62230 Federal Register / Vol. 71, No. 205 / Tuesday, October 24, 2006 / Proposed Rules 

post allowance to reflect the elimination 

of that allowance from the Department 

of States’ Standardized Regulations 

(Government Civilians, Foreign Areas), 

Chapter 230. 

B. Regulatory Planning and Review 

This is not a significant regulatory 

action and, therefore, is subject to 

review under Section 6(b) of Executive 

Order 12866, Regulatory Planning and 

Review, dated September 30, 1993. This 

rule is not a major rule under 5 U.S.C. 

804. 

C. Regulatory Flexibility Act 

Pursuant to requirements set forth in 

the Regulatory Flexibility Act (RFA) (5 

U.S.C. 601 et seq.), USAID has 

considered the economic impact of the 

rule and has determined that its 

provisions would not have a significant 

economic impact on a substantial 

number of small entities. 

D. Paperwork Reduction Act 

The Paperwork Reduction Act does 

not apply because the proposed changes 

to the AIDAR do not impose 

information collection requirements that 

require the approval of the Office of 

Management and Budget under 44 

U.S.C. 3501 et seq. 

List of Subjects in 48 CFR Part 7 

Government procurement. 

For the reasons set forth in the 

preamble, the U. S. Agency for 

International Development proposes to 

amend 48 CFR part 7 as follows: 

1. The authority citation for 48 CFR 

part 7 continues to read as follows: 

Authority: Sec. 621, Pub. L. 87–195, 75 

Stat. 445, (22 U.S.C. 2381) as amended; E.O. 

12163, Sept. 29, 1979, 44 FR 56673; 3 CFR 

1979 Comp., p. 435. 

PART 752—SOLICITATION 

PROVISIONS AND CONTRACT 

CLAUSES 

2. Amend Section 752.7028 by 

revising paragraph (a), removing and 

reserving paragraph (e), and adding a 

sentence at the end of paragraph (j)(1) to 

read as follows: 

§ 752.7028 Differential and allowances. 

* * * * * 

(a) Post differential. Post differential 

is an additional compensation for 

service at places in foreign areas where 

conditions of environment differ 

substantially from conditions of 

environment in the continental United 

States and warrant additional 

compensation as a recruitment and 

retention incentive. 

(1) In areas where post differential is 

paid to USAID direct-hire employees, 

post differentials not to exceed the 

percentage of salary as is provided such 

USAID employees in accordance with 

the Standardized Regulations 

(Government civilians, Foreign Areas), 

Chapter 500 (except the limitation 

contained in Section 552, ‘‘Ceiling on 

Payment’’) Tables—Chapter 900, as from 

time to time amended, will be 

reimbursable hereunder for employees 

in respect to amounts earned during the 

time such employees actually spend 

overseas on work under this contract. 

(See Standardized Regulation 510). 

Payments for post differential are 

limited to that percentage rate applied 

to a maximum 40-hour work week, 

regardless of whether the contracting 

officer has authorized a work week in 

excess of 40 hours. Exceptions to this 

policy may be granted either by the 

Mission Director or the Assistant 

Administrator having program 

responsibility for the project. 

(2) When such post differential is 

provided to regular employees of the 

Contractor, it shall be payable beginning 

on the date of arrival at the post of 

assignment and continue, including 

periods away from post on official 

business, until the close of business on 

the day of departure from post of 

assignment en route to the United 

States. Sick or vacation leave taken at or 

away from the post of assignment will 

not interrupt the continuity of the 

assignment or require a discontinuance 

of such post differential payments, 

provided such leave is not taken within 

the United States or the territories of the 

United States. Post differential will not 

be payable while the employee is away 

from his/her post of assignment for 

purposes of home leave. Short-term 

employees shall be entitled to post 

differential beginning with the fortythird (43rd) day at post. 

* * * * * 

(e) Reserved. 

* * * * * 

(j) (1) * * * Payments for danger pay 

are limited to that percentage of basic 

compensation as established by the 

Standardized Regulations applied to a 

maximum 40-hour work week, 

regardless of whether the contracting 

officer has authorized a work week in 

excess of 40 hours. Exceptions to this 

policy may be granted either by the 

Mission Director or the Assistant 

Administrator having program 

responsibility for the project. 

Dated: October 12, 2006. 

Michael F. Walsh, 

Procurement Executive. 

[FR Doc. E6–17543 Filed 10–23–06; 8:45 am] 

BILLING CODE 6116–01–P 

DEPARTMENT OF DEFENSE 

GENERAL SERVICES 

ADMINISTRATION 

NATIONAL AERONAUTICS AND 

SPACE ADMINISTRATION 

48 CFR Parts 12, 13, 32, 33, 36, 42, and 

52 

[FAR Case 2005–018] 

RIN: 9000–AK59: Docket 2006–0020; 

Sequence 11 

Federal Acquisition Regulation; FAR 

Case 2005–018, Contract Debts 

AGENCIES: Department of Defense (DoD), 

General Services Administration (GSA), 

and National Aeronautics and Space 

Administration (NASA). 

ACTION: Proposed rule. 

SUMMARY: The Civilian Agency 

Acquisition Council and the Defense 

Acquisition Regulations Council 

(Councils) are proposing to amend the 

Federal Acquisition Regulation (FAR) to 

revise the policies and procedures for 

contract debts. 

DATES: Interested parties should submit 

written comments to the FAR 

Secretariat on or before December 26, 

2006 to be considered in the 

formulation of a final rule. 

