Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Rules and Regulations 12705

C. Paperwork Reduction Act

The Paperwork Reduction Act does

not apply because the changes to the

FAR do not impose recordkeeping or

information collection requirements, or

collections of information from offerors,

contractors, or members of the public

which 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 31

Government procurement.

Dated: March 7, 1997.

Edward C. Loeb,

Director, Federal Acquisition Policy Division.

Therefore, 48 CFR Part 31 is amended

as set forth below:

PART 31—CONTRACT COST

PRINCIPLES AND PROCEDURES

1. The authority citation for 48 CFR

Part 31 continues to read as follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C.

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

2. Section 31.205–18(e) is revised to

read as follows:

31.205–18 Independent research and

development and bid and proposal costs.

* * * * *

(e) Cooperative arrangements. (1)

IR&D costs may be incurred by

contractors working jointly with one or

more non-Federal entities pursuant to a

cooperative arrangement (for example,

joint ventures, limited partnerships,

teaming arrangements, and

collaboration and consortium

arrangements). IR&D costs also may

include costs contributed by contractors

in performing cooperative research and

development agreements, or similar

arrangements, entered into under—

(i) Section 12 of the StevensonWydler Technology Transfer Act of

1980 (15 U.S.C. 3710(a));

(ii) Sections 203(c) (5) and (6) of the

National Aeronautics and Space Act of

1958, as amended (42 U.S.C. 2473(c) (5)

and (6));

(iii) 10 U.S.C. 2371 for the Defense

Advanced Research Projects Agency; or

(iv) Other equivalent authority.

(2) IR&D costs incurred by a

contractor pursuant to these types of

cooperative arrangements should be

considered as allowable IR&D costs if

the work performed would have been

allowed as contractor IR&D had there

been no cooperative arrangement.

[FR Doc. 97–6318 Filed 3–14–97; 8:45 am]

BILLING CODE 6820–EP–P

DEPARTMENT OF DEFENSE

GENERAL SERVICES

ADMINISTRATION

NATIONAL AERONAUTICS AND

SPACE ADMINISTRATION

48 CFR Parts 32 and 52

[FAC 90–46; FAR Case 91–091; Item X]

RIN 9000–AF61

Federal Acquisition Regulation;

Prompt Payment

AGENCIES: Department of Defense (DOD),

General Services Administration (GSA),

and National Aeronautics and Space

Administration (NASA).

ACTION: Final rule.

SUMMARY: The Civilian Agency

Acquisition Council and the Defense

Acquisition Regulations Council have

agreed on a final rule amending the

Federal Acquisition Regulation (FAR) to

incorporate changes required by the

Prompt Payment Act Amendments of

1988. This regulatory action was not

subject to Office of Management and

Budget (OMB) review under Executive

Order 12866, dated September 30, 1993,

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

804.

EFFECTIVE DATE: May 16, 1997.

FOR FURTHER INFORMATION CONTACT: Mr.

Jeremy Olson at (202) 501–3221 in

reference to this FAR case. For general

information, contact the FAR

Secretariat, Room 4035, GS Building,

Washington, DC 20405, (202) 501–4755.

Please cite FAC 90–46, FAR case 91–

091.

SUPPLEMENTARY INFORMATION:

A. Background

Federal Acquisition Circular (FAC)

84–45 contained a final rule which was

published in the Federal Register at 54

FR 13332, March 31, 1989, to

incorporate changes required by the

Prompt Payment Act Amendments of

1988 (Public Law 100–496). OMB

implemented the statutory requirements

by revising OMB Circular A–125,

Prompt Payment. The OMB Circular

was published as a final rule in the

Federal Register on December 21, 1989,

and became effective 30 days after

publication. OMB’s final guidance

differed somewhat from earlier

proposed coverage which served as the

basis for the FAR changes published in

FAC 84–45. This final rule amends the

FAR to reflect the changes in the OMB

circular.

