32.604
Demand for payment
Contracting officers must promptly issue a detailed demand for payment when a contractor owes a debt, ensuring all required notifications, accounting, and compliance steps are followed.
Overview
FAR 32.604 outlines the procedures and requirements for contracting officers to issue a formal demand for payment when a contractor owes a debt to the Government. The section details when and how demands must be issued, the required content of the demand letter, and exceptions to the process. It ensures that debts are formally documented, communicated, and tracked, and provides guidance on handling complex accounting situations, interest calculations, and contractor notifications.
Key Rules
- Issuance of Demand for Payment
- Contracting officers must issue a demand for payment as soon as a debt is determined, regardless of ongoing negotiations, contract terms, or contractor agreement to repay.
- Content Requirements
- The demand must describe the debt, distribute the principal by line(s) of accounting, state the basis and amount of interest or penalties, and provide specific notifications to the contractor.
- Accounting Distribution
- If multiple lines of accounting are affected, all should be identified or representative lines selected, even if funds are expired or cancelled.
- Interest and Penalties
- The demand must specify interest rates and calculation methods based on contract terms or statutory requirements.
- Contractor Notifications
- Contractors must be informed of their rights to dispute, pay, request installment plans, and the possibility of offsets or administrative charges.
- Exceptions and Timing
- Demands are not required if the contractor self-identifies and pays or credits the debt, but must be issued if the debt is not resolved within 30 days.
- Distribution and Documentation
- Demands must be sent to the contractor with proof of receipt and forwarded to the payment office.
Responsibilities
- Contracting Officers: Must issue, document, and distribute demands for payment, ensure proper accounting, and follow up on exceptions.
- Contractors: Must review, respond, and pay or dispute debts as outlined in the demand letter.
- Agencies: Must track debts, ensure compliance with statutory requirements, and coordinate with payment offices.
Practical Implications
- This section ensures prompt and formal notification of contract debts, supporting government financial management and compliance with debt collection laws. Contractors must be prepared for immediate action upon receipt of a demand and understand their rights and obligations. Common pitfalls include delayed responses, improper accounting, or failure to follow notification procedures, which can result in interest accrual or offsets.