIL 21, 1961, AS AMENDED, WITH TELEVISION COMMUNICATIONS, INC., FOR SERVICES, LABOR, MATERIAL AND EQUIPMENT NECESSARY FOR INSTALLATION AND OPERATION OF A CLOSED CIRCUIT TELEVISION AUCTION SALE OF GOVERNMENT PROPERTY.

UNDER THE PROVISIONS OF THE CONTRACT THE CONTRACTOR AGREED TO FURNISH ALL SERVICES, LABOR, MATERIAL, AND EQUIPMENT NECESSARY FOR THE INSTALLATION AND OPERATION OF A CLOSED CIRCUIT TELEVISION AUCTION SALE OF GOVERNMENT PROPERTY ON JUNE 5 AND JUNE 6, 1961, BETWEEN THE HOURS 9:00 A.M., AND 3 P.M., PACIFIC DAYLIGHT SAVING TIME, INCLUDING AN ENGINEERING LINE FOR A PERIOD OF 3 DAYS, 24 HOURS PER DAY, AT GOVERNMENT-FURNISHED SITES. ITEM NO. A OF THE CONTRACT PROVIDED FOR THE PAYMENT OF $32,889 FOR THE SERVICES, LABOR, MATERIAL AND EQUIPMENT FURNISHED BY THE CONTRACTOR. PARAGRAPH 7 (B) OF THE TERMS AND CONDITIONS OF THE INVITATION UNDER WHICH THE AWARD WAS MADE PROVIDED THAT---

"IN CONNECTION WITH ANY DISCOUNT OFFERED, TIME WILL BE COMPUTED FROM DATE OF DELIVERY OF SUPPLIES TO CARRIER WHEN DELIVERY AND ACCEPTANCE ARE AT POINT OF ORIGIN, OR FROM DATE OF DELIVERY AT DESTINATION OR PORT OF EMBARKATION WHEN DELIVERY AND ACCEPTANCE ARE AT EITHER OF THOSE POINTS, OR FROM DATE CORRECT INVOICE IS RECEIVED IN THE OFFICE SPECIFIED BY THE GOVERNMENT IF THE LATTER DATE IS LATER THAN THE DATE OF DELIVERY. * * *"

THE FINANCE AND ACCOUNTING DIVISION, SHARPE GENERAL DEPOT, LATHROP, CALIFORNIA, WAS DESIGNATED AS THE RECEIVING OFFICE FOR THE INVOICES. THE CONTRACT PROVIDED FOR A DISCOUNT OF 1/2 PERCENT, 20 CALENDAR DAYS NET.

THE RECORD SHOWS THAT FOLLOWING COMPLETION OF THE SERVICES REQUIRED UNDER ITEM NO. A OF THE CONTRACT, AN INVOICE DATED JUNE 6, 1961, WAS RECEIVED IN THE FINANCE AND ACCOUNTING DIVISION ON JUNE 19, 1961, FOR $32,889, THE FULL CONTRACT PRICE FOR THIS ITEM, EVEN THOUGH THE LAST HOUR OF TELEVISION PREVIOUSLY HAD BEEN CANCELLED BY THE PARTIES SUBJECT TO FUTURE NEGOTIATIONS AFTER ALL DATA WAS MADE AVAILABLE AS TO ANY SAVINGS TO THE CONTRACTOR. ACCORDINGLY, BECAUSE OF THE UNCERTAINTY AS TO THE AMOUNT OF THE SAVINGS WHICH WOULD RESULT FROM THE ABOVE CANCELLATION THE AMOUNT OF $8,222.25 WAS WITHHELD FROM THE CONTRACTOR'S BILLING. THE CONTRACT DISCOUNT RATE OF 1/2 PERCENT WAS COMPUTED ON THE BALANCE OF $24,666.75 ($123.33) AND THE AMOUNT OF $24,543.42 WAS PAID TO THE CONTRACTOR ON DISBURSING OFFICER'S VOUCHER NO. 22096, JUNE 26, 1961, ACCOUNTS OF J. A. HUDOCK, CAPTAIN, FC SYMBOL 6519. IN JUSTIFICATION OF THE AMOUNT WITHHELD FROM PAYMENT THE CONTRACTING OFFICER HAS REPORTED, IN EFFECT, THAT IT WAS DIFFICULT TO EVALUATE THE COST OF THE CANCELLED SERVICES BECAUSE OF THE MAGNITUDE OF SUCH SERVICES AND BECAUSE THE CONTRACT PROVIDED FOR A LUMP- SUM PAYMENT. IT WAS EXPLAINED THAT THE ONLY OTHER SIMILAR PROCUREMENT AT COLUMBUS GENERAL DEPOT WAS FOR A MUCH SMALLER AMOUNT.

