Government Printing Office - Treatment of Prompt Payment Discounts

B-276509 Aug 28, 1998 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights We conclude that GPO is not required to pass on prompt payment discounts received from commercial printers directly to federal agencies ordering printing from GPO. When GPO is not able or equipped to provide printing services. GPO is the source of printing and related services and supplies for the Government. 44 U.S.C. GPO's customers do not have the authority to procure directly the printing that GPO is unable to provide. Analysis GPO's Authorizing Statutes GPO's recovery of its printing costs is statutorily based. The most logical interpretation is that GPO must base its charges on its actual costs to the maximum extent possible and that allocations for indirect costs are limited to costs such as overhead which cannot be specifically attributed to work GPO does for any specific agency. View Decision Matter of: Government Printing Office - Treatment of Prompt Payment Discounts File: B-276509 Date: August 28, 1998 DIGEST DECISION The Chief Financial Officer of the Internal Revenue Service (IRS) at the Department of the Treasury asks whether the Government Printing Office (GPO) must pass on prompt payment discounts received from commercial printers directly to agencies ordering printing from GPO or whether GPO may use the discount to offset indirect costs that it recovers through a surcharge applied to all procured printing. We conclude that GPO is not required to pass on prompt payment discounts received from commercial printers directly to federal agencies ordering printing from GPO. Instead, GPO may apply the discount to offset indirect costs and thereby reduce the surcharge used to recover indirect costs for all procured printing. Background All printing for the Government generally must be done by GPO. 44 U.S.C. Sec. 501 (1994). When GPO is not able or equipped to provide printing services, it procures printing under 44 U.S.C. Sec. 502. Under the terms of its contracts, GPO may receive discounts from printing contractors for paying the invoiced amount within a designated period. The revolving fund for departmental printing covers the payment of the invoiced amount of procured printing less any applicable prompt payment discounts. See 44 U.S.C. Sec. 309(b). To reimburse the revolving fund, GPO charges its customers for procured printing based on the full invoice price charged by printing contractors (regardless of whether it receives the contractors' discounts for prompt payment) plus a six percent surcharge to cover the indirect costs associated with procured printing. /1/ GPO treats prompt payment discounts up to five percent as an offset against its indirect costs, in effect reducing the surcharge it would otherwise charge its customers of procured printing. GPO treats any discount in excess of five percent as a trade discount that it passes on directly to the customer agency. GPO does not function as an agent of its customers. Rather, GPO is the source of printing and related services and supplies for the Government. 44 U.S.C. Sec. 501 (1994). With limited exception, GPO's customers do not have the authority to procure directly the printing that GPO is unable to provide. See 44 U.S.C. Sec. 504 (1994). GPO's customer has no contractual relationship with the printing contractor and no influence over the terms of the contract. Further, the ordering agency has no control over GPO's ability or inability to pay the contractor within the designated period. According to the submission, IRS ranks as GPO's second largest customer, obtaining large amounts of printing each year from GPO. The IRS estimates that under GPO's current policy with respect to prompt payment discounts, it loses over $1 million from discounts not being passed on to it. /2/ The IRS asserts that GPO has no authority to retain prompt payment discounts received from commercial printers in connection with IRS printing and that such a policy violates various statutory and other legal principles. Analysis GPO's Authorizing Statutes GPO's recovery of its printing costs is statutorily based. Section 309, title 44, United States Code directs that GPO's revolving fund for departmental printing "shall be reimbursed for the cost of all services and supplies furnished . . . at rates which include charges for overhead and related expenses . . . ." In addition, 44 U.S.C. Sec. 310 requires an ordering agency to pay GPO, upon its written request, all or part of the estimated or actual cost of the delivered work, and GPO to adjust its billing on the basis of actual cost when a customer pays for delivered work in advance. The IRS asserts that when reading these two provisions together, the most logical interpretation is that GPO must base its charges on its actual costs to the maximum extent possible and that allocations for indirect costs are limited to costs such as overhead which cannot be specifically attributed to work GPO does for any specific agency.