A proposed FAR rule to implement

the guidance published in OMB Circular

A–125 (Revised) was published in the

Federal Register at 59 FR 23776, May 6,

1994. Ten sources submitted public

comments. These comments were

considered in developing the final rule.

B. Regulatory Flexibility Act

A Final Regulatory Flexibility

Analysis (FRFA) has been performed. A

copy of the FRFA may be obtained from

the FAR Secretariat. The FRFA is

summarized as follows:

The need for, and the objectives of, the

final rule, are to implement changes made in

Office of Management and Budget (OMB)

Circular A–125 (Revised), dated December

12, 1989, to comply with the Prompt

Payment Act Amendments of 1988 (Public

Law 100–496). The Prompt Payment Act, as

amended, requires Executive departments

and agencies to make payments on time, to

pay interest penalties when payments are

late, and to take discounts only when

payments are made on or before the discount

date. We did not receive any public

comments in response to the Initial

Regulatory Flexibility Analysis. This rule

will apply to all small entities that are

awarded Government contracts, except

contracts with payment terms and late

payment penalties established by other

Governmental authority (e.g., tariffs). The

rule will also apply to all small entities that

enter into construction contracts with

contractors holding prime Federal

construction contracts. To date, no

supporting data has been collected; therefore,

there is no available estimate of the number

of small businesses that will be subject to the

rule. The Federal Procurement Data System

Federal Procurement Report for Fiscal Year

(FY) 1995 states that 203,241 awards and

contract modifications valued at more than

$25,000 were placed with small entities in

FY 1995. However, information is not

available as to the number of small entities

that received these awards, the number of

small entities that receive awards not subject

to this rule, or the number of small entities

that enter into construction contracts with

contractors holding prime Federal

construction contracts. The corresponding

information for actions valued at $25,000 or

less is also not available. There are no

significant alternatives that could accomplish

the objectives of this rule.

C. Paperwork Reduction Act

The Paperwork Reduction Act does

not apply because the changes to the

FAR do not impose recordkeeping or

information collection requirements, or

collections of information from offerors,

contractors, or members of the public

which 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 32 and

52

Government procurement.
12706 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Rules and Regulations

Dated: March 7, 1997.

Edward C. Loeb,

Director, Federal Acquisition Policy Division.

Therefore, 48 CFR Parts 32 and 52 are

amended as set forth below:

1. The authority citation for 48 CFR

Parts 32 and 52 continues to read as

follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C.

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

PART 32—CONTRACT FINANCING

2. Section 32.102 is amended by

revising paragraph (d) to read as

follows:

32.102 Description of contract financing

methods.

* * * * *

(d) Partial payments for accepted

supplies and services that are only a

part of the contract requirements are

authorized under 41 U.S.C. 255 and 10

U.S.C. 2307. Office of Management and

Budget Circular A–125, Prompt

Payment, requires agencies to pay for

partial delivery of supplies or partial

performance of services unless

specifically prohibited by the contract.

Although partial payments generally are

treated as a method of payment and not

as a method of contract financing, using

partial payments can assist contractors

to participate in Government contracts

without, or with minimal, contract

financing. When appropriate, contract

statements of work and pricing

arrangements shall be designed to

permit acceptance and payment for

discrete portions of the work, as soon as

accepted (but see 32.903(f)(2)).

* * * * *

3. Section 32.902 is amended by

revising the definitions of ‘‘Day’’,

‘‘Designated billing office’’, and

‘‘Discount for prompt payment’’; and by

adding a definition of ‘‘Invoice’’ to read

as follows:

32.902 Definitions.

* * * * *

Day, as used in this subpart, means

calendar day, including weekends and

holidays, unless otherwise indicated.

(However, see 32.903(e)(3) concerning

payments due on Saturdays, Sundays,

and legal holidays.)

Designated billing office, as used in

this subpart, means the office or person

(governmental or nongovernmental)

designated in the contract where the

contractor first submits invoices and

contract financing requests. This might

be the Government disbursing office,

contract administration office, office

accepting the supplies delivered or

services performed by the contractor,

contract audit office, or a

nongovernmental agent. In some cases,

different offices might be designated to

receive invoices and contract financing

requests.

