General Services Administration Acquisition Regulation; 10 Day Payment Clause for Certain Federal Supply Service Contracts

SUMMARY: The General Services Administration Acquisition Regulation

(GSAR) is amended to authorize payment of invoices in 10 days after

receipt for Federal Supply Service (FSS) Stock, Special Order, and

Schedules contracts when the contractor agrees to full cycle electronic

commerce.

DATES: Effective Date March 16, 1998. Comments should be submitted in

writing to the address shown below on or before May 15, 1998.

ADDRESSES: Mail comments to General Services Administration, Office of

Acquisition Policy, GSA Acquisition Policy Division (MVP), 1800 F

Street, NW, Room 4012, Washington, DC 20405.

FOR FURTHER INFORMATION CONTACT: Gloria Sochon, GSA Acquisition Policy

Division, (202) 208-6726.

SUPPLEMENTARY INFORMATION:

A. Background

Electronic commerce (EC) helps to reduce the cost and improve the

efficiency of administrative processes by using electronic data

interchange (EDI) and electronic funds transfer (EFT) to conduct

business transactions. GSA FSS seeks to encourage contractors to

implement full cycle EC so that both parties realize these benefits.

Full cycle EC includes placing orders, receiving orders, issuing

invoices, and paying invoices electronically. Payment by electronic

funds transfer is already mandatory for most Federal contracts under

the Debt Collection Improvement Act of 1996 (31 U.S.C. 3332). GSA FSS

has the capability to issue orders and receive invoices electronically.

To encourage contractor participation, GSA will pay invoices in 10 days

for contractors who agree to process orders and invoices electronically

using implementation conventions provided by GSA.

B. Executive Order 12866

This regulatory action was not subject to Office of Management and

Budget review under Executive Order 12866, dated September 30, 1993,

and is not a major rule under 5 U.S.C. 804.

C. Regulatory Flexibility Act

This interim rule will not have a significant economic impact on a

substantial number of small entities within the meaning of the

Regulatory Flexibility Act, 5 U.S.C. 601, et seq. The rule provides

that the Government will make payment in 10 days from receipt of a

proper invoice when the contractor agrees to full cycle EC. Because not

all contractors are EDI capable, full cycle EC is not mandatory.

Contractors who do not agree to the terms will be paid under standard

Prompt Payment Act (31 U.S.C. 3903) procedures and suffer no adverse

consequences. Contractors who agree to full cycle EC will benefit from

receiving payment more quickly and being able to streamline

administrative procedures and costs associated with processing contract

orders.

D. Paperwork Reduction Act

The Paperwork Reduction Act does not apply because the changes to

the GSAR do not impose recordkeeping or information collection

requirements, or otherwise collect information from offerors,

contractors, or members of the public that require approval of the

Office of Management and Budget under 44 U.S.C. 3501 et seq.

E. Determination to Issue an Interim Rule

Urgent and compelling reasons exist to promulgate this interim rule

without prior opportunity for public comment. GSA believes this rule

will provide significant benefits to both the Federal government and

GSA contractors. Contractors who participate in full cycle EC will

receive payment more quickly than the standard 30 days under the Prompt

Payment Act. Electronic processing will reduce costs and improve

efficiency for both contractors and the government. However, pursuant

to Pub. L. 98-577 and FAR 1.501, GSA will consider public comments

received in response to this interim rule in the formation of the final

rule.

List of Subjects in 48 CFR Parts 532 and 552

Government procurement.

Accordingly, 48 CFR 532 and 552 are amended as follows:

1. The authority citation for 48 CFR Parts 532 and 552 continues to

read as follows:

Authority: 40 U.S.C. 486(c)

PART 532--CONTRACT FINANCING

Section 532.902 is added to read as follows:

532.902 Definitions.

Full cycle electronic commerce means the use of electronic data

interchange (EDI) and electronic funds transfer (EFT):

(a) By the Government, to place purchase or delivery orders,

receive invoices, and pay invoices.

(b) By the Contractor, to accept and fill orders, submit invoices,

and receive payment.

3. Section 532.905 is amended by adding a new paragraph (c) as

follows:

532.905 Invoice payments.

* * * * *

(c)(1) To increase efficiency and reduce costs to the Government,

Federal Supply Service contracts under the Stock, Special Order, and

Schedules Programs may authorize payment within 10 days of receipt of a

proper invoice. The contract must meet the following conditions:

(i) The contractor agrees to full cycle electronic commerce.

(ii) The contract includes FAR 52.232-33, Mandatory Information for

Electronic Funds Transfer Payment.