ADDRESSES: Submit comments 

identified by FAR case 2005–018 by any 

of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Search for any 

document by first selecting the proper 

document types and selecting ‘‘Federal 

Acquisition Regulation’’ as the agency 

of choice. At the ‘‘Keyword’’ prompt, 

type in the FAR case number (for 

example, FAR Case 2006–001) and click 

on the ‘‘Submit’’ button. You may also 

search for any document by clicking on 

the ‘‘Advanced search/document 

search’’ tab at the top of the screen, 

selecting from the agency field ‘‘Federal 

Acquisition Regulation’’, and typing the 

FAR case number in the keyword field. 

Select the ‘‘Submit’’ button. 

• Fax: 202–501–4067. 

• Mail: General Services 

Administration, Regulatory Secretariat 

(VIR), 1800 F Street, NW, Room 4035, 

ATTN: Laurieann Duarte, Washington, 

DC 20405. 

Instructions: Please submit comments 

only and cite FAR case 2005–018 in all 

correspondence related to this case. All 

comments received will be posted 

without change to http:// 

www.regulations.gov, including any 

personal and/or business confidential 

information provided. 


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FOR FURTHER INFORMATION CONTACT: Mr. 

Jeremy Olson at (202) 501–3221 for 

clarification of content. For information 

pertaining to status or publication 

schedules, contact the FAR Secretariat 

at (202) 501–4755. Please cite FAR case 

2005–018. 

SUPPLEMENTARY INFORMATION: 

A. Background 

In 2003, the DoD Comptroller 

established the DoD Accounts 

Receivable Workgroup to evaluate the 

processes and procedures for reporting 

accounts receivables. This Workgroup 

concluded that contracting officers may 

not be properly reporting contract debts. 

Based on the Workgroup’s 

recommendations, DoD established a 

Contract Debt Integrated Process Team 

(IPT). 

The mission of the IPT was to 

evaluate the adequacy of DoD’s existing 

controls and procedures for ensuring 

that contract debts are identified and 

recovered in a timely manner, properly 

accounted for in DoD’s books and 

records, and properly coordinated with 

the appropriate Government Officials. 

Contract debts result from compliance, 

or a failure to comply, with the terms of 

a contract and include debts identified 

by auditors, contracting officers, 

disbursing officials, and contractors. On 

May 26, 2005, a final report was issued 

that included a number of 

recommended FAR changes to improve 

contract debt controls and procedures, 

and to ensure consistency within/ 

between existing regulations. 

The Councils established this case to 

evaluate the DoD recommendations. As 

a result of this review, the Councils are 

proposing the revisions discussed 

below. In addition, the Councils are 

considering whether the current 

provisions regarding interest provisions 

are sufficient. In particular, concerns 

have been expressed over the current 

timeline for computing interest. The 

Councils agreed to defer this issue for 

consideration to a later date (including 

a possible public meeting). 

1. Reorganize FAR Subpart 32.6. 

Reorganizes FAR Subpart 32.6 to add 

clarity and provide a logical sequence. 

The Subpart has been reorganized as 

follows: 

32.600 Scope of subpart. 

32.601 General. 

32.602 Responsibilities. 

32.603 Debt determination. 

32.604 Demand for payment. 

32.605 Final decisions. 

32.606 Debt collection. 

32.607 Installment payments and 

deferment of collection. 

32.607–1Installment payments. 

32.607–2Deferment of collection. 

32.608Interest. 

32.608–1Interest charges. 

32.608–2Interest credits. 

32.609 Delays in receipt of notices or 

demands. 

32.610 Compromising debts. 

32.611 Contract clause. 

2. Scope of Subpart. Revise FAR 

32.600 to provide a more accurate 

description of the scope of this FAR 

subpart. FAR 32.6 prescribes policies 

and procedures for identifying, 

collecting, and deferring contract debts 

(including interest, if applicable). 

3. Responsible Official. Replace the 

term ‘‘responsible official’’ with the 

specific individual/organization 

responsible for fulfilling the FAR 

requirement. Some of the 

responsibilities currently listed are 

assigned to one individual/organization 

(e.g., the Procuring Contracting Officer) 

and other responsibilities are assigned 

to another individual/organization (e.g., 

the payment office). To assure a clear 

understanding of the process and 

applicable duties, the proposed rule 

specifies the responsible party for each 

required action(e.g., the Procuring 

Contracting Officer, the Administrative 

Contracting Officer, the payment office, 

etc.) rather than referring to all parties 

as ‘‘responsible officials.’’

4. Contract Debt – General. Revise 

FAR 32.601 to specify what constitutes 

a contract debt, rather than how a 

contract debt may arise. In addition, 

amend this section to include payments 

determined to be in excess of contract 

limitations for commercial financing, 

since such payments constitute a 

contract debt. 

5. Contract Debt Responsibilities –

Identifying, Demanding Payment, 

Collecting, and Liquidating. Add a 

section to clearly define the 

responsibilities of the contracting officer 

and the payment officials to assure an 

efficient and non-duplicative process. 

Under the proposed rule the––

(a) The contracting officer is 

responsible for identifying a contract 

debt and demanding payment of a 

contract debt. The contracting officer is 

prohibited from collecting contract 

debts or otherwise liquidating contract 

debts (e.g., offsetting the amount of the 

debt against existing unpaid bills due 

the contractor or allowing contractors to 

retain contract debts to cover amounts 

that may be payable to the contractor in 

the future). 

(b) The payment office is responsible 

for collecting payment of the contract 

debt and liquidating the contract debt. 

6. Contract Debt Determinations 

Consolidate all discussions of contract 

debt determinations in FAR 32.603, 

Debt Determinations, including the 

responsibility of the contracting officer 

in making debt determinations. 

7. Tax Credit. Delete the current FAR 

32.607 because the referenced tax credit 

(Sec. 1481) was repealed on November 

5, 1990, by Public Law 101–508. 

