52.232-17 Interest
Source: FAR 52.232-17 on acquisition.gov
Contractors must pay debts to the Government within 30 days to avoid accruing interest at Treasury rates, with strict procedures for demands, disputes, and interest calculation.
Overview
FAR 52.232-17, "Interest," establishes the requirements for charging interest on amounts owed by contractors to the Government under a contract. Unless otherwise specified by clauses related to defective pricing or Cost Accounting Standards, any debt owed by the contractor that is not paid within 30 days of becoming due will accrue simple interest at a rate set by the Secretary of the Treasury. The clause outlines when amounts become due, how interest is calculated, and the process for government demands and final decisions regarding contractor debts. It also provides for possible reduction of interest charges under certain circumstances.
Key Rules
- Interest on Contractor Debts
- All amounts payable by the contractor to the Government accrue simple interest if not paid within 30 days of becoming due, except as otherwise provided by specific clauses.
- Demand for Payment
- The Government may issue a demand for payment when a debt is determined to be due.
- Final Decision Process
- If there is a dispute or delay in payment, the Contracting Officer will issue a final decision per FAR 33.211.
- Due Dates for Amounts Owed
- Amounts are due on the contractually fixed date or the date of the first written demand for payment.
- Interest Calculation
- Interest is calculated based on the actual number of days from the due date until payment or offset.
- Reduction of Interest
- Interest charges may be reduced following procedures in FAR 32.608-2.
Responsibilities
- Contracting Officers: Issue demands for payment, make final decisions on debts, and ensure proper calculation and application of interest.
- Contractors: Pay debts to the Government promptly, respond to demands for payment, and request installment or deferment agreements if needed.
- Agencies: Oversee compliance with interest provisions and maintain accurate records of debts and payments.
Practical Implications
- This clause incentivizes timely payment of debts by contractors and provides a clear process for handling overdue amounts.
- Contractors should monitor payment deadlines closely to avoid accruing interest charges.
- Disputes or delays can trigger formal decisions and additional administrative steps, potentially increasing costs and complexity.
As prescribed in 32.611 (a) and (b), insert the following clause:
Interest (May 2014)
(a) Except as otherwise provided in this contract under a Price Reduction for Defective Certified Cost or Pricing Data clause or a Cost Accounting Standards clause, all amounts that become payable by the Contractor to the Government under this contract shall bear simple interest from the date due until paid unless paid within 30 days of becoming due. The interest rate shall be the interest rate established by the Secretary of the Treasury as provided in http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title41-section7109&num=0&edition=prelim" target="_blank">41 U.S.C. 7109, which is applicable to the period in which the amount becomes due, as provided in paragraph (e) of this clause, and then at the rate applicable for each six-month period as fixed by the Secretary until the amount is paid.
(b) The Government may issue a demand for payment to the Contractor upon finding a debt is due under the contract.
(c) Final Decisions. The Contracting Officer will issue a final decision as required by 33.211 if-
(1) The Contracting Officer and the Contractor are unable to reach agreement on the existence or amount of a debt in a timely manner;
(2) The Contractor fails to liquidate a debt previously demanded by the Contracting Officer within the timeline specified in the demand for payment unless the amounts were not repaid because the Contractor has requested an installment payment agreement; or
(3) The Contractor requests a deferment of collection on a debt previously demanded by the Contracting Officer (see 32.607-2).
(d) If a demand for payment was previously issued for the debt, the demand for payment included in the final decision shall identify the same due date as the original demand for payment.
(e) Amounts shall be due at the earliest of the following dates:
(1) The date fixed under this contract.
(2) The date of the first written demand for payment, including any demand for payment resulting from a default termination.
(f) The interest charge shall be computed for the actual number of calendar days involved beginning on the due date and ending on-
(1) The date on which the designated office receives payment from the Contractor;
(2) The date of issuance of a Government check to the Contractor from which an amount otherwise payable has been withheld as a credit against the contract debt; or
(3) The date on which an amount withheld and applied to the contract debt would otherwise have become payable to the Contractor.
(g) The interest charge made under this clause may be reduced under the procedures prescribed in 32.608-2 of the Federal Acquisition Regulation in effect on the date of this contract.
(End of clause)