(2) The 10 day payment terms apply to each order that meet all the

following conditions:

(i) FSS places the order using EDI and the contractor submits EDI

invoices in accordance with the Trading Partner Agreement.

(ii) A GSA Finance Center pays the invoices using EFT.

(3) The 10 day payment terms do not apply to any order:

(i) Placed by a GSA contracting activity other than FSS.

(ii) Placed by or paid by another agency.

4. Section 532.908 is amended by revising paragraph (a) to read as

follows:

532.908 Contract clause.

(a) For FSS Stock, Special Order, and Schedules solicitations and

contracts that provide payment in 10 days under 532.905(c), the

contracting officer must:

(1) If the contract will include FAR 52.212-4, insert the clause at

552.232-70. GSA received a class deviation to allow use of 552.232-70

for commercial items.

(2) If the contract will not include FAR 52.212-4, insert 552.232-

25, Prompt Payment, instead of FAR 52.232-25.

* * * * *

[[Page 12967]]

PART 552--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

5. Section 552.212-71 is revised by changing the provision date and

revising the clause ``Invoice Payments'' in numerical order as follows:

552.212-71 Contract Terms and Conditions Applicable to GSA Acquisition

of Commercial Items

As prescribed in 512.301(a)(2), insert the following provision:

CONTRACT TERMS AND CONDITIONS APPLICABLE TO GSA ACQUISITION OF

COMMERCIAL ITEMS (MAR 1998)

* * * * *

______552.232-70 Invoice Payments

* * * * *

6. A new section 552.232-25 is added to read as follows:

552.232-25 Prompt payment.

As prescribed in 532.908(a)(2), insert the following clause:

PROMPT PAYMENT (MAY 1997) (DEVIATION MAR 1998)

Notwithstanding any other payment clause in this contract, the

Government will make invoice payments and contract financing

payments under the terms and conditions specified in this clause.

Payment shall be considered as being made on the day a check is

dated or the date of an electronic funds transfer. Definitions of

pertinent terms are set forth in section 32.902 of the Federal

Acquisition Regulation. All days referred to in this clause are

calendar days, unless otherwise specified. (However, see

subparagraph (a)(4) of this clause concerning payments due on

Saturdays, Sundays, and legal holidays.)

(a) Invoice payments.

(1) The due date for making invoice payments by the designated

payment office is:

(i) For orders placed electronically by the General Services

Administration (GSA) Federal Supply Service (FSS), and to be paid by

GSA through electronic funds transfer (EFT), the later of the

following two events:

(A) The 10th day after the designated billing office receives a

proper invoice from the Contractor. If the designated billing office

fails to annotate the invoice with the date of receipt at the time

of receipt, the invoice payment due date shall be the 10th day after

the date of the Contractor's invoice; provided the Contractor

submitted a proper invoice and no disagreement exists over quantity,

quality, or Contractor compliance with contract requirements.

(B) The 10th day after Government acceptance of supplies

delivered or services performed by the Contractor.

(ii) For all other orders, the later of the following two

events:

(A) The 30th day after the designated billing office receives a

proper invoice from the Contractor. If the designated billing office

fails to annotate the invoice with the date of receipt at the time

of receipt, the invoice payment due date shall be the 30th day after

the date of the Contractor's invoice; provided the Contractor

submitted a proper invoice and no disagreement exists over quantity,

quality, or Contractor compliance with contract requirements.

(B) The 30th day after Government acceptance of supplies

delivered or services performed by the Contractor.

(iii) On a final invoice, if the payment amount is subject to

contract settlement actions, acceptance occurs on the effective date

of the contract settlement.

(2) The General Services Administration will issue payment on

the due date in (a)(1)(i) above if the Contractor complies with full

cycle electronic commerce. Full cycle electronic commerce includes

all the following elements:

(i) The Contractor must receive and fulfill electronic data

interchange (EDI) purchase orders (transaction set 850).

(ii) The Contractor must generate and submit to the Government

valid EDI invoices (transaction set 810).

(iii) The Contractor's financial institution must receive and

process, on behalf of the Contractor, EFT payments through the

Automated Clearing House (ACH) system.

(iv) The EDI transaction sets in (i) through (iii) above must

adhere to implementation conventions provided by GSA.

(3) If any of the conditions in (a)(2) above do not occur, the

10 day payment due dates in (a)(1) become 30 day payment due dates.

(4) Certain food products and other payments.