8. Demand for Payment. Consolidate 

all discussions of the demand for 

payment in a single section, at FAR 

32.604, Demand for Payment to include: 

(a) A requirement to issue the demand 

letter except in specific circumstances. 

(b) A requirement that the demand 

letter include accounting information to 

enable the payment office to correctly 

record the amounts in the proper 

accounts. 

(c) A requirement that the demand 

letter include the amount of interest 

owed under statutes that require interest 

assessments from the date of 

noncompliance to the date of repayment (CAS and TINA). 

(d) A paragraph implementing the 

requirements of 31 U.S.C. 3717(e)(1) and 

the Debt Collection Improvement Act of 

1996; and 

(e) A paragraph addressing instances 

where overpayments exist but a demand 

for payment is not necessary. 

9. Final Decisions. Consolidate all 

discussions of final decisions in a single 

section at FAR 32.605, Final Decisions, 

to include: 

(a) When a final decision must be 

issued; 

(b) A statement that the due date for 

a demand letter is not extended simply 

because a final decision is being issued; 

(c) A need to obtain evidence of 

receipt by the contractor to establish the 

starting date for interest computations 

and the statute of limitations. 

10. Debt Collection. Consolidate all 

discussions of debt collection in a single 

section, at FAR 32.606, Debt Collection, 

to include: 

(a) The current requirements at 

32.612; 

(b) The current requirements for 

transferring debts to the Department of 

Treasury; and 

(c) A requirement to assure the debt 

is being collected by maintaining 

communication between the contracting 

officer and the payment office. 

11. Installment Payments and 

Deferment of Collection. Clarify 

procedures for processing installment 

payments and deferment of collection 

requests. 

12. Interest. Consolidate and simplify 

all discussions of interest in a single 

section at FAR 32.608, Interest, to 

include: 

(a) The substance of the current 

language at 32.614; 

(b) Computing interest on 

overpayments. 


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13. FAR 12.215 and 32.008 –

Notification of Overpayment. Revise 

FAR 32.008 to specifically state the 

responsibilities of the contracting officer 

when notified by the contractor of a 

duplicate payment or that the 

Government has otherwise overpaid. In 

addition, amend FAR 12.215 to include 

reference to the requirement in FAR 

32.604. 

14. FAR Contract Clauses – Payment. 

Revise the contract clauses at FAR 

52.212–4(i)(5)and (6); 52.232–25(d); 

52.232–26(c); and FAR 52.232–27(l) to 

assure that the contractor remits 

payment to the payment office (rather 

than the contracting officer) and the 

payment office is able to properly 

account for the remittance. 

15. FAR 52.232–17, Interest. Revise 

FAR 52.232–17 to conform with the 

other proposed revisions. 

This is not a significant regulatory 

action and, therefore, was not subject to 

review under Section 6(b) of Executive 

Order 12866, Regulatory Planning and 

Review, dated September 30, 1993. This 

rule is not a major rule under 5 U.S.C. 

804. 

B. Regulatory Flexibility Act 

The Councils do not expect this 

proposed rule to have a significant 

economic impact on a substantial 

number of small entities within the 

meaning of the Regulatory Flexibility 

Act, 5 U.S.C. 601, et seq., because the 

regulatory changes are predominantly 

internal operating procedures for 

contracting officers and will not 

significantly change duties of small 

entities under their contracts. An Initial 

Regulatory Flexibility Analysis has, 

therefore, not been performed. We invite 

comments from small businesses and 

other interested parties. The Councils 

will consider comments from small 

entities concerning the affected FAR 

Part(s) 12, 13, 32, 33, 36, 42, and 52 in 

accordance with 5 U.S.C. 610. Interested 

parties must submit such comments 

separately and should cite 5 U.S.C. 601, 

et seq. (FAR case 2005–018), in 

correspondence. 

C. Paperwork Reduction Act 

The Paperwork Reduction Act does 

not apply because the proposed changes 

to the FAR do not impose information 

collection requirements that require the 

approval of the Office of Management 

and Budget under 44 U.S.C. 3501, et 

seq. 

List of Subjects in 48 CFR Parts 12, 13, 

32, 33, 36, 42, and 52 

Government procurement. 

Dated: October 6, 2006. 

Ralph De Stefano, 

Director, Contract Policy Division. 

Therefore, DoD, GSA, and NASA 

propose amending 48 CFR parts 12, 13, 

32, 33, 36, 42, and 52 as set forth below: 

1. The authority citation for 48 CFR 

parts 12, 13, 32, 33, 36, 42, and 52 

continues to read as follows: 

Authority: 40 U.S.C. 121(c); 10 U.S.C. 

chapter 137; and 42 U.S.C. 2473(c). 

PART 12—ACQUISITION OF 

COMMERCIAL ITEMS 

2. Revise section 12.215 to read as 

follows: 

12.215 Notification of Overpayment. 

If the contractor notifies the 

contracting officer of a duplicate 

payment or that the Government has 

otherwise overpaid, the contracting 

officer shall follow the procedures at 

32.604. 

PART 13—SIMPLIFIED ACQUISITION 

PROCEDURES 

3. Revise section 13.401 (b) to read as 

follows: 

13.401 General. 

* * * * * 

(b) The contracting officer shall be 

primarily responsible for determining 

the amount of debts resulting from 

failure of contractors to properly 

replace, repair, or correct supplies lost, 

damaged, or not conforming to purchase 

requirements (see 32.602 and 32.603). 

* * * * * 

PART 32—CONTRACT FINANCING 

4. Revise section 32.008 to read as 

follows: 

32.008 Notification of Overpayment. 

If the contractor notifies the 

contracting officer of a duplicate 

payment or that the Government has 

otherwise overpaid, the contracting 

officer shall follow the procedures at 

32.604. 