* * * * *

Discount for prompt payment means

an invoice payment reduction

voluntarily offered by the contractor, in

conjunction with the clause at 52.232–

8, Discounts for Prompt Payment, if

payment is made by the Government

prior to the due date. The due date is

calculated from the date of the

contractor’s invoice. If the contractor

has not placed a date on the invoice, the

due date is calculated from the date the

designated billing office receives a

proper invoice, provided the agency

annotates such invoice with the date of

receipt at the time of receipt. When the

discount date falls on a Saturday,

Sunday, or legal holiday when Federal

Government offices are closed and

Government business is not expected to

be conducted, payment may be made on

the following business day and a

discount may be taken.

* * * * *

Invoice means a contractor’s bill or

written request for payment under the

contract for supplies delivered or

services performed.

* * * * *

4. Sections 32.903, 32.904, and 32.905

are revised to read as follows:

32.903 Policy.

(a) All solicitations and contracts

subject to this subpart shall specify

payment procedures, payment due

dates, and interest penalties for late

invoice payment.

(b) The Government shall not make

invoice and contract financing

payments earlier than 7 days prior to the

due dates specified in the contract

unless the agency head, or designee,

determines to make earlier payment on

a case-by-case basis (see 32.908 for

required clauses).

(c) Payment will be based on receipt

of a proper invoice or contract financing

request and satisfactory contract

performance.

(d) Agency procedures shall ensure

that, when specifying due dates, full

consideration is given to the time

reasonably required by Government

officials to fulfill their administrative

responsibilities under the contract.

(e)(1) Checks shall be mailed on the

same day they are dated.

(2) For payments made by electronic

funds transfer, the date specified by the

Government (see 32.902 for definition of

‘‘specified payment date’’) for

settlement of the payment at a Federal

Reserve Bank shall be on or before the

established due date.

(3) When the due date falls on a

Saturday, Sunday, or legal holiday

when Federal Government offices are

closed and Government business is not

expected to be conducted, payment may

be made on the following business day

without incurring a late payment

interest penalty.

(f)(1) Contracting officers shall, where

the nature of the work permits, write

contract statements of work and pricing

arrangements that allow contractors to

deliver, and receive invoice payments

for, discrete portions of the work as

soon as completed and found acceptable

by the Government (see 32.102(d)).

(2) Unless specifically prohibited by

the contract, the contractor is entitled to

payment for accepted partial deliveries

of supplies or partial performance of

services that comply with all applicable

contract requirements and for which

prices can be calculated from the

contract terms.

(3) Under some types of contracts,

such as many cost-reimbursement

contracts, partial payments cannot be

made because the invoice price cannot

be determined until after settlement of

total contract costs and other contractwide final arrangements. However,

interim payments or contract financing

payments may be made in accordance

with the terms of the contract.

(g) Discounts for prompt payment

offered by the contractor shall be taken

only when payments are made within

the discount period specified by the

contractor.

(h) Agencies shall pay an interest

penalty, without request from the

contractor, for late invoice payments or

improperly taken discounts for prompt

payment. The temporary unavailability

of funds to make a timely payment does

not relieve an agency from the

obligation to pay interest penalties or

the additional interest penalties

discussed in paragraph (i) of this section

and paragraph (g) of 32.907–1.

(i) For contracts awarded after

October 1, 1989, if the interest penalty

is not paid within 10 days after it is due

and the contractor makes a written

demand for payment within 40 days

after payment of the principal amount

due, agencies shall pay an additional

penalty amount, which shall be

calculated in accordance with 32.907–

1(g).