(i) Due dates on Contractor invoices for meat, meat food

products, or fish; perishable agricultural commodities; and dairy

products, edible fats or oils, and food products prepared from

edible fats or oils are --

(A) For meat or meat food products, as defined in section

2(a)(3) of the Packers and Stockyard Act of 1921 (7 U.S.C. 182(3)),

and as further defined in Pub. L. 98-181, including any edible fresh

or frozen poultry meat, any perishable poultry meat food product,

fresh eggs, and any perishable egg product, as close as possible to,

but not later than, the 7th day after product delivery.

(B) For fresh or frozen fish, as defined in section 204(3) of

the Fish and Seafood Promotion Act of 1986 (16 U.S.C. 4003(3)), as

close as possible to, but not later than, the 7th day after product

delivery.

(C) For perishable agricultural commodities, as defined in

section 1(4) of the Perishable Agricultural Commodities Act of 1930

(7 U.S.C. 499a(4)), as close as possible to, but not later than, the

10th day after product delivery, unless another date is specified in

the contract.

(D) For dairy products, as defined in section 111(e) of the

Dairy Production Stabilization Act of 1983 (7 U.S.C. 4502(e)),

edible fats or oils, and food products prepared from edible fats or

oils, as close as possible to, but not later than, the 10th day

after the date on which a proper invoice has been received. Liquid

milk, cheese, certain processed cheese products, butter, yogurt, ice

cream, mayonnaise, salad dressings, and other similar products, fall

within this classification. Nothing in the Act limits this

classification to refrigerated products. When questions arise

regarding the proper classification of a specific product,

prevailing industry practices will be followed in specifying a

contract payment due date. The burden of proof that a classification

of a specific product is, in fact, prevailing industry practice is

upon the Contractor making the representation.

(ii) If the contract does not require submission of an invoice

for payment (e.g., periodic lease payments), the due date will be as

specified in the contract.

(5) Contractor's invoice. The Contractor shall prepare and

submit invoices to the designated billing office specified in the

contract. A proper invoice must include the items listed in

subdivisions (a)(5)(i) through (a)(5)(viii) of this clause. If the

invoice does not comply with these requirements, it shall be

returned within 7 days after the date the designated billing office

received the invoice (3 days for meat, meat food products, or fish;

5 days for perishable agricultural commodities, edible fats or oils,

and food products prepared from edible fats or oils), with a

statement of the reasons why it is not a proper invoice. Untimely

notification will be taken into account in computing any interest

penalty owed the Contractor in the manner described in subparagraph

(a)(5) of this clause.

(i) Name and address of the Contractor.

(ii) Invoice date. (The Contractor is encouraged to date

invoices as close as possible to the date of the mailing or

transmission.)

(iii) Contract number or other authorization for supplies

delivered or services performed (including order number and contract

line item number).

(iv) Description, quantity, unit of measure, unit price, and

extended price of supplies delivered or services performed.

(v) Shipping and payment terms (e.g., shipment number and date

of shipment, prompt payment discount terms). Bill of lading number

and weight of shipment will be shown for shipments on Government

bills of lading.

(vi) Name and address of Contractor official to whom payment is

to be sent (must be the same as that in the contract or in a proper

notice of assignment).

(vii) Name (where practicable), title, phone number, and mailing

address of person to be notified in the event of a defective

invoice.

(viii) Any other information or documentation required by the

contract (such as evidence of shipment).

(ix) While not required, the Contractor is strongly encouraged

to assign an identification number to each invoice.

(6) Interest penalty. An interest penalty shall be paid

automatically by the designated payment office, without request from

the Contractor, if payment is not made by the due date and the

conditions listed in subdivisions (a)(6)(i) through (a)(6)(iii) of

this clause are met, if applicable. However, when the due date falls

on a Saturday, Sunday, or legal holiday when Federal Government

offices are closed and Government business is not expected to be

conducted, payment may be made on the following business day without

incurring a late payment interest penalty.

[[Page 12968]]

(i) A proper invoice was received by the designated billing

office.

(ii) A receiving report or other Government documentation

authorizing payment was processed, and there was no disagreement

over quantity, quality, or Contractor compliance with any contract

term or condition.

(iii) In the case of a final invoice for any balance of funds

due the Contractor for supplies delivered or services performed, the

amount was not subject to further contract settlement actions

between the Government and the Contractor.