5. Revise subpart 32.6 to read as 

follows: 

Subpart 32.6—Contract Debts 

Sec. 

32.600 Scope of subpart. 

32.601 General. 

32.602 Responsibilities. 

32.603 Debt determination. 

32.604 Demand for payment. 

32.605 Final decisions. 

32.606 Debt collection. 

32.607 Installment payments and deferment 

of collection. 

32.607–1 Installment payments. 

32.607–2 Deferment of collection. 

32.608 Interest. 

32.608–1 Interest charges. 

32.608–2 Interest credits. 

32.609 Delays in receipt of notices or 

demands. 

32.610 Compromising debts. 

32.611 Contract clause. 

32.600 Scope of Subpart. 

This subpart prescribes policies and 

procedures for identifying, collecting, 

and deferring contract debts(including 

interest, if applicable). Sections 32.607, 

32.608, and 32.610 of this subpart do 

not apply to claims against common 

carriers for transportation overcharges 

and freight and cargo losses (31 U.S.C. 

3726). 

32.601 General. 

(a) Contract debts are amounts that—

(1) Have been paid to a contractor to 

which the contractor is not currently 

entitled under the terms and conditions 

of the contract; or 

(2) Are otherwise due from the 

contractor under the terms and 

conditions of the contract.(b) Contract 

debts include, but are not limited to, the 

following: 

(1) Billing and price reductions 

resulting from contract terms for price 

redetermination or for determination of 

prices under incentive type contracts. 

(2) Price or cost reductions for 

defective cost or pricing data. 

(3) Financing payments determined to 

be in excess of the contract limitations 

at 52.232–16(a)(7), Progress Payments, 

or 52.232–32(d)(2), Performance-Based 

Payments, or any contract clause for 

commercial item financing. 

(4) Increases to financing payment 

liquidation rates. 

(5) Overpayments disclosed by 

quarterly statements required under 

price redetermination or incentive 

contracts. 

(6) Price adjustments resulting from 

Cost Accounting Standards (CAS) 

noncompliances or changes in cost 

accounting practice. 

(7) Reinspection costs for 

nonconforming supplies or services. 

(8) Duplicate or erroneous payments. 

(9) Damages or excess costs related to 

defaults in performance. 

(10) Breach of contract obligations 

concerning progress payments, 

performance based payments, advance 

payments, commercial item financing, 

or Government-furnished property. 

(11) Government expense of 

correcting defects. 

(12) Overpayments related to errors in 

quantity or billing or deficiencies in 

quality. 

(13) Delinquency in contractor 

payments due under agreements or 

arrangements for deferral or 

postponement of collections. 


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(14) Reimbursement of amounts due 

under 33.102(b)(3) and 33.104(h)(8). 

32.602 Responsibilities. 

(a) The contracting officer has primary 

responsibility for identifying and 

demanding payment of contract debts 

except those resulting from errors made 

by the payment office. The contracting 

officer shall not collect contract debts or 

otherwise agree to liquidate contract 

debts (e.g. offset the amount of the debt 

against existing unpaid bills due the 

contractor, or allow contractors to retain 

contract debts to cover amounts that 

may become payable in future periods. 

(b) The payment office has primary 

responsibility for—

(1) Collecting contract debts identified 

by contracting officers; 

(2) Identifying and collecting 

duplicate and erroneous payments; and 

(3) Authorizing the liquidation of 

contract debts in accordance with 

agency procedures. 

32.603 Debt determination. 

(a) If the contracting officer has any 

indication that a contractor owes money 

to the Government under a contract, the 

contracting officer shall determine 

promptly whether an actual debt is due 

and the amount. Any unnecessary delay 

may contribute to—

(1) Loss of timely availability of the 

funds to the program for which the 

funds were initially provided; 

(2) Increased difficulty in collecting 

the debt; or 

(3) Actual monetary loss to the 

Government. 

(b) The amount of indebtedness 

determined unilaterally by the 

contracting officer shall be an amount 

that—

(1) Is based on the merits of the case; 

and 

(2) Is consistent with the contract 

terms. 

32.604 Demand for payment. 

(a) Except as provided in paragraph 

(c) of this section, the contracting officer 

shall take the following actions: 

(1) Issue the demand for payment as 

soon as the contracting officer has 

determined that an actual debt is due 

the Government and the amount. 

(2) Issue a demand for payment even 

if—

(i) The debt is or will be the subject 

of a bilateral modification; 

(ii) The contractor is otherwise 

obligated to pay the money under the 

existing contract terms; or 

(iii) The contractor has agreed to 

repay the debt. 

(3) Issue the demand for payment as 

a part of the final decision, if a final 

decision is required by 32.605(a). 

(b) The demand for payment shall 

include the following: 

(1) A description of the debt, 

including the debt amount. 

(2) A distribution of the principal 

amount of the debt by line(s) of 

accounting subject to the following: 

(i) If the debt affects multiple lines of 

accounting, the contracting officer shall, 

to the maximum extent practicable, 

identify all affected lines of accounting. 

If it is not practicable to identify all 

affected lines of accounting, the 

contracting officer may select 

representative lines of accounting in 

accordance with paragraph (b)(2)(ii) of 

this section. 

(ii) In selecting representative lines of 

accounting, the contracting officer 

shall—

(A) Consider the affected departments 

or agencies, years of appropriations, and 

the predominant types of 

appropriations; 

(B) Not distribute to any line of 

accounting an amount of the principal 

in excess of the total obligation for the 

line of accounting; and 

(iii) Include the lines of accounting 

even if the associated funds are expired 

or cancelled. While cancelled funds will 

be deposited in a miscellaneous receipt 

account of the Treasury if collected, the 

funds are tracked under the closed year 

appropriation(s) to comply with the 

Anti-Deficiency Act. 

