Contractor's Discount

[Foxfire_88]

QUESTION: We received an invoice for one amount.  The contractor discounted 1% for payment within 10 days.   The base contract does not have discount terms.  FAR clause 52.212-4 (1)(2) is included in the contract and considered a basis for discount. What's the best way to rectify this difference?  Can the Government accept the discounted payment?

[joel hoffman]

Yes, if the government can make payment within ten days. The 52.212-4 clause language covers this. You need to be asking the office that will actually make the payment if and how this works, i.e. , if they can make it happen.

Is the normal timeframe for payment 30 days after receipt? The discount period would start upon the date of the invoice (per the clause) or later, if the invoice describes a later start period for the offered 10 day discount.

[dsmith101abn]

Yes you can accept a discount. It’s almost always beneficial to accept price/payment terms that are more favorable to the government if they come to light after a proposal or signed contract. Invoices for things that say 2/10 n 30 (pronounced two ten net thirty) is supposed to incentive a business (or government) to pay earlier than a due date. It’s generally in your best interest to pay earlier to get the discount, but if cash flow is a problem it may not be.

[dsmith101abn]

O, but i once worked for an agency that discouraged taking advantage of a Ktrs discounts because the agency financial software would make you do a "modification" and it was more painful to do the "adjustment" than to pay the 1%. I don't know if you work for such an agency but bottom line is yes you can accept a discount whether there is a clause or not that says you can or can't accept.

[Neil Roberts]

On 8/16/2021 at 10:50 PM, Foxfire_88 said:

QUESTION: We received an invoice for one amount.  The contractor discounted 1% for payment within 10 days.   The base contract does not have discount terms.  FAR clause 52.212-4 (1)(2) is included in the contract and considered a basis for discount. What's the best way to rectify this difference?  Can the Government accept the discounted payment?

In an attempt to answer your question about "rectifying," I offer the following relative to the DOD world:

020301. Discounts 

As prescribed by 5 CFR 1315.7(a), if a DoD Component is offered a
discount by a vendor, whether stipulated in the contract or offered against an invoice, a DoD
Component must take the discount if economically justified, but only after acceptance of the goods
or services has occurred. DOD 7000.14.R, Vol 10 Ch.2, Discount Offers and Rebates/Refunds (Feb 2021) . See, https://comptroller.defense.gov/Portals/45/documents/fmr/Combined_Volume1-16.pdf

[ji20874]

dsmith101abn,

Whatever agency that was where you once worked, I am glad you are no longer there.  Requiring a contract modification to take a payment discount is stupid (or, if that word is problematic, here are the most common synonyms from an internet source:  dull, dumb, foolish, futile, ill-advised, irrelevant, laughable, ludicrous, naive, senseless).

[Vern Edwards]

@ji20874"Stupid"! You're starting to sound like, like... 😄