(j) If the contractor has assigned a

contractor identifier (such as an invoice

number) to an invoice or financing

request, each payment or remittance

advice shall use the contractor identifier

(in addition to any Government or

contract information) in describing any

payment made.
Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Rules and Regulations 12707

(k) For payments made by electronic

funds transfer, the specified payment

date, included in the Government’s

order to pay the contractor, is the date

of payment for prompt payment

purposes, whether or not the Federal

Reserve System actually makes the

payment by that date, and whether or

not the contractor’s financial agent

credits the contractor’s account on that

date. However, a specified payment date

must be a valid date under the rules of

the Federal Reserve System. For

example, if the Federal Reserve System

requires 2 days’ notice before a specified

payment date to process a transaction,

release of a payment transaction

instruction to the Federal Reserve Bank

1 day before the specified payment date

could not constitute a valid date under

the rules of the Federal Reserve System.

32.904 Responsibilities.

(a) Agency heads—

(1) Shall establish the policies and

procedures necessary to implement this

subpart;

(2) May prescribe additional

standards for establishing due dates on

invoice payments (see 32.905) and

contract financing payments (see

32.906) necessary to support agency

programs and foster prompt payment to

contractors;

(3) May adopt different payment

procedures in order to accommodate

unique circumstances, provided that

such procedures are consistent with the

policies set forth in this subpart; and

(4) Shall inform contractors of points

of contact within their cognizant

payment offices to enable contractors to

obtain status of invoices.

(b) Contracting officers, in drafting

solicitations and contracts, shall

identify for each contract line item

number, subline item number, or exhibit

line item number—

(1) Which of the applicable Prompt

Payment clauses applies to each item

when the solicitation or contract

contains items that will be subject to

different payment terms; and

(2) The applicable Prompt Payment

food category (e.g., which item numbers

are meat or meat food products, which

are perishable agricultural

commodities), when the solicitation or

contract contains multiple payment

terms for various classes of foods and

edible products.

32.905 Invoice payments.

(a) General. Except as prescribed in

paragraphs (b), (c), and (d) of this

section, the due date for making an

invoice payment by the designated

payment office shall be as follows:

(1) The 30th day after the designated

billing office has received a proper

invoice from the contractor (except as

provided in paragraph (a)(2) of this

section); or the 30th day after

Government acceptance of supplies

delivered or services performed by the

contractor, whichever is later.

(i) On a final invoice where the

payment amount is subject to contract

settlement actions, acceptance shall be

deemed to have occurred on the

effective date of the contract settlement.

(ii) For the sole purpose of computing

an interest penalty that might be due the

contractor, Government acceptance

shall be deemed to have occurred

constructively on the 7th day after the

contractor has delivered supplies or

performed services in accordance with

the terms and conditions of the contract,

unless there is a disagreement over

quantity, quality, or contractor

compliance with a contract requirement.

In the event that actual acceptance

occurs within the constructive

acceptance period, the determination of

an interest penalty shall be based on the

actual date of acceptance. The

constructive acceptance requirement

does not, however, compel Government

officials to accept supplies or services,

perform contract administration

functions, or make payment prior to

fulfilling their responsibilities. Except

in the case of a contract for the purchase

of a commercial item as defined in

2.101, including a brand-name

commercial item for authorized resale

(e.g., commissary items), the contracting

officer may specify a longer period for

constructive acceptance in the

solicitation and resulting contract, if

required to afford the Government a

reasonable opportunity to inspect and

test the supplies furnished or to

evaluate the services performed. The

contract file shall indicate the

justification for extending the

constructive acceptance period beyond

7 days. Extended acceptance periods

shall not be a routine agency practice

but shall be used only when necessary

to permit proper Government inspection

and testing of the supplies delivered or

services performed.

(iii) If the contract does not require

submission of an invoice for payment

(e.g., periodic lease payments), the due

date will be as specified in the contract.

(2) If the designated billing office fails

to annotate the invoice with the actual

date of receipt at the time of receipt, the

invoice payment due date shall be the

30th day after the date of the contractor’s

invoice, provided a proper invoice is

received and there is no disagreement

over quantity, quality, or contractor

compliance with contract requirements.