(iv) If the debt affects multiple 

contracts and the lines of accounting are 

not readily available, the contracting 

officer shall—

(A) Issue the demand for payment 

without the distribution of the principal 

amount to the affected lines of 

accounting; 

(B) Include a statement in the demand 

for payment advising when the 

distribution will be provided; and 

(C) Provide the distribution by the 

date identified in the demand for 

payment. 

(3) The basis for and amount of any 

accrued interest or penalty. 

(4)(i) For debts resulting from specific 

contract terms (e.g., debts resulting from 

incentive clause provisions, Quarterly 

Limitation on Payments Statement, Cost 

Accounting Standards, price reduction 

for defective pricing), a notification 

stating that payment should be made 

promptly, and that interest is due in 

accordance with the terms of the 

contract. Interest shall be computed 

from the date specified in the applicable 

contract clause until repayment by the 

contractor. The interest rate shall be the 

rate specified in the applicable contract 

clause. 

(ii) For all other contract debts, a 

notification stating that any amounts not 

paid within 30 days from the date of the 

demand for payment will bear interest. 

Interest shall be computed from the date 

of the demand for payment until 

repayment by the contractor. The 

interest rate shall be the interest rate 

established by the Secretary of the 

Treasury, as provided in Section 611 of 

the Contract Disputes Act of 1978 

(Public Law 95–563), which is 

applicable to the period in which the 

amount becomes due, and then at the 

rate applicable for each six-month 

period as established by the Secretary 

until the amount is paid. 

(iii) In the case of a debt arising from 

a price reduction for defective pricing, 

or as specifically set forth in a Cost 

Accounting Standards (CAS) clause in 

the contract, interest is computed from 

the date of overpayment by the 

Government until repayment by the 

contractor at the underpayment rate 

established by the Secretary of the 

Treasury, for the periods affected, under 

26 U.S.C. 6621(a)(2). 

(5) A statement advising the 

contractor—

(i) To contact the contracting officer if 

the contractor believes the debt is 

invalid or the amount is incorrect; and 

(ii) To remit a check payable to the 

‘‘Treasurer of the United States’’

annotated with the contract number 

along with a copy of the demand for 

payment to the payment office 

identified in the contract or as otherwise 

specified in the demand letter in 

accordance with agency procedures. 

(6) Notification that the payment 

office may offset the debt against any 

payments otherwise due the contractor. 

(7) Notification that the debt is subject 

to administrative charges in accordance 

with the requirements of 31 U.S.C. 

3717(e) and the Debt Collection 

Improvement Act of 1996. 

(8) A notification that the contractor 

may submit a request for installment 

payments or deferment of collection if 

immediate payment is not practicable or 

if the amount is disputed. 

(c) Except as provided in paragraph 

(d) of this section, the contracting officer 

should not issue a demand for payment 

if the contracting officer only becomes 

aware of the debt when the contractor—

(1) Provides a lump sum payment or 

submits a credit invoice. (A credit 

invoice is a contractor’s request to 

liquidate the debt against existing 

unpaid bills due the contractor); or 

(2) Notifies the contracting officer that 

the payment office overpaid on an 

invoice payment. When the contractor 

provides the notification, the 

contracting officer shall notify the 

payment office of the overpayment. 


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(d) If a demand for payment was not 

issued as provided for in paragraph (c) 

of this section, the contracting officer 

shall issue a demand for payment no 

sooner than 30 days after the contracting 

officer becomes aware of the debt 

unless—

(i) The contractor has liquidated the 

debt; 

(ii) The contractor has requested an 

installment payment agreement; or 

(iii) The payment office has issued a 

demand for payment. 

(e) The contracting officer shall—

(1) Furnish a copy of the demand for 

payment to the contractor by certified 

mail, return receipt requested, or by any 

other method that provides evidence of 

receipt; and 

(2) Forward a copy of the demand to 

the payment office. 

32.605 Final decisions. 

(a) The contracting officer shall 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). 

(b) 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. 

(c) The contracting officer shall–

(1) Furnish the decision to the 

contractor by certified mail, return 

receipt requested, or by any other 

method that provides evidence of 

receipt; and 

(2) Forward a copy to the payment 

office identified in the contract. 

32.606 Debt collection. 

(a) If the contractor has not liquidated 

the debt within 30 days of the date due 

or requested installment payments or 

deferment of collection, the payment 

office initiates withholding of principal, 

interest, penalties, and administrative 

charges. In the event the contract is 

assigned under the Assignment of 

Claims Act of 1940 (31 U.S.C. 3727 and 

41 U.S.C. 15), the rights of the assignee 

will be scrupulously respected and 

withholding of payments shall be 

consistent with those rights. For 

additional information on assignment of 

claims, see Subpart 32.8. 

(b) As provided for in the Debt 

Collection Improvement Act of 1996, 

payment offices are required to transfer 

any debt that is delinquent more than 

180 days to the Department of Treasury 

for collection. 

(c) The contracting officer shall 

periodically follow up with the payment 

office to determine whether the debt has 

been collected and credited to the 

correct appropriation(s). 

32.607 Installment payments and 

deferment of collection. 

(a) The contracting officer shall not 

approve or deny a contractor’s request 

for installment payments or deferment 

of collections. The office designated in 

agency procedures is responsible for 

approving or denying requests for 

installment payments or deferment of 

collections. 

