B-168469, JAN. 13, 1970

B-168469, JAN. 13, 1970

BID PROTEST--DISCOUNTS--PROMPT PAYMENT V. TRADE DECISION DENYING PROTEST OF E.C.T. CORPORATION AGAINST EVALUATION OF DISCOUNT IN BIDS FOR FURNISHING COLD WEATHER JACKETS FOR DEFENSE PERSONNEL SUPPORT CENTER. A CONTRACTING OFFICER'S EVALUATION OF A 2.1 PERCENT, 10-DAY DISCOUNT AS A TRADE DISCOUNT PURSUANT TO ASPR 400.1.17 AND REFUSAL TO CONSIDER THE PROTESTANT'S OFFER OF A 2 PERCENT 10-DAY DISCOUNT UNDER INVITATION ESTABLISHING 20 DAYS AS MINIMUM EVALUATION PERIOD FOR PROMPT PAYMENT DISCOUNTS OF 2 PERCENT OR LESS WAS PROPER SINCE UNDER DISCOUNT LIMITATION CLAUSE OF ASPR IF DISCOUNTS EXCEED 2 PERCENT AND A TRADE DISCOUNT IS NOT SEPARATELY STATED DISCOUNT IS CONSIDERED TRADE DISCOUNT. SEE B-167984, DECEMBER 3, 1969.

TO LAW OFFICES OF EDWIN J. MCDERMOTT:

REFERENCE IS MADE OT A TELEGRAM DATED NOVEMBER 24, 1969, FROM THE E.C.T. CORPORATION AND TO YOUR SUPPLEMENTARY LETTER OF DECEMBER 5, 1969, PROTESTING AGAINST THE AWARD OF A CONTRACT UNDER INVITATION FORBIDS (IFB) DSA-100-70-B-0442, ISSUED BY THE DEFENSE PERSONNEL SUPPORT CENTER, PHILADELPHIA, PENNSYLVANIA.

THE ABOVE MENTIONED INVITATION WAS ISSUED ON SEPTEMBER 22, 1969, AND CALLED FOR THE FURNISHING, FOB DESTINATION, OF 7,684 INSULATED, EXTREME COLD WEATHER JACKETS. FIVE OFFERS WERE RECEIVED IN RESPONSE TO THE INVITATION. THE TWO LOW OFFERS, SUBMITTED BY THE LANCER CLOTHING CORPORATION (LANCER) AND E.C.T. CORPORATION (E.C.T.), WERE EVALUATED AS FOLLOWS:

UNIT PROMPT PAYMENT

OFFEROR QUANTITY PRICE DISCOUNT LANCER CLOTHING 7,684 $28.95

CORPORATION (LESS 2-1/30% - .58855

DAYS; TREATED AS $28.36145 2% - 20 DAYS

A TRADE DISCOUNT) E.C.T. CORP. 7,684 $28.37 2% - 10 DAYS

1-9/10% -

20 DAYS

AS NOTED ABOVE THE 2-1/30 PERCENT, 10 DAY, DISCOUNT OFFERED BY LANCER WAS TREATED AS A TRADE DISCOUNT RESULTING IN AN IMMEDIATE REDUCTION IN PRICE. THE 2 PERCENT, 10 DAY, DISCOUNT OFFERED BY E.C.T. WAS NOT CONSIDERED IN THE EVALUATION OF ITS BID. IT IS YOUR CONTENTION THAT THE CONTRACTING OFFICER ACTED UNFAIRLY BY CONSIDERING LANCER'S 2-1/30 PERCENT, 10 DAY, DISCOUNT IN THE EVALUATION OF LANCER'S BID, WHILE REFUSING TO CONSIDER E.C.T.'S 2 PERCENT, 10 DAY, DISCOUNT OFFER IN THE EVALUATION OF E.C.T.'S BID. E.C.T.'S OFFER OF A 2 PERCENT, 10 DAY, DISCOUNT WAS NOT CONSIDERED IN THE EVALUATION OF ITS BID BECAUSE ACCORDING TO CLAUSE 170.6 OF THE INVITATION "PROMPT PAYMENT DISCOUNTS WILL BE CONSIDERED IN THE EVALUATION OF OFFERS PROVIDED THE MINIMUM PERIOD FOR THE OFFERED DISCOUNT IS:

(I) 20 DAYS FROM DATE OF DELIVERY OF THE SUPPLIES TO CARRIER WHEN ACCEPTANCE IS AT POINT OF ORIGIN.

