GSAR Case 2006-G515; Rewrite of Part 532, Contract Financing (Comment #1)

The following comments are respectfully submitted in response to the GSAR Case 532 publication. GSA’s 1142 Release of Claim form contains no OMB control number indicating it has been approved for the collection of information. Additionally, there is no indication that a Regulatory Flexibility Analysis was ever performed to reflect the burden or impact on contractors, including small businesses, especially the requirements for a ‘witness’ and a ‘seal’. Additionally the form fails to advise contractors, especially small businesses that, by signing the form, they are likely waiving their rights to submit claims permitted under the Disputes Act. It is improper for the government to require an unconditional release from contractors as a prerequisite for final payment. Therefore, it is recommended that the form be revised to recognize a contractor’s right to submit claims “within 6 years following the release date or notice of final payment date, whichever is earlier” as set forth in FAR 52.216-7(h)(2)(ii), and FAR 33.206, when a claim was unknown at the time of executing the form. Similarly the form should allow contractors the ability to cite ‘estimated amounts when the exact amounts are not known” as permitted under the same FAR clause. Furthermore, since releases of claims are cited in FAR [52.232-7(g) for Time & Material/Labor Hour contracts, and in paren as an example(‘e.g.’) under 52.232-26 and -27 for A-E and construction contracts, respectively], it would seem more appropriate for the FAR Council to develop a Standard Form (SF) to be used by all agencies in accordance with FAR 1.304(c) since it is not just pertinent to GSA. And since releases apply to “final payments”, it is highly recommended that GSA and/or the FAR Council consider allowing contractors to submit the release jointly along with the electronic submission of a final invoice request. There is a major concern about GSA’s allowance for Contracting Officers (COs) to make “repeated attempts” to obtain a release of claims from contractors under GSAM 532.904 as this could be construed as coercion penalizing contractors by withholding funds “without cause”. GSAM should justify the reasonableness of withholding any funds from contractors beyond the 30 days authorized by FAR for final payments. Any ”unreasonable delay” in payment could, by law, convert invoices into a claim. Recommendation is made for GSA to consider establishing a limit to the number of “repeated attempts” and a maximum number of days for GSA COs to withhold final payment from the date when the invoice is officially received. The GSAM needs to provide some guidance for any authority of COs to initiate an action for A-E design services in advance of approved appropriations. Many find nothing in the FAR that precludes COs from selecting an A-E using Brooks Act procedures through the solicitation and negotiation phase up to award when the appropriation request is included in the President's Budget. Others wait until after the budget has actually been approved and still others wait until the funds have actually been received in their organizational office before they publish the synopsis notice. Consistency should be established based on what is in the best interest of the Government and what is appropriate. Electronic Invoices Contractors experience numerous problems attempting to submit invoices electronically to GSA for payment. Frequently GSA has failed to enter obligations into Pegasys which, in turn, prohibits contractors from being able to submit a pay request and establish a ‘receipt date’ for purposes of computing interest which appears to be in direct violation of FAR 32.907(f). GSA’s Pegasys system should permit contractors to submit an invoice and date it as ‘received’ for interest purposes regardless of whether or not GSA has entered the obligations. If the invoice was submitted in error or ‘improper’ in any way, there are mechanisms permitted under FAR for rejecting the invoice. But contractors, esp. small and disadvantage, including 8(a) firms, should not be penalized for GSA’s failure to enter obligations into the system in a timely manner. Nor should GSA be permitted to escape its responsibility to pay interest and/or penalties for late payment. As an added protection for contractors, it is also recommended that GSA include a notice on its invoicing system to cite FAR 32.909(b)’s suggestion to contact GSA’s small business specialist or representative from the Office of Small and Disadvantaged Business Utilization to obtain additional assistance related to payment issues, late payment interest penalties, and information on the Prompt Payment Act.” If satisfaction is not achieved from GSA’s designated representative, small businesses should be encouraged to seek assistance from SBA’s Advocacy office. Construction To eliminate confusion and ensure consistency, all GSA contractors should be permitted to submit invoices electronically including those for construction contracts awarded on an SF1442. It should be noted that invoices for construction contracts awarded on a GSA 300 as a task order against an IDIQ are permitted to be submitted electronically. All construction payments, whether awarded on an SF 1442 