32.907 Interest penalties.

(a) Late payment. The designated payment office will pay an interest penalty automatically, without

request from the contractor, when all of the following conditions, if applicable, have been met:

(1) The designated billing office received a proper invoice.

(2) The Government processed a receiving report or other Government documentation authorizing

payment, and there was no disagreement over quantity, quality, or contractor compliance with any

contract requirement.

(3) In the case of a final invoice, the payment amount is not subject to further contract settlement

actions between the Government and the contractor.

(4) The designated payment office paid the contractor after the due date.

(5) In the case of interim payments on cost-reimbursement contracts for services, when payment is

made more than 30 days after the designated billing office receives a proper invoice.

(b) Improperly taken discount. The designated payment office will pay an interest penalty

automatically, without request from the contractor, if the Government takes a discount for prompt

payment improperly. The interest penalty is calculated on the amount of discount taken for the

period beginning with the firstday after the end of the discount period through the date when the

contractor is paid.

(c) Failure to pay interest.

(1) The designated payment office will pay a penalty amount, in addition to the interest penalty

amount, only if-

(i) The Government owes an interest penalty of $1 or more;

(ii) The designated payment office does not pay the interest penalty within 10 days after the date the

invoice amount is paid; and

(iii) The contractor makes a written demand to the designated payment office for additional penalty

payment in accordance with paragraph (c)(2) of this section, postmarked not later than 40 days after

the date the invoice amount is paid.

(2)

(i) Contractors must support written demands for additional penalty payments with the following

data. The Government must not request additional data. Contractors must-

(A) Specifically assert that late payment interest is due under a specific invoice, and request

payment of all overdue late payment interest penalty and such additional penalty as may be

required;

(B) Attach a copy of the invoice on which the unpaid late payment interest is due; and
(C) State that payment of the principal has been received, including the date of receipt.

(3) If there is no postmark or the postmark is illegible-

(i) The designated payment office that receives the demand will annotate it with the date of receipt,

provided the demand is received on or before the 40 thday after payment was made; or

(ii) If the designated payment office fails to make the required annotation, the Government will

determine the demand’s validity based on the date the contractor has placed on the demand;

provided such date is no later than the 40 thday after payment was made.

(d) Disagreements.

(1) The payment office will not pay interest penalties if payment delays are due to disagreement

between the Government and contractor concerning-

(i) The payment amount;

(ii) Contract compliance; or

(iii) Amounts temporarily withheld or retained in accordance with the terms of the contract.

(2) The Government and the contractor must resolve claims involving disputes, and any interest that

may be payable in accordance with the Disputes clause.

(e) Computation of interest penalties. The Government will compute interest penalties in accordance

with OMB prompt payment regulations at 5 CFR Part 1315. These regulations are available via the

Internet at http://www.fms.treas.gov/prompt/.

(f) Unavailability of funds. The temporary unavailability of funds to make a timely payment does not

relieve an agency from the obligation to pay interest penalties.

Parent topic: Subpart 32.9 - Prompt Payment