(b) Architect-engineer contracts. The

due date for making payments on

contracts that contain the clause at

52.232–10, Payments Under Fixed-Price

Architect-Engineer Contracts, shall be as

follows:

(1) The due date for work or services

completed by the contractor shall be the

later of the following two events:

(i) The 30th day after the designated

billing office has received a proper

invoice from the contractor.

(ii) The 30th day after Government

acceptance of the work or services

completed by the contractor. On a final

invoice where the payment amount is

subject to contract settlement actions

(e.g., release of claims), acceptance shall

be deemed to have occurred on the

effective date of the settlement. For the

sole purpose of computing an interest

penalty that might be due the

contractor, Government acceptance

shall be deemed to have occurred

constructively on the 7th day after the

contractor has completed the work or

services in accordance with the terms

and conditions of the contract (see also

paragraph (b)(4) of this section). In the

event that actual acceptance occurs

within the constructive acceptance

period, the determination of an interest

penalty shall be based on the actual date

of acceptance.

(2) The due date for progress

payments shall be the 30th day after

Government approval of contractor

estimates of work or services

accomplished. For the sole purpose of

computing an interest penalty that

might be due the contractor,

Government approval shall be deemed

to have occurred constructively on the

7th day after contractor estimates have

been received by the designated billing

office (see also paragraph (b)(4) of this

section). In the event that actual

approval occurs within the constructive

approval period, the determination of an

interest penalty shall be based on the

actual date of approval.

(3) If the designated billing office fails

to annotate the invoice or payment

request with the actual date of receipt at

the time of receipt, the payment due

date shall be the 30th day after the date

of the contractor’s invoice or payment

request, provided a proper invoice or

payment request is received and there is

no disagreement over quantity, quality,

or contractor compliance with contract

requirements.

(4) The constructive acceptance and

constructive approval requirements

described in paragraphs (b)(1) and (b)(2)

of this section are conditioned upon

receipt of a proper payment request and

no disagreement over quantity, quality,

contractor compliance with contract
12708 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Rules and Regulations

requirements, or the requested progress

payment amount. These requirements

do not compel Government officials to

accept work or services, approve

contractor estimates, perform contract

administration functions, or make

payment prior to fulfilling their

responsibilities. The contracting officer

may specify a longer period for

constructive acceptance or constructive

approval, if required to afford the

Government a reasonable opportunity to

inspect and test the supplies furnished

or to evaluate the services performed.

(c) Construction contracts. (1) The

due date for making payments on

construction contracts shall be as

follows:

(i) The due date for making progress

payments based on contracting officer

approval of the estimated amount and

value of work or services performed,

including payments for reaching

milestones in any project, shall be 14

days after receipt of a proper payment

request by the designated billing office.

If the designated billing office fails to

annotate the payment request with the

actual date of receipt at the time of

receipt, the payment due date shall be

deemed to be the 14th day after the date

of the contractor’s payment request,

provided a proper payment request is

received and there is no disagreement

over quantity, quality, or contractor

compliance with contract requirements.

The contracting officer may specify a

longer period in the solicitation and

resulting contract if required to afford

the Government a reasonable

opportunity to adequately inspect the

work and to determine the adequacy of

the contractor’s performance under the

contract. The contract file shall indicate

the justification for extending the due

date beyond 14 days. The contracting

officer or a representative shall not

approve progress payment requests

unless the certification and

substantiation of amounts requested are

provided as required by the clause at

52.232–5, Payments Under Fixed-Price

Construction Contracts.

(ii) The due date for payment of any

amounts retained by the contracting

officer in accordance with the clause at

52.232–5, Payments Under Fixed-Price

Construction Contracts, shall be as

specified in the contract or, if not

specified, 30 days after approval by the

contracting officer for release to the

contractor. This release of retained

amounts shall be based on the

contracting officer’s determination that

satisfactory progress has been made.