(II) 30 DAYS WHERE DELIVERY AND ACCEPTANCE ARE AT DESTINATION."

THUS, IT APPEARS THAT THE INVITATION ESTABLISHED 20 DAYS AS THE MINIMUM PERIOD FOR EVALUATION OF PROMPT PAYMENT DISCOUNTS OF 2 PERCENT OR LESS. HOWEVER, LANCER'S 10 DAY DISCOUNT OF 2-1/30 PERCENT WAS EVALUATED PURSUANT TO CLAUSE 170.7 OF THE INVITATION, ENTITLED DISCOUNT LIMITATION, WHICH PROVIDES AS FOLLOWS:

"IT IS UNDERSTOOD AND AGREED THAT, FOR THE PURPOSE OF PAYMENTS UNDER THIS CONTRACT, AN OFFER OF PROMPT PAYMENT DISCOUNT IN EXCESS OF TWO PERCENT SHALL BE CONSIDERED AS A TRADE OR SPECIAL DISCOUNT WHICH SHALL BE AVAILABLE TO THE GOVERNMENT AS A REDUCTION FROM THE PRICES QUOTED, WITHOUT REGARD TO WHETHER INVOICES ARE ACTUALLY PAID WITHIN THE DESIGNATED DISCOUNT PERIOD. OFFERORS WHO DESIRE TO DO SO MAY QUOTE CUSTOMARY TERMS OF DISCOUNT (NOT IN EXCESS OF TWO PERCENT), FOR PROMPT PAYMENT IN ADDITION TO ANY TRADE OR SPECIAL DISCOUNT AVAILABLE TO THE GOVERNMENT, PROVIDED SUCH DISCOUNTS ARE STATED SEPARATELY IN THEIR OFFERS. UNLESS SUCH TRADE OR SPECIAL DISCOUNTS ARE SEPARATELY STATED, THE OFFEROR AGREES THAT, WHEN THE DISCOUNT OFFERED EXCEEDS TWO PERCENT, THE ENTIRE DISCOUNT WILL BE CONSIDERED AS A TRADE OR SPECIAL DISCOUNT AND WILL NOT BE TREATED AS A DISCOUNT FOR PROMPT PAYMENT."

THE ISSUE INVOLVED IN THE PRESENT CASE IS THE PROPER INTERPRETATION OF THE ABOVE QUOTED CLAUSE. IN A DECISION BY THIS OFFICE, INVOLVING THE SAME LEGAL ISSUE (B-167984, DECEMBER 3, 1969), WE STATED AS FOLLOWS IN HOLDING THAT A PROMPT PAYMENT DISCOUNT EXCEEDING 2 PERCENT COULD BE TAKEN AS A TRADE DISCOUNT:

