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Quantity Discount


tmenza

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A question on discounts: An ID/IQ contract provided that the government would receive an incremental quantity discount if it ordered a certain number of boxes. The unit of issue in the contract was ?box.? However, the EDI systems between the government and the contractor converted the unit of issue from ?boxes? to ?crates and, rather than ordering the units in ?boxes,? the government ordered ?crates.? Thus, the government ordered 20 crates when it only intended to order 20 boxes. (Assume that each crate contains 10 boxes. Also assume that one crate cost $100.00 and one box cost $10.00.) Thus, the government paid $2,000.00, but received 20 boxes. Neither the government nor the contractor was aware of the discrepancy regarding the difference in the unit of issue.

1. In such an instance, is the government entitled to recoup the price difference between boxes and crates i.e. $1,800.00?

2. If so, is the government still entitled to receive a quantity discount even though it failed to properly identify the unit of issue in accordance with the contract? (Assume that the total number of boxes contained in the crates met the incremental quantity discount amount.)

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Tmenza,

You write, "Neither the government nor the contractor was aware of the discrepancy regarding the difference in the unit of issue." What do you mean when you say, neither was aware of the discrepancy? If you mean that, following delivery, the parties agree what the contract and DO means, then press based on that shared understanding. If not, more information might be helpful, including both sides views.

Was it the basic contract or an individual delivery order under it that uses the word, "crate" (or both)?

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Guest Vern Edwards

So the unit was supposed to be box, but in the contract that was inadvertently switched to crates. The government ordered 20 crates, but meant to order 20 boxes. The contractor picked up on the mistake and shipped only 20 boxes, but the government paid for 20 crates. Now you want to know if the government should get the quantity discount, even though it received only what it meant to order. Right?

I don't know the answer, because I haven't seen the contract. But I have a question for you: Why aren't you asking how to get the excess payment back?

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Mr. Edwards,

Thank you for your reply. Neither the contractor nor the government was aware of the switch (and/or mistake) in the unit of issue until approximately two years after the government paid on the delivery orders.

Is it correct to assume that the government can recoup the excess payment?

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Neither the contractor nor the government was aware of the switch (and/or mistake) in the unit of issue until approximately two years after the government paid on the delivery orders.

Is it correct to assume that the government can recoup the excess payment?

Yes. It appears the contractor also had to invoice incorrectly in order for the government to overpay.

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Guest Vern Edwards

I don't understand something. We were told that there are 10 boxes in a crate and that the government ordered 20 crates. That should be 200 boxes, but we were told that the government received 20 boxes. I don't get it.

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Mr. Edwards,

You are correct in that the government ordered 10 boxes. The EDI system inadvertently converted the unit of issue from ?box? to ?crate.? However, the contractor only delivered 10 boxes, but invoiced for 10 crates. The government accepted the boxes and paid the invoice. The invoice was based on the ?per crate? price which was significantly higher than the ?per box? price. Neither the government nor the contractor was aware of the discrepancy until approximately two years after the invoice has been paid.

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