(iii) The due date for final payments

based on completion and acceptance of

all work (including any retained

amounts), and payments for partial

deliveries that have been accepted by

the Government (e.g., each separate

building, public work, or other division

of the contract for which the price is

stated separately in the contract) shall

be as follows:

(A) Either the 30th day after receipt by

the designated billing office of a proper

invoice from the contractor, or the 30th

day after Government acceptance of the

work or services completed by the

contractor, whichever is later. If the

designated billing office fails to annotate

the invoice with the actual date of

receipt at the time of receipt, the invoice

payment due date shall be deemed to be

the 30th day after the date of the

contractor’s invoice, provided a proper

invoice is received and there is no

disagreement over quantity, quality, or

contractor compliance with contract

requirements.

(B) On a final invoice where the

payment amount is subject to contract

settlement actions (e.g., release of

contractor claims), acceptance shall be

deemed to have occurred on the

effective date of the contract settlement.

(iv) For the sole purpose of computing

an interest penalty that might be due the

contractor for payments described in

paragraph (c)(1)(iii)(A) of this section,

Government acceptance or approval

shall be deemed to have occurred

constructively on the 7th day after the

contractor has completed the work or

services in accordance with the terms

and conditions of the contract (see also

paragraph (c)(1)(v) of this section). In

the event that actual acceptance occurs

within the constructive acceptance

period, the determination of an interest

penalty shall be based on the actual date

of acceptance.

(v) The constructive acceptance and

constructive approval requirements

described in paragraph (c)(1)(iv) of this

section are conditioned upon receipt of

a proper payment request and no

disagreement over quantity, quality,

contractor compliance with contract

requirements, or the requested amount.

These requirements do not compel

Government officials to accept work or

services, approve contractor estimates,

perform contract administration

functions, or make payment prior to

fulfilling their responsibilities. The

contracting officer may specify a longer

period for constructive acceptance or

constructive approval in the solicitation

and resulting contract, if required to

afford the Government a reasonable

opportunity to adequately inspect the

work and to determine the adequacy of

the contractor’s performance under the

contract.

(2) Construction contracts contain

special provisions concerning contractor

payments to subcontractors, along with

special contractor certification

requirements. The Office of

Management and Budget has

determined that these certifications are

not to be construed as final acceptance

of the subcontractor’s performance. The

certification in 52.232–5(c) implements

this determination; however, certificates

are still acceptable if the contractor

deletes paragraph (c)(4) of 52.232–5

from the certificate.

(3)(i) Paragraph (d) of the clause at

52.232–5, Payments under Fixed-Price

Construction Contracts, and paragraph

(e)(6) of the clause at 52.232–27, Prompt

Payment for Construction Contracts,

provide for the contractor to pay interest

on unearned amounts in certain

circumstances. This interest shall be

recovered from subsequent payments to

the contractor. Therefore, normally no

demand for payment shall be made.

Contracting officers shall—

(A) Compute the amount in

accordance with the clause;

(B) Provide the contractor with a final

decision; and

(C) Notify the payment office of the

amount to be withheld.

(ii) The payment office shall be

responsible for making the deduction of

interest. Amounts collected in

accordance with these provisions shall

revert to the Treasury of the United

States.

(d) Food and specified items. Due

dates for payments of contractor

invoices for meat, meat food products,

or fish; perishable agricultural

commodities; and dairy products, edible

fats or oils, and food products prepared

from edible fats or oils are as follows:

(1) For meat or meat food products, as

defined in section 2(a)(3) of the Packers

and Stockyard Act of 1921 (7 U.S.C.

182(3)), and as further defined in Public

Law 98–181, including any edible fresh

or frozen poultry meat, any perishable

poultry meat food product, fresh eggs,

and any perishable egg product, as close

as possible to, but not later than, the 7th

day after product delivery.

(2) For fresh or frozen fish, as defined

in section 204(3) of the Fish and

Seafood Promotion Act of 1986 (16

U.S.C. 4003(3)), as close as possible to,

but not later than, the 7th day after

product delivery.

(3) For perishable agricultural

commodities, as defined in section 1(4)

of the Perishable Agricultural

Commodities Act of 1930 (7 U.S.C.