"WITH REGARD TO YOUR VIEW THAT THE 2.1-PERCENT, 10-DAY DISCOUNT OFFER SHOULD NOT HAVE BEEN EVALUATED SINCE CLAUSE 400.1.17 PROVIDES THAT ONLY 20 DAYS ORIGIN AND 30 DAYS DESTINATION WILL BE CONSIDERED IN THE EVALUATION OF PROMPT PAYMENT DISCOUNTS, THE CONTRACTING OFFICE ACKNOWLEDGES THAT 20 DAYS IS THE MINIMUM PERIOD ESTABLISHED BY THE INVITATION FOR EVALUATION OF PROMPT PAYMENT DISCOUNTS. IT IS POINTED OUT, HOWEVER, THAT BY REASON OF THE TERMS OF THE DISCOUNT LIMITATION CLAUSE QUOTED ABOVE, THE 2.1-PERCENT, 10-DAY DISCOUNT OFFERED BY METZ WAS CONSIDERED TO BE A TRADE DISCOUNT UNDER WHICH THE BID PRICE IS REDUCED BY 2.1-PERCENT REGARDLESS OF THE TIME PERIOD INVOLVED. CONSEQUENTLY, A TRADE DISCOUNT IS CONSIDERED IN BID EVALUATION AS A TENDERED PRICE REDUCTION AND IS NOT AFFECTED BY PARAGRAPH 2-407.3(A) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), SINCE THIS PROVISION HAS REFERENCE ONLY TO PROMPT PAYMENT DISCOUNTS. . . . .

"RESPECTING YOUR CONTENTION THAT WHEN A BIDDER OFFERS PROMPT PAYMENT DISCOUNTS FOR VARYING PERIODS, THE BIDDER DOES NOT INTEND ITS OFFER TO BE CUMULATIVE BUT RATHER AS INDEPENDENT OFFERS, WE MUST OBSERVE THAT THE SUBJECTIVE INTENT OF THE BIDDER IS IMMATERIAL AND ONLY ITS MANIFESTED INTENT IS CONTROLLING. SEE 3 CORBIN ON CONTRACTS SEC. 538, PAGE 57 (1960). IN THE INSTANT CASE, THE INTENT TO BE DERIVED IS RESTRICTED TO THE BIDDER'S WRITTEN RESPONSE TO THE INVITATION TERMS AND CONDITIONS INCLUDING THE DISCOUNT LIMITATION CLAUSE.

"WHILE A BIDDER MAY OFFER A DISCOUNT FOR PAYMENT IN VARYING PERIODS, THE DISCOUNT LIMITATION CLAUSE IS QUITE SPECIFIC THAT IF ANY OF THESE DISCOUNTS EXCEED 2 PERCENT AND A TRADE DISCOUNT IS NOT SEPARATELY STATED, SUCH DISCOUNT SO OFFERED SHALL BE CONSIDERED A TRADE OR SPECIAL DISCOUNT. A BIDDER WHO SUBMITS AN OFFER SUBJECT TO THE INVITATION DISCOUNT LIMITATION CLAUSE MAY NOT THEREAFTER CONTEND SUCCESSFULLY THAT IS SUBJECTIVELY INTENDED A RESULT CONTRARY TO THE EXPRESS WORDING OF THE CLAUSE.

"YOUR CONTENTION THAT A BIDDER CAN QUOTE BOTH A TRADE DISCOUNT AND A PROMPT PAYMENT ONLY IF THE TRADE DISCOUNT IS SEPARATELY STATED IS NOT TENABLE SINCE IT FAILS TO GIVE EFFECT TO THE PLAIN LANGUAGE OF THE DISCOUNT LIMITATION CLAUSE. THE CLAUSE PROVIDES, IN PERTINENT PART, 'UNLESS SUCH TRADE OR SPECIAL DISCOUNTS ARE SEPARATELY STATED, THE OFFEROR AGREES THAT, WHEN THE DISCOUNT OFFERED EXCEEDS TWO PERCENT, THE ENTIRE DISCOUNT WILL BE CONSIDERED AS A TRADE OR SPECIAL DISCOUNT AND WILL NOT BE TREATED AS A DISCOUNT FOR PROMPT PAYMENT'."

IN VIEW OF THE LANGUAGE OF THE ABOVE QUOTED DISCOUNT LIMITATION CLAUSE, AND OF THE INTERPRETATION PLACED THEREON BY THIS OFFICE IN OUR DECISION OF DECEMBER 3, 1969, WE FIND NO LEGAL OBJECTION TO THE ACTION TAKEN BY THE CONTRACTING OFFICER IN THE INSTANT CASE.