(b) If a contractor has not appealed the 

debt or filed an action under the 

Disputes clause of the contract and the 

contractor has submitted a proposal for 

debt deferment or installment 

payments–

(1) The office designated in agency 

procedures may arrange for deferment/ 

installment payments if the contractor is 

unable to pay at once in full or the 

contractor’s operations under national 

defense contracts would be seriously 

impaired. The arrangement shall 

include appropriate covenants and 

securities and should be limited to the 

shortest practicable maturity; and 

(2) The deferment/installment 

agreement shall include a specific 

schedule or plan for payment. It should 

permit the Government to make 

periodic financial reviews of the 

contractor and to require payments 

earlier than required by the agreement if 

the Government considers the 

contractor’s ability to pay improved. It 

should also provide for required stated 

or measurable payments on the 

occurrence of specific events or 

contingencies that improve the 

contractor’s ability to pay. 

(c) If not already applicable under the 

contract terms, interest on contract debt 

shall be made an element of any 

agreement entered into an installment 

payment or deferment of collection 

agreement. 

32.607–1 Installment payments. 

If a contractor requests an installment 

payment agreement, the contracting 

officer shall notify the contractor to 

send a written request for installment 

payments to the office designated in 

agency procedures. 

32.607–2 Deferment of collection. 

(a) All requests for deferment of 

collection must be submitted in writing 

to the contracting officer. 

(1) If the contractor has appealed the 

debt under the procedures of the 

Disputes clause of the contract, the 

information with the request for 

deferment may be limited to an 

explanation of—

(i) The contractor’s financial 

condition; and 

(ii) Whether deferment of the debt 

collection is advisable to avoid possible 

overcollection. 

(2) If there is no appeal pending or 

action filed under the Disputes clause of 

the contract, the following information 

about the contractor should be 

submitted with the request: 

(i) Financial condition. 

(ii) Contract backlog. 

(iii) Projected cash receipts and 

requirements. 

(iv) The feasibility of immediate 

payment of the debt. 

(v) The probable effect on operations 

of immediate payment in full. 

(vi) Whether deferment of the debt 

collection is advisable to avoid possible 

over collection. 

(b) Upon receipt of the contractor’s 

written request, the contracting officer 

shall promptly provide a notification to 

the payment office and advise the 

payment office that the contractor’s 

request is under consideration. Prompt 

notification is required to ensure that 

the payment office does not begin 

collection while the deferment request 

is being considered. 

(c)(1) The contracting officer shall 

forward the following to the office 

designated in agency procedures for a 

decision: 

(i) A copy of the contractor’s request 

for a deferment of collection. 

(ii) A written recommendation on the 

request and the basis for the 

recommendation including the 

advisability of deferment to avoid 

possible overcollections. 

(iii) A statement as to whether the 

contractor has an appeal pending or 

action filed under the Disputes clause of 

the contract and the docket number if 

the appeal has been filed. 

(iv) A copy of the contracting officer’s 

final decision (see 32.605). 

(2) The contracting officer should 

consider any information necessary to 

develop a recommendation on the 

deferment request. 

(d) The office designated in agency 

procedures may authorize a deferment 

pending the resolution of appeal to 

avoid possible overcollections. The 

agency is required to use current year 

unexpired funds to pay interest on 

overcollections. 


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(e) Deferments pending disposition of 

appeal may be granted to small business 

concerns and financially weak 

contractors, with a reasonable balance of 

the need for Government security 

against loss and undue hardship on the 

contractor. 

(f) Contracts and arrangements for 

deferment shall not provide that a claim 

of the Government will not become due 

and payable pending mutual agreement 

on the amount of the claim or, in the 

case of a dispute, until the decision is 

reached. 

(g) At a minimum, the deferment 

agreement shall contain the following: 

(1) A description of the debt. 

(2) The date of first demand for 

payment. 

(3) Notice of an interest charge, in 

conformity with FAR 32.608 and the 

FAR clause at 52.232–17, Interest; or, in 

the case of a debt arising from a 

defective pricing or a CAS 

noncompliance overpayment, interest, 

as prescribed by the applicable Price 

Reduction for Defective Cost or Pricing 

Data or CAS clause. 

(4) Identification of the office to 

which the contractor is to send debt 

payments. 

(5) A requirement for the contractor to 

submit financial information requested 

by the Government and for reasonable 

access to the contractor’s records and 

property by Government 

representatives. 

(6) Provision for the Government to 

terminate the deferment agreement and 

accelerate the maturity of the debt if the 

contractor defaults or if bankruptcy or 

insolvency proceedings are instituted by 

or against the contractor. 

(7) Protective requirements that are 

considered by the Government to be 

prudent and feasible in the specific 

circumstances. The coverage of 

protective terms at 32.409 and 32.501–

5 may be used as a guide. 

(h) If a contractor appeal of the debt 

determination is pending, the deferment 

agreement shall also include a 

requirement that the contractor shall —; 

(1) Diligently prosecute the appeal; 

and 

(2) Pay the debt in full when the 

appeal is decided, or when the parties 

reach agreement on the debt amount. 

(i) The deferment agreement may 

provide for the right to make early 

payments without prejudice, for refund 

of overpayments, and for crediting of 

interest. 

(j) Actions filed by contractors under 

the Disputes clause shall not suspend or 

delay collection. Until the action is 

decided, deferments shall only be 

granted if, within 30 days after the filing 

of such action, the contractor presents to 

the office designated in agency 

procedures a good and sufficient bond, 

or other acceptable collateral, in the 

amount of the claim, and the deferment 

is approved by the office designated in 

agency procedures. Any amount 

collected by the Government in excess 

of the amount found to be due on appeal 

under the Disputes clause of the 

contract shall be refunded to the 

contractor with interest thereon from 

the date of collection by the 

Government until the date the monies 

are remitted to the contractor at the 

annual rate established by the Secretary 

of Treasury under Public Law 92–41. 