499a(4)), as close as possible to, but not

later than, the 10th day after product

delivery, unless another date is

specified in the contract.

(4) For dairy products (as defined in

section 111(e) of the Dairy Production
Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Rules and Regulations 12709

Stabilization Act of 1983 (7 U.S.C.

4502(e)), edible fats or oils, and food

products prepared from edible fats or

oils, as close as possible to, but not later

than, the 10th day after the date on

which a proper invoice has been

received. Liquid milk, cheese, certain

processed cheese products, butter,

yogurt, ice cream, mayonnaise, salad

dressings, and other similar products,

fall within this classification. Nothing in

the Act limits this classification to

refrigerated products. When questions

arise regarding the proper classification

of a specific product, prevailing

industry practices should be followed in

specifying a contract payment due date.

The burden of proof that a classification

of a specific product is, in fact,

prevailing industry practice is upon the

contractor making the representation.

(e) Content of invoices. A proper

invoice must include the items listed in

paragraphs (e)(1) through (e)(8) of this

section. If the invoice does not comply

with these requirements, it shall be

returned within 7 days after the date the

designated billing office received the

invoice (3 days on contracts for meat,

meat food products, or fish; 5 days on

contracts for perishable agricultural

commodities, dairy products, edible fats

or oils, and food products prepared from

edible fats or oils), with a statement of

the reasons why it is not a proper

invoice. If such notice is not timely,

then an adjusted due date for the

purpose of determining an interest

penalty, if any, will be established in

accordance with 32.907–1(b):

(1) Name and address of the

contractor.

(2) Invoice date. (Contractors are

encouraged to date invoices as close as

possible to the date of mailing or

transmission.)

(3) Contract number or other

authorization for supplies delivered or

services performed (including order

number and contract line item number).

(4) Description, quantity, unit of

measure, unit price, and extended price

of supplies delivered or services

performed.

(5) Shipping and payment terms (e.g.,

shipment number and date of shipment,

prompt payment discount terms). Bill of

lading number and weight of shipment

will be shown for shipments on

Government bills of lading.

(6) Name and address of contractor

official to whom payment is to be sent

(must be the same as that in the contract

or in a proper notice of assignment).

(7) Name (where practicable), title,

phone number, and mailing address of

person to be notified in the event of a

defective invoice.

(8) Any other information or

documentation required by the contract

(such as evidence of shipment).

(9) While not required, contractors are

strongly encouraged to assign an

identification number to each invoice.

(f) Authorization to pay. All invoice

payments shall be supported by a

receiving report or any other

Government documentation authorizing

payment. The agency receiving official

should forward the receiving report or

other Government documentation to the

designated payment office by the 5th

working day after Government

acceptance or approval, unless other

arrangements have been made. This

period of time does not extend the due

dates prescribed in this section.

Acceptance should be completed as

expeditiously as possible. The receiving

report or other Government

documentation authorizing payment

shall, as a minimum, include the

following:

(1) Contract number or other

authorization for supplies delivered or

services performed.

(2) Description of supplies delivered

or services performed.

(3) Quantities of supplies received

and accepted or services performed, if

applicable.

(4) Date supplies delivered or services

performed.

(5) Date supplies or services were

accepted by the designated Government

official (or progress payment request

was approved if being made under the

clause at 52.232–5, Payments Under

Fixed-Price Construction Contracts, or

the clause at 52.232–10, Payments

Under Fixed-Price Architect-Engineer

Contracts).

(6) Signature, or when permitted by

agency regulations, electronic

equivalent, printed name, title, mailing

address, and telephone number of the

designated Government official

responsible for acceptance or approval

functions.

(7) If the contract provides for the use

of Government certified invoices in lieu

of a separate receiving report, the

Government certified invoice also must

contain the information described in

paragraphs (f)(1) through (f)(6) of this

section.

(g) Discounts. When a discount for

prompt payment is to be taken, payment

will be made as close as possible to, but

not later than, the end of the discount

period. Payment terms are specified in

the clause at 52.232–8, Discounts for

Prompt Payment.