(7) Computing penalty amount. The interest penalty shall be at

the rate established by the Secretary of the Treasury under section

12 of the Contract Disputes Act of 1978 (41 U.S.C. 611) that is in

effect on the day after the due date, except where the interest

penalty is prescribed by other governmental authority (e.g.,

tariffs). This rate is referred to as the ``Renegotiation Board

Interest Rate,'' and it is published in the Federal Register

semiannually on or about January 1 and July 1. The interest penalty

shall accrue daily on the invoice principal payment amount approved

by the Government until the payment date of such approved principal

amount; and will be compounded in 30-day increments inclusive from

the first day after the due date through the payment date. That is,

interest accrued at the end of any 30-day period will be added to

the approved invoice principal payment amount and will be subject to

interest penalties if not paid in the succeeding 30-day period. If

the designated billing office failed to notify the Contractor of a

defective invoice within the periods prescribed in subparagraph

(a)(5) of this clause, the due date on the corrected invoice will be

adjusted by subtracting from such date the number of days taken

beyond the prescribed notification of defects period. Any interest

penalty owed the Contractor will be based on this adjusted due date.

Adjustments will be made by the designated payment office for errors

in calculating interest penalties.

(i) For the sole purpose of computing an interest penalty that

might be due the Contractor, Government acceptance shall be deemed

to have occurred constructively on the 7th day (unless otherwise

specified in this contract) after the Contractor delivered the

supplies or performed the services in accordance with the terms and

conditions of the contract, unless there is a disagreement over

quantity, quality, or Contractor compliance with a contract

provision. In the event that actual acceptance occurs within the

constructive acceptance period, the determination of an interest

penalty shall be based on the actual date of acceptance. The

constructive acceptance requirement does not, however, compel

Government officials to accept supplies or services, perform

contract administration functions, or make payment prior to

fulfilling their responsibilities.

(ii) The following periods of time will not be included in the

determination of an interest penalty:

(A) The period taken to notify the Contractor of defects in

invoices submitted to the Government, but this may not exceed 7 days

(3 days for meat, meat food products, or fish; 5 days for perishable

agricultural commodities, dairy products, edible fats or oils, and

food products prepared from edible fats or oils).

(B) The period between the defects notice and resubmission of

the corrected invoice by the Contractor.

(C) For incorrect electronic funds transfer (EFT) information,

in accordance with the EFT clause of this contract.

(iii) Interest penalties will not continue to accrue after the

filing of a claim for such penalties under the clause at 52.233-1,

Disputes, or for more than 1 year. Interest penalties of less than

$1 need not be paid.

(iv) Interest penalties are not required on payment delays due

to disagreement between the Government and the Contractor over the

payment amount or other issues involving contract compliance or on

amounts temporarily withheld or retained in accordance with the

terms of the contract. Claims involving disputes, and any interest

that may be payable, will be resolved in accordance with the clause

at 52.233-1, Disputes.

(8) Prompt payment discounts. An interest penalty also shall be

paid automatically by the designated payment office, without request

from the Contractor, if a discount for prompt payment is taken

improperly. The interest penalty will be calculated as described in

subparagraph (a)(7) of this clause on the amount of discount taken

for the period beginning with the first day after the end of the

discount period through the date when the Contractor is paid.

(9) Additional interest penalty.

(i) If this contract was awarded on or after October 1, 1989, a

penalty amount, calculated in accordance with subdivision

(a)(9)(iii) of this clause, shall be paid in addition to the

interest penalty amount if the Contractor--

(A) Is owed an interest penalty of $1 or more;

(B) Is not paid the interest penalty within 10 days after the

date the invoice amount is paid; and

(C) Makes a written demand to the designated payment office for

additional penalty payment, in accordance with subdivision

(a)(9)(ii) of this clause, postmarked not later than 40 days after

the invoice amount is paid.

(ii)(A) Contractors shall support written demands for additional

penalty payments with the following data. No additional data shall

be required. Contractors shall --

(1) Specifically assert that late payment interest is due under

a specific invoice, and request payment of all overdue late payment

interest penalty and such additional penalty as may be required;

(2) Attach a copy of the invoice on which the unpaid late

payment interest was due; and

(3) State that payment of the principal has been received,

including the date of receipt.

(B) Demands must be postmarked on or before the 40th day after

payment was made, except that--

(1) If the postmark is illegible or nonexistent, the demand must

have been received and annotated with the date of receipt by the

designated payment office on or before the 40th day after payment

was made; or

(2) If the postmark is illegible or nonexistent and the

designated payment office fails to make the required annotation, the

demand's validity will be determined by the date the Contractor has

placed on the demand; provided such date is no later than the 40th

day after payment was made.

(iii)(A) The additional penalty shall be equal to 100 percent of

any original late payment interest penalty, except--

(1) The additional penalty shall not exceed $5,000;

(2) The additional penalty shall never be less than $25; and

(3) No additional penalty is owed if the amount of the

underlying interest penalty is less than $1.