ON JUNE 28, 1961, THE CONTRACTOR SUBMITTED EVIDENCE OF THE APPARENT VALUE OF THE CANCELLED SERVICES AS $1,126.33. THIS INFORMATION WAS RECEIVED IN THE F AND A DIVISION ON JUNE 30, 1961, AND ON JULY 11, 1961, THE F AND A DIVISION AGREED TO RELEASE ALL WITHHELD MONIES EXCEPT $1,126.33. PAYMENT OF THE AMOUNT PREVIOUSLY WITHHELD ($8,222.25), LESS THE COST OF THE CANCELLED SERVICES ($1,126.33), OR $7,095.92, WAS MADE BY YOU ON JULY 17, 1961, ON VOUCHER NO. 497 FROM WHICH VOUCHER THERE WAS DEDUCTED THE AMOUNT OF $35.48 REPRESENTING 1/2 PERCENT DISCOUNT PROVIDED FOR BY THE CONTRACT. THIS RESULTED IN A TOTAL GROSS PAYMENT OF $31,762.67.

A FINAL DETERMINATION AND AGREEMENT OF THE PARTIES WAS EFFECTED BY SUPPLEMENTAL AGREEMENT NO. 3 WHEREIN THE AMOUNT UNDER ITEM NO. A OF THE CONTRACT WAS DECREASED BY $1,310.40, OR FROM $32,889 TO $31,578.60. THE CIRCUMSTANCES, THE GROSS PAYMENTS TOTALING $31,762.67 PREVIOUSLY MADE RESULTED IN AN OVERPAYMENT FOR THE SERVICES UNDER ITEM NO. A IN THE AMOUNT OF $184.07. BY LETTER DATED MAY 17, 1962, THE CONTRACTOR SUBMITTED ITS CHECK FOR $148.59 IN SETTLEMENT FOR THE OVERPAYMENT AND ADVISED THAT THE DIFFERENCE OF $35.48 REPRESENTED UNEARNED DISCOUNT DEDUCTED ON THE PAYMENT MADE TO IT ON VOUCHER NO. 497, JULY 17, 1961.

IN THE CIRCUMSTANCES YOU REQUEST TO BE ADVISED---

A. AS TO WHETHER YOUR OFFICE WAS JUSTIFIED IN DEDUCTING 1/2 OF 1 PERCENT DISCOUNT ON $7,095.92 WHEN PAYMENT WAS NOT MADE ON VOUCHER NO. 497 UNTIL JULY 17, 1961?

B. SHOULD THE DEDUCTION OF DISCOUNT HAVE BEEN MADE ON THE TOTAL BILLING OF $32,889 ON THE FIRST PAYMENT UNDER THE CONTRACT EVEN THOUGH ONLY THE GROSS AMOUNT OF $24,666.75 WAS AUTHORIZED TO BE PAID AT THAT TIME?

THE ANSWER TO QUESTION "A" MUST BE IN THE AFFIRMATIVE AND THE ANSWER TO QUESTION "B" MUST BE IN THE NEGATIVE. WITH RESPECT TO QUESTION "B" THE ANSWER TO THAT QUESTION IS NECESSARILY DEPENDENT ON WHETHER THE CONTRACTOR WAS ENTITLED TO PAYMENT OF THE FULL CONTRACT PRICE. SINCE PART OF THE SERVICES PROVIDED FOR UNDER ITEM NO. A OF THE CONTRACT HAD BEEN CANCELLED BY THE PARTIES AND MADE THE SUBJECT OF FUTURE NEGOTIATIONS, THE ORIGINAL INVOICE, BASED AS IT WAS ON THE FULL CONTRACT PRICE FOR THAT ITEM, WAS NOT A "CORRECT" INVOICE WITHIN THE INTENT AND MEANING OF THE DISCOUNT CLAUSE WHICH SPECIFICALLY PROVIDED THAT TIME IN CONNECTION WITH THE DISCOUNT OFFERED IS FOR COMPUTATION EITHER FROM "DATE OF DELIVERY AT DESTINATION * * * OR FROM DATE CORRECT INVOICE IS RECEIVED * * * IF THE LATTER DATE IS LATER THAN THE DATE OF DELIVERY * * *.' AT THE TIME THE INVOICE WAS SUBMITTED THE CONTRACTOR AND THE CONTRACTING OFFICER KNEW THAT THE CONTRACT PRICE WAS TO BE ADJUSTED BASED UPON THE CANCELLATION OF PART OF SERVICES PROVIDED FOR BY THE CONTRACT AND CERTAIN OTHER MATTERS AFFECTING THE CONTRACT PRICE. ACCORDINGLY, SINCE PAYMENT OF THE FULL CONTRACT PRICE WAS NOT JUSTIFIED AT THE TIME PAYMENT WAS MADE ON THE ORIGINAL INVOICE DEDUCTION OF A DISCOUNT BASED ON THE FULL AMOUNT OF THE INVOICE WOULD NOT HAVE BEEN JUSTIFIED.

AS TO QUESTION "A" SINCE EVIDENCE OF THE VALUE OF THE CANCELLED SERVICES WAS NOT RECEIVED IN THE F AND A DIVISION UNTIL JUNE 30, 1961, AND SINCE PAYMENT OF THE BALANCE OF THE AMOUNT WITHHELD FROM THE ORIGINAL PAYMENT WAS MADE WITHIN THE DISCOUNT PERIOD FOLLOWING THE RECEIPT OF SUCH EVIDENCE IT MUST BE CONCLUDED THAT THE DISCOUNT TAKEN ON THIS PAYMENT WAS PROPERLY EARNED.