(h) Billing office. The designated

billing office shall immediately annotate

each invoice with the actual date it

receives the invoice.

(i) Payment office. The designated

payment office shall annotate each

invoice and receiving report with the

date a proper invoice or receiving report

was received by the designated payment

office.

(j) Multiple payment rates.

Contractors may be encouraged, but

cannot be required, to submit separate

invoices for products with different

payment due dates under the same

contract or order. When an invoice is

received that contains items with

different payment periods (a mixed

invoice), the payment office shall

comply with all contractual and

statutory payment provisions. In dealing

with mixed invoices the payment office

may, subject to agency policy—

(1) Pay all items at the later of the due

dates, provided applicable interest

penalties also are paid;

(2) Pay all items at the earlier of the

due dates; or

(3) Split invoice payments, making

payment by the due date applicable to

each payment class.

5. Section 32.906 is amended by

revising the first sentence of paragraph

(a) to read as follows:

32.906 Contract financing payments.

(a) Unless otherwise prescribed in

policies and procedures issued by the

agency head, or designee, the due date

for making contract financing payments

by the designated payment office will be

the 30th day after the designated billing

office has received a proper request.

* * *

* * * * *

6. Section 32.907–1 is amended by

revising paragraphs (a), (b), (d), and (g)

to read as follows:

32.907–1 Late invoice payment.

(a) An interest penalty shall be paid

automatically by the designated

payment office, without request from

the contractor, when all of the following

conditions, if applicable, have been met:

(1) A proper invoice was received by

the designated billing office.

(2) A receiving report or other

Government documentation authorizing

payment was processed, 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.

(b) The interest penalty computation

shall not include—

(1) The time taken by the Government

to notify the contractor of a defective
12710 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Rules and Regulations

invoice, unless it exceeds the periods

prescribed in 32.905(e);

(2) The time taken by the contractor

to correct the invoice. If the designated

billing office failed to notify the

contractor of a defective invoice within

the periods prescribed in 32.905(e), the

due date on the corrected invoice will

be adjusted by subtracting from such

date the number of days taken beyond

the prescribed notification of defects

period. Any interest penalty owed the

contractor will be based on this adjusted

due date; and

(3) The period between the date of an

attempted electronic funds transfer and

the date the contractor furnishes correct

electronic funds transfer data; provided

the Government notifies the contractor

of the defective data within 7 days after

the Government receives notice that the

transfer could not be completed because

of defective data.

* * * * *

(d) The interest penalty shall be at the

rate established by the Secretary of the

Treasury under section 12 of the

Contract Disputes Act of 1978 (41 U.S.C.

611) that is in effect on the day after the

due date, except where the interest

penalty is prescribed by other

governmental authority (e.g., tariffs).

The rate in effect on the day after the

due date shall remain fixed during the

period for which an interest penalty is

calculated. This rate is referred to as the

‘‘Renegotiation Board Interest Rate,’’

and it is published in the Federal

Register semiannually on or about

January 1 and July 1. Information

concerning this interest rate can be

obtained from the Department of the

Treasury, Financial Management

Service, Washington, DC 20227,

telephone (202) 874–6995. Interest

calculations shall be based upon a 360-

day year. The interest penalty shall

accrue daily on the invoice principal

payment amount approved by the

Government until the payment date of

such approved principal amount; and

will be compounded in 30-day

increments inclusive from the first day

after the due date through the payment

date. That is, interest accrued at the end

of any 30-day period will be added to

the approved invoice principal payment

amount and will be subject to interest

penalties if not paid in the succeeding

30-day period. The interest penalty

amount, the interest rate, and the period

for which the interest penalty was

computed, will be stated separately by

the designated payment office on the

check, in accompanying remittance

advice, or, for an electronic funds

transfer, by an appropriate electronic or

other remittance advice. Adjustments

will be made by the designated payment

office for errors in calculating interest

penalties.

* * * * *

(g)(1) For contracts awarded on or

