Propriety of Payment of Transportation Charges

An advance decision was requested concerning the propriety of paying for transportation charged under a Coast Guard firm-fixed-price contract. The contract involved the purchase of steel piles. The solicitation requested offerors to quote prices "FOB destination." The invoices submitted by the contractor for delivery of the piles itemized the shipping costs for tax and internal control purposes. The agency requested proof that the contractor had paid the transportation costs before approving payment of that portion of the contract price comprising the transportation charges. GAO believes there is no legal requirement that the contractor furnish proof that the transportation costs were paid. Under an FOB destination contract, the seller agrees to deliver goods at the designated point without charge for prior transportation service. By billing only for the FOB destination contract price, the contractor clearly bears the costs of transporting the piles to the destination. GAO held that if the terms of the contract were otherwise performed, the contract award price as represented by the invoices should be paid.