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Chapter XIII

Books and Documents > Medical Department of the U.S. Army in the World War, Volume III, Finance & Supply

CHAPTER XIII

DISBURSEMENTS

In the purchase of supplies in time of peace it is customary to call for delivery at the depot making the purchase. This point of delivery is usually stated in the circular of advertisement. The prices paid for the articles include, therefore, transportation charges from the point of manufacture to the depot. They represent the cost of the article delivered into the warehouse of the purchasing depot. In routine purchases under those conditions it has been customary to wait until the supplies have been received before preparing vouchers for their payment. These vouchers contained a certificate signed by the purchasing officer that the supplies had been received. This certificate was the outgrowth of the act of January 31, 1823. Section I of this act provides that “payments on contracts shall not exceed the value of the services rendered or of articles delivered previous to such payments.” For many years partial payments upon vouchers for medical supplies were not looked upon with much favor. The quantities purchased were generally small. The period covered by the expected delivery was generally short and the sums involved were not large. For such contracts payments were withheld until delivery had been made complete and the articles accepted, whereupon payment was made in full. In annual contracts, and those in which deliveries covered a long period, partial payments were made at stated intervals, in accordance with the quantities delivered.

For the greater part of the year 1917 these same procedures obtained. As the bulk of supplies increased, shipments direct from the factory to points other than the purchasing depot became more numerous; the assistance of the Government in securing transportation for the shippers increased, and other measures became necessary. Cars moving on Government bills of lading had preference on the railroads over those moving on commercial bills of lading and were generally more easily secured. If the contract called for delivery at the depot and direct shipments were made from the factory on Government bills of lading, it became necessary to make adjustments to cover the freight charges included in the prices paid for the articles. Consequently, the custom grew up of making purchases f.o.b. cars at the manufacturers’ plants. Because of the magnitude of the contract, the length of time covered by the deliveries, and the value of the articles shipped, partial payments became the rule rather than the exception. But here again difficulty was experienced by the purchasing officer in making payments. Under the interpretation of the regulation then in force, the purchasing officers were of the opinion that payments could be made only after receipt of an acknowledgment from the receiving officer, or other satisfactory evidence of delivery at destination. Under this conception considerable periods, often weeks, elapsed between shipment and the formal acknowledgment of receipt at destination.1 Payments were correspondingly delayed, often to the inconvenience of the manufacturer. In order to reduce


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this inconvenience as much as possible, the following instructions were given by the Surgeon General, October 25, 1917, to all purchasing depots: 2

Payment for supplies delivered under contract may be considerably expedited by furnishing the contractor with blank vouchers. When he sends his bill on he should enter in the gridiron on the vouchers the total amount of his bill, sign the vouchers, and return to the purchasing depot. When the goods have been received, payment can be made without waiting to send the vouchers in the usual manner. In this way several days can usually be saved, which will be a considerable help to contractors at this time.

In time of peace the expense involved in producing the quantities called for in Medical Department contracts was relatively small. Financial accommodations were secured easily by the manufacturers from the local banks with which they did business, and no material inconvenience resulted from the delay in making payments. With war expansion the situation changed. The production of the great quantity of supplies required called for the expenditures of large sums of money, both for raw materials and increased labor, as well as for expansion of manufacturing facilities and the financial risks increased. Accommodations at the banks became increasingly more difficult to obtain. The manufacturers had to depend more and more upon moneys received from the Government in payment for the supplies delivered. Delays between the shipment of supplies and receipt of payment became increasingly inconvenient. Some short cut became necessary. Furthermore, due to the transportation situation at the end of 1917, the majority of shipments of medical and hospital supplies were being made on Government bills of lading. The supplies were being inspected at the factories by representatives of the Government acting on behalf of the Medical Department. It was decided therefore to accept deliveries at the contractor’s plant. Accordingly, the following instructions to officers in charge of the purchasing of medical supplies were issued by the Surgeon General, December 20, 1917. They remained in force throughout the remainder of the war.3

Many complaints are reaching this office from contractors in regard to the delay in remittances to them for goods delivered. The conditions will probably continue to get worse as banking conditions become less favorable.

I have discussed this matter with the legal advisors of this office, and it seems to be the consensus of opinion that contractors who have agreed to deliver goods f.o.b. the point of manufacture should not be compelled to wait for several weeks (in some cases) for their money.

It is directed that in future you proceed in the following manner, in so far as contracts calling for delivery f.o.b. point of manufacture are concerned.

A copy of the Government bill of lading signed by the agent of the railroad receiving the goods for shipment accompanying the bills will be sufficient evidence of delivery, and you are directed to pay such bills without waiting for notification of their arrival at destination, unless the destination is your depot. This should apply to reputable dealers only. Any discrepancies that may be discovered in the amount delivered or quality, etc., of goods may be adjusted at a later date.

Supplies to be delivered at your depot or at points designated in the contract other than the point of manufacture should not be paid for until actually delivered by the contractor.

It is further directed that you expedite payments as much as possible by promptly forwarding vouchers and checks.

Under this method of making payment it was possible for the contractor to receive payment for the articles shipped before they actually had reached their


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destination. This method was applied of course only to those contracts which called for delivery f.o.b. cars at the manufacturer’s plant. If a contract called for delivery at the depot the supplies were shipped on commercial bills of lading and delivery was not accepted until the articles had actually arrived at the depot. In case a shortage was found in shipments accepted at the manufacturer’s plant when the car arrived at its destination, an investigation was at once started to determine whether the loss had occurred in transit, in which case the transportation company became responsible for the shortage. If the investigation developed the fact that the full quantities had not been loaded in the car at the factory, adjustments were made in subsequent payments. While this system was in operation very few adjustments were necessary.

It was the continued effort of the supply service of the Medical Department throughout the war to make payments to the contractors at the earliest possible date after the receipt and acceptance of articles shipped. In the earlier purchasing there was an insufficient number of trained personnel to handle the various procedures necessary to the preparation of the vouchers and some delay resulted. As the organization of the disbursing officers increased and became more efficient, the delays were reduced. The number of vouchers handled increased from month to month. During the summer and fall of 1918, the number of vouchers handled by the disbursing officer in the Surgeon General’s Office exceeded 10,000 per month. The major part of the appropriations for the Medical Department was disbursed by the disbursing officers in the Surgeon General’s Office and the disbursing officer at the Medical Supply Depot, New York. The disbursements made by the disbursing officer at the various depots of the Medical Department, both in the United States and with the American Expeditionary Forces are shown in the following tables:4

Chart


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Disbursements of medical and hospital department funds by disbursing officers, Medical Department--Continued

Chart continued

Disbursements made by medical officers during the calendar years 1917 and 1918, by appropriations.

Chart


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REFERENCES

(1) Second indorsement, from the officer in charge, Medical Supply Depot, New York, to Supply Division, S. G. O., Washington, D. C., October 22, 1917, relative to payment
for supplies. On file, Finance and Supply Division, S. G. O., 437/2.
(2) Third indorsement, War Department, S. G. O., to the officer in charge, Medical Supply Depot, St. Louis, Mo., October 25, 1917, relative to payment for supplies. On file,
Finance and Supply Division, S. G. O., 437/2.
(3) Letter from the Surgeon General’s Office, to the officer in charge, Field Medical Supply Depot, Washington, D. C., December 20, 1917. Subject: Payments to contractors.
On file, Finance and Supply Division, S. G. O., 713-750 Wash. D./146.
(4) Compiled from accounts current of various disbursing officers, Medical Department, on file in the General Accounting Office.