(B) If the interest penalty ceases to accrue in accordance with

the limits stated in subdivision (a)(5)(iii) of this clause, the

amount of the additional penalty shall be calculated on the amount

of interest penalty that would have accrued in the absence of these

limits, subject to the overall limits on the additional penalty

specified in subdivision (a)(7)(iii)(A) of this clause.

(C) For determining the maximum and minimum additional

penalties, the test shall be the interest penalty due on each

separate payment made for each separate contract. The maximum and

minimum additional penalty shall not be based upon individual

invoices unless the invoices are paid separately. Where payments are

consolidated for disbursing purposes, the maximum and minimum

additional penalty determination shall be made separately for each

contract therein.

(D) The additional penalty does not apply to payments regulated

by other Government regulations (e.g., payments under utility

contracts subject to tariffs and regulation).

(b) Contract financing payments.

(1) Due dates for recurring financing payments. If this contract

provides for contract financing, requests for payment shall be

submitted to the designated billing office as specified in this

contract or as directed by the Contracting Officer. Contract

financing payments shall be made on the [insert day as prescribed by

Agency head; if not prescribed, insert 30th day] day after receipt

of a proper contract financing request by the designated billing

office. In the event that an audit or other review of a specific

financing request is required to ensure compliance with the terms

and conditions of the contract, the designated payment office is not

compelled to make payment by the due date specified.

(2) Due dates for other contract financing. For advance

payments, loans, or other arrangements that do not involve recurring

submissions of contract financing requests, payment shall be made in

accordance with the corresponding contract terms or as directed by

the Contracting Officer.

(3) Interest penalty not applicable. Contract financing payments

shall not be assessed an interest penalty for payment delays.

(c) Fast payment procedure due dates. If this contract contains

the clause at 52.213-1, Fast Payment Procedure, payments will be

made within 15 days after the date of receipt of the invoice.

[[Page 12969]]

(End of clause)

7. Section 552.232-70 is revised as follows:

552.232-70 Invoice payments.

As prescribed in 532.908(a)(1), insert the following clause:

INVOICE PAYMENTS (MAR 1998)

(a) The due date for making invoice payments by the designated

payment office is:

(1) For orders placed electronically by the General Services

Administration (GSA) Federal Supply Service (FSS), and to be paid by

GSA through electronic funds transfer (EFT), the later of the

following two events:

(i) The 10th day after the designated billing office receives a

proper invoice from the Contractor. If the designated billing office

fails to annotate the invoice with the date of receipt at the time

of receipt, the invoice payment due date shall be the 10th day after

the date of the Contractor's invoice; provided the Contractor

submitted a proper invoice and no disagreement exists over quantity,

quality, or Contractor compliance with contract requirements.

(ii) The 10th day after Government acceptance of supplies

delivered or services performed by the Contractor.

(2) For all other orders, the later of the following two events:

(i) The 30th day after the designated billing office receives a

proper invoice from the Contractor. If the designated billing office

fails to annotate the invoice with the date of receipt at the time

of receipt, the invoice payment due date shall be the 30th day after

the date of the Contractor's invoice; provided the Contractor

submitted a proper invoice and no disagreement exists over quantity,

quality, or Contractor compliance with contract requirements.

(ii) The 30th day after Government acceptance of supplies

delivered or services performed by the Contractor.

(3) On a final invoice, if the payment amount is subject to

contract settlement actions, acceptance occurs on the effective date

of the contract settlement.

(b) The General Services Administration will issue payment on

the due date in (a)(1) above if the Contractor complies with full

cycle electronic commerce. Full cycle electronic commerce includes

all the following elements:

(1) The Contractor must receive and fulfill electronic data

interchange (EDI) purchase orders (transaction set 850).

(2) The Contractor must generate and submit to the Government

valid EDI invoices (transaction set 810).

(3) The Contractor's financial institution must receive and

process, on behalf of the Contractor, EFT payments through the

Automated Clearing House (ACH) system.

(4) The EDI transaction sets in (b)(1) through (b)(3) above must

adhere to implementation conventions provided by GSA.

(c) If any of the conditions in (b) above do not occur, the 10

day payment due dates in (a)(1) become 30 day payment due dates.

(d) All other provisions of the Prompt Payment Act (31 U.S.C.

3901 et seq.) and Office of Management and Budget (OMB) Circular A-

125, Prompt Payment, apply.

(End of clause)

Dated: February 27, 1998.

Ida M. Ustad,

Deputy Associate Administrator, Office of Acquisition Policy.

[FR Doc. 98-6664 Filed 3-13-98; 8:45 am]

BILLING CODE 6820-61-P