Simple interest shall be calculated to 

reflect each 6-month period change in 

the rates established by the Secretary. 

32.608 Interest. 

32.608–1 Interest charges. 

(a) Unless specified otherwise in the 

FAR clause at 52.232–17—

(1) Interest charges shall apply to any 

contract debt unpaid after 30 days from 

the issuance of a demand for payment 

or from any earlier date specified in the 

contract unless—

(i) The contract is a kind excluded 

under 32.611; or 

(ii) The contract or debt has been 

exempted from interest charges under 

agency procedures. 

(2) The interest charge shall be at the 

rate established by the Secretary of the 

Treasury under Public Law 92–41 for 

the period in which the amount 

becomes due. The interest charge shall 

be computed for the actual number of 

calendar days involved beginning on the 

due date and ending on—

(i) The date on which the designated 

office receives payment from the 

contractor; 

(ii) 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 

(iii) The date on which an amount 

withheld and applied to the contract 

debt would otherwise have become 

payable to the contractor. 

(b) If not already applicable under the 

contract terms, interest on contract debt 

shall be made an element of any 

agreement entered into on installment 

payment and deferment of collection 

agreements. 

32.608–2 Interest credits. 

(a) An equitable interest credit shall 

be applied under the following 

circumstances: 

(1) When the amount of debt initially 

determined is subsequently reduced; 

e.g., through a successful appeal. 

(2) When the collection procedures 

followed in a given case result in an 

over collection of the debt due. 

(3) When the responsible official 

determines that the Government has 

unduly delayed payments to the 

contractor on the same contract at some 

time during the period to which the 

interest charge applied, provided an 

interest penalty was not paid for such 

late payment. 

(b) Any appropriate interest credits 

shall be computed under the following 

procedures: 

(1) Interest at the rate under paragraph 

(b) of the FAR clause at 52.232–17 and 

32.608–1(a)(2) shall be charged on the 

reduced debt from the date specified in 

the first demand made for payment of 

the higher debt. 

(2) Interest may not be reduced for 

any time between the due date under 

the demand and the period covered by 

a deferment of collection, unless the 

contract includes an interest clause; e.g., 

the clause prescribed in 32.611. 

(3) Interest shall not be credited in an 

amount that, when added to other 

amounts refunded or released to the 

contractor, exceeds the total amount 

that has been collected, or withheld for 

the purpose of collecting the debt. This 

limitation shall be further reduced by 

the amount of any limitation applicable 

under paragraph (b)(2) of this 

subsection. 

32.609 Delays in receipt of notices or 

demands. 

If interest is accrued based on the date 

of the demand letter and delivery of the 

demand letter is delayed by the 

Government (e.g., undue delay after 

dating at the originating office or delays 

in the mail), the date of the debt and 

accrual of interest shall be extended to 

a time that is fair and reasonable under 

the particular circumstances. 

32.610 Compromising debts. 

For debts under $100,000, excluding 

interest, if further collection is not 

practicable or would cost more than the 

amount of recovery, the designated 

agency official may compromise the 

debt. Compromise is authorized by the 

Federal Claims Collection Act (31 U.S.C. 

3711). Compromise shall conform to 

Federal Claims Collection Standards 31 

CFR part 900), and agency regulations. 

Unless specifically authorized by 

agency procedures, contracting officers 

can not compromise debts. 

32.611 Contract clause. 

(a) The contracting officer shall insert 

the clause at 52.232-17, Interest, in 

solicitations and contracts unless it is 

contemplated that the contract will be 


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62236 Federal Register / Vol. 71, No. 205 / Tuesday, October 24, 2006 / Proposed Rules 

in one or more of the following 

categories: 

(1) Contracts at or below the 

simplified acquisition threshold. 

(2) Contracts with Government 

agencies. 

(3) Contracts with a State or local 

government or instrumentality. 

(4) Contracts with a foreign 

government or instrumentality. 

(5) Contracts without any provision 

for profit or fee with a nonprofit 

organization. 

(6) Contracts described in Subpart 5.5, 

Paid Advertisements. 

(7) Any other exceptions authorized 

under agency procedures. 

(b) The contracting officer may insert 

the FAR clause at 52.232–17, Interest, in 

solicitations and contracts when it is 

contemplated that the contract will be 

in any of the categories specified in 

32.611(a). 

PART 33—PROTESTS, DISPUTES, 

AND APPEALS 

33.208 [Amended] 

6. Amend section 33.208(b) by 

removing ‘‘32.614’ and adding ‘‘32.608’’

in its place. 

33.211 [Amended] 

7. Amend section 33.211(a)(vi)by 

removing ‘‘32.610(b)’’ and adding 

‘‘32.604 and 32.605’’ in its place. 

PART 36—CONSTRUCTION AND 

ARCHITECT-ENGINEER CONTRACTS 

36.608 [Amended] 

8. Amend section 36.608 in the fourth 

sentence by removing ‘‘collect’’ and 

adding ‘‘issue a demand for payment of 

the amount due’’ in its place. 

PART 42—CONTRACT 

ADMINISTRATION AND AUDIT 

SERVICES 

9. Amend section 42.302 by revising 

paragraph (a)(17) to read as follows: 

42.302 Contract administration functions. 

(a) * * * 

(17) Analyze quarterly limitation on 

payments statements and take action in 

accordance with Subpart 32.6 to recover 

overpayments from the contractor. 

* * * * * 

PART 52—SOLICITATION PROVISIONS 

AND CONTRACT CLAUSES 

10. Amend section 52.212–4 by 

revising the date of the clause and 

paragraph (i)(5); and adding paragraph 

(i)(6) to read as follows: 

52.212–4 Contract Terms and 

Conditions—Commercial Items. 