or a GSA 300, are 14-day pay. To ensure “prompt payment”, GSA should also consider allowing contractors to submit the “substantiation” information electronically with their invoice. Additionally there is currently no requirement in FAR for construction contractors to attend “progress payment meetings” and/or submit preliminary invoices to the Government for ’approval’ prior to formally submitting them to the CO. Any requirement for contractors to attend a progress meeting and/or submit preliminary invoices for approval, as a condition for a “proper invoice", would appear to require a deviation to FAR 32.904. In fact, FAR 52.232-5(b) states, “The Government shall make progress payments monthly as the work proceeds, or at more frequent intervals as determined by the Contracting Officer, on estimates of work accomplished which meets the standards of quality established under the contract, as approved by the Contracting Officer.” Therefore it is recommended that GSA develop a clause for incorporation into GSAM to address the PBS requirement for preliminary approval and/or progress payment meetings as a prerequisite for invoice approval if deemed appropriate. If not appropriate, the GSAM should prohibit this practice. Per FAR 32.103, “Retainage should not be used as a substitute for good contract management, and the CO should not withhold funds without cause. Determinations…will be based on the contracting officer’s assessment of past performance and the likelihood that such performance will continue.” More importantly, the percentage should “recognize better than expected performance, the ability to rely on alternative safeguards, and other factors” such as the allowance and responsibility of COs to approve a lesser amount for payment than than contractor has indicated in the invoice if estimated progress is not accurate. Furthermore, para. (e) of the construction payment clause states that :”the Contracting Officer shall authorize payment to be made in full” when “satisfactory progress was achieved during any period for which a progress payment is to be made.” And even “if satisfactory progress has not been made”, the CO is limited to “retaining a maximum of 10 percent of the amount of the payment until satisfactory progress is achieved.” COs are not permitted to withhold 10% of the total contract price, only the payment amount, and retainage is not permitted when progress is satisfactory. Therefore, it is recommended that GSAM remind COs of the FAR 32.103 requirement to execute a written ‘determination’ to withhold any funds including retainage. It is further suggested that GSA consider adding a requirement for approval of any withholding of funds at a level above the CO to ensure compliance. Just like the Release of Claims form, it would seem more appropriate for the FAR Council to develop a Standard Form (SF) to be used by all agencies in accordance with FAR 1.304(c) in lieu of GSA’s Certification of Progress Payment Form 2419 since the requirement is set forth for all construction contracts under FAR 32.904(d)(1)(i)(C) and not specific to GSA. And since this certification requirement applies to all construction invoices, it is highly recommended that GSA and/or the FAR Council consider allowing contractors to submit the certification jointly along with any electronic submission of an invoice. In the alternative, COs should recognize the fact that most invoices, including AIA's application for payment, already have a built-in certification. So use of the GSA 2419 form is often unnecessary duplication. Rejection of Invoices Any rejection of invoices should cite the specific section of FAR 32.905(b)(1) that is in non-compliance and also advise contractors of their rights under the Disputes clause. Avoidance of interest or penalties should not be a sufficient reason for GSA COs to reject an invoice. In particular, if the reason is failure to comply with a contract requirement, the rejection should cite the specific term or condition. GSA COs should be reminded also that a disagreement in payment amounts does not require rejection since a lesser amount can be authorized if appropriate. In fact, GSA should provide contractors with the information cited under FAR 32.906(b)(4) which says, “When it is determined that the designated billing office erroneously rejected a proper invoice and upon resubmission of the invoice, will enter in the payment system the original date the invoice was received by the designated billing office for the purpose of calculating the correct payment due date and any interest penalties that may be due.” EFT Lastly, GSA has from time-to-time collected EFT information from contractors using a form that has not been approved by OMB for this collection of information. More importantly there is no indication that GSA is ensuring the financial information collected is protected as privileged and confidential in accordance with FAR 32.1104. Therefore a recommendation is made to review any form used by GSA to collect EFT information from contractors, that are not required to be registered in CCR (i.e. where FAR 52.232-34 applies), and perform a proper analysis as required by the Paperwork Reduction Act to ensure compliance with FAR. Thank you for the opportunity to comment on this case. Regards, Debbie Loftin