Agencies Dodge Law Requiring Them to Pay Promptly : Problem With Uncle Sam? Check Is in the Mail

Last April, the Government Sales Division of Douron Inc. shipped $20,000 in chairs to a military base in the Azores. Ten months and dozens of international telephone calls, letters and duplicate invoices later, it got paid, without interest.

“People who have to lay out money for raw materials and labor, I wonder how they make it” when they sell to the government, said Joel B. Snyder, head of accounting for Douron, a commercial office sales company in Columbia, Md.

“We send every invoice certified mail, return receipt,” said Jane Grossman, accounts receivable clerk with Interface Video Systems, a company that provides video services to the government. “It costs $1.60 but it’s worth it. I log every phone call with a procurement person. I take copious notes.

“Sometimes nobody will take responsibility. They say, ‘Oh, you know the government.’ I say, ‘You are the government!’ ”

1982 Payment Law

The Prompt Pay Act, passed in 1982, requires the government to pay all bills within 30 days or else pay interest to the seller. Only in “emergency” situations could Uncle Sam avoid these requirements and then only for an additional 15 days.

Five years later, a quarter of government bills are still paid late, the emergency grace period has become a routine addition to the due dates of bills and the overwhelming majority of late checks do not include interest, the General Accounting Office says.

As a result, a packet of amendments known as Prompt Pay II, with 75 Senate co-sponsors and unexpected presidential support, is moving rapidly toward passage. It would gradually eliminate the emergency grace period, would define when the clock starts ticking and would enforce the interest requirement.

“Five of every six vendors that were entitled by law to interest payments did not receive them,” said Sen. John Glenn (D-Ohio), chairman of the Governmental Affairs Committee. “Moreover, the GAO report indicated that almost 19% of all payments are being made during the 15-day grace period.”

Not What Intended

“This was hardly Congress’ intention,” he said. “The grace period was meant to be reserved for those relatively rare instances when timely payment is impossible.”

The problem, said a congressional aide, is a combination of “plain old inefficiency, a little bit of complacency and a few purposeful efforts.”

Roy Boucher, deputy comptroller for finance at the General Services Administration, said that as one of the primary procurement offices of the government, GSA has worked hard to eliminate any “lackadaisical attitude” toward payment.

The agency, he said, incurred only $300,000 in late interest penalties last year, out of $5 billion disbursed.

“We pay 79% of our bills on time--77% right on time and 2% early. We get gigged (by the government) if we pay early.”

In the private sector, he said, businesses paid only 75.5% of bills on time or early.

Size of Job

“I’m paying 350,000 invoices worth $10 billion a year,” said Col. Wayne Kissinger, finance and administrative officer for the Defense Contract Administrative Service Region that pays some of the military’s bills in Virginia, West Virginia, Maryland, Delaware and southern New Jersey. “In the last 2 1/2 years, we’ve gone from 45,000 to 72,000 contracts.

“We’re not an untypical (defense payment) region,” said Kissinger, who supervises 275 people. “They’re all going that way” because of President Reagan’s defense buildup, he said. “We make mistakes but we try to push (payments) out as fast as we can. Generally, we’re still paying as promptly as we ever did.”

That is little comfort to Eleanor Zappone, president of Walcott-Taylor Co. Inc., a 60-year-old office furniture and equipment firm in Bethesda, Md. “As of today,” she said, “72% of my (government) accounts receivable are 30 to 60 days old, 3.5% are 61 to 90, and 8.7% are over three months overdue.

Half-Percent Discount

“What really gripes me is that we offer a half-percent discount for payment in 20 days. Three months late, they’ll take the discount.”

Marian E. Green, president of Substation Test Co., an electrical service company in Maryland, also complains of governmental foot-dragging. “We did some work for Naval Surface Weapons. We worked with one lady, and she left. Nobody knew anything about our contract. We went for the better part of a year and a half submitting copies. They just seemed like they weren’t interested.”

“We have waited as long as two years for payment. That’s an extraordinary time,” said Dana L. Green, the company’s manager. “One issue is when they start the clock. They manage the clock, and sometimes they don’t start it for 42 days.”

“Very often you have to fight for the interest. Agencies don’t want to recognize that interest is due. It places them in an unfavorable light.

Lots of Paper Work

“The paper work arrives and leaves in inches for the simplest piece of work. It is not uncommon for this party or that party to be on leave. You go to a meeting with them, and they can have 20 people on their side and just you on the other. This can be over a bill of $10,000.”

“The government is very technical,” Snyder said. “You have to cross your t’s and dot your i’s or you will never get paid.”

Last year, for example, Dyess Air Force Base, citing new postal requirements, informed all companies doing business with the Texas base that they could not get paid without a correct nine-digit ZIP code number. The directive was issued on a five-digit ZIP code letterhead.

The Azores chairs saga was an exercise in technicalities of another type.

In 1985, Douron’s Government Sales Division received from New York a purchase order with the proper contract numbers and signatures, on the correct form and with the required GSA information, Snyder said. For shipment to the Azores through Portugal, the $20,000 worth of chairs were delivered to a terminal in Bayonne, N.J., which is the military’s major embarkation point for Atlantic shipments.

Bill Rerouted

The bill was sent, per GSA instructions, to Cleveland. But Cleveland did not have the contract on file and said to bill Grand Rapids, Mich. Grand Rapids did not have anything on it, and referred Douron to Baltimore. Baltimore said to bill Philadelphia, which pays bills for Baltimore.

“We had to get in touch with people in the Azores to change the billing location on the purchase order,” Snyder said. “Finally, after we made many, many calls, they said they would make the change.

“But when the new purchase order came . . . they did not change the payment office to Philadelphia.

“Philadelphia kicked back the bill two or three times. They had no idea what we were talking about.” As a result, when the Bayonne receiving people sent the paper work to Philadelphia, confirming that the shipment had been made, “Philadelphia said, ‘We are not identified as the payment office.’

“In April of last year we finally got paid,” Snyder said. “But Philadelphia said they were not going to pay interest because they didn’t have the paper work on it” until the end, so any delays were not their fault.

Boucher acknowledges that there are horror stories. “You do hear from time to time about (government) people who have taken invoices that were two, three, four months old and put them in a desk drawer. Out of sight, out of mind.”

But, he said, “I think we’ve solved that. We get a report out every month of where the mistakes were made and whose fault it was.”