* * * * * 

CONTRACT TERMS AND CONDITIONS—

COMMERCIAL ITEMS–(DATE) 

* * * * * 

(i) * * * 

(5) Overpayments. If the Contractor 

becomes aware of a duplicate contract 

financing or invoice payment or that the 

Government has otherwise overpaid on 

a contract financing or invoice payment, 

the Contractor shall take the following 

actions: 

(i) Remit the overpayment amount to 

the payment office cited in the contract 

along with a description of the 

overpayment including the—

(A) Circumstances of the overpayment 

(e.g., duplicate payment, erroneous 

payment, liquidation errors, date(s) of 

overpayment); 

(B) Affected contract number and 

delivery order number if applicable; 

(C) Affected contract line item or 

subline item, if applicable; and 

(D) Contractor point of contact. 

(ii) Provide a copy of the remittance 

and supporting documentation to the 

Contracting Officer. 

(6) Interest. (i) 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 

Section 611 of the Contract Disputes Act 

of 1978 (Public Law 95–563), which is 

applicable to the period in which the 

amount becomes due, as provided in 

paragraph (b) of this clause and then at 

the rate applicable for each six-month 

period as fixed by the Secretary until 

the amount is paid. 

(ii) Amounts shall be due at the 

earliest of the following dates: 

(A) The date fixed under this contract. 

(B) The date of the first written 

demand for payment consistent with 

this contract, including any demand for 

payment resulting from a default 

termination. 

(iii) The interest charge shall be 

computed for the actual number of 

calendar days involved beginning on the 

due date and ending on—

(A) The date on which the designated 

office receives payment from the 

Contractor; 

(B) 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 

(C) The date on which an amount 

withheld and applied to the contract 

debt would otherwise have become 

payable to the Contractor. 

(iv) 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. 

* * * * * 

11. Revise section 52.232–17 to read 

as follows: 

52.232–17 Interest. 

As prescribed in 32.611(a) and (b), 

insert the following clause: 

INTEREST (DATE) 

(a) Except as otherwise provided in 

this contract under a Price Reduction for 

Defective 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 Section 611 of 

the Contract Disputes Act of 1978 

(Public Law 95–563), which is 

applicable to the period in which the 

amount becomes due, as provided in 

paragraph (b) 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) 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 consistent with 

this contract, including any demand for 

payment resulting from a default 

termination. 

(c) 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. 

(d) 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. 

12. Amend section 52.232–25 by 

revising the date of the clause and 

paragraph (d) to read as follows: 

52.232–25 Prompt Payment. 

* * * * * 

PROMPT PAYMENT (DATE) 

* * * * * 


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(d) Overpayments. If the Contractor 

becomes aware of a duplicate contract 

financing or invoice payment or that the 

Government has otherwise overpaid on 

a contract financing or invoice payment, 

the Contractor shall—

(1) Remit the overpayment amount to 

the payment office cited in the contract 

along with a description of the 

overpayment including the—

(i) Circumstances of the overpayment 

(e.g., duplicate payment, erroneous 

payment, liquidation errors, date(s) of 

overpayment); 

(ii) Affected contract number and 

delivery order number if applicable; 

(iii) Affected contract line item or 

subline item, if applicable; and 

(iv) Contractor point of contact. 

(2) Provide a copy of the remittance 

and supporting documentation to the 

Contracting Officer. 

(End of clause) 

13. Amend section 52.232–26 by 

revising the date of the clause and 

paragraph (c) to read as follows: 

52.232–26 Prompt Payment for Fixed-Price 

Architect-Engineer Contracts. 

* * * * * 

PROMPT PAYMENT FOR FIXED-PRICE 

ARCHITECT-ENGINEER CONTRACTS 

(DATE) 

* * * * * 

(c) Overpayments. If the Contractor 

becomes aware of a duplicate contract 

financing or invoice payment or that the 

Government has otherwise overpaid on 

a contract financing or invoice payment, 

the Contractor shall—

(1) Remit the overpayment amount to 

the payment office cited in the contract 

along with a description of the 

overpayment including the—

(i) Circumstances of the overpayment 

(e.g., duplicate payment, erroneous 

payment, liquidation errors, date(s) of 

overpayment); 

(ii) Affected contract number and 

delivery order number if applicable; 

(iii) Affected contract line item or 

subline item, if applicable; and 

(iv) Contractor point of contact. 

(2) Provide a copy of the remittance 

and supporting documentation to the 

Contracting Officer. 

(End of clause) 

14. Amend section 52.232–27 by 

revising the date of the clause and 

paragraph (l) to read as follows: 

52.232–27 Prompt Payment for 

Construction Contracts. 

* * * * * 

PROMPT PAYMENT FOR CONSTRUCTION 

CONTRACTS (DATE) 

* * * * * 

(l) Overpayments. If the Contractor 

becomes aware of a duplicate contract 

financing or invoice payment or that the 

Government has otherwise overpaid on 

a contract financing or invoice payment, 

the Contractor shall—

(1) Remit the overpayment amount to 

the payment office cited in the contract 

along with a description of the 

overpayment including the—

(i) Circumstances of the overpayment 

(e.g., duplicate payment, erroneous 

payment, liquidation errors, date(s) of 

overpayment); 

(ii) Affected contract number and 

delivery order number if applicable; 

(iii) Affected contract line item or 

subline item, if applicable; and 

(iv) Contractor point of contact. 

(2) Provide a copy of the remittance 

and supporting documentation to the 

Contracting Officer. 

(End of clause) 

[FR Doc. 06–8806 Filed 10–23–06; 8:45 am] 

BILLING CODE 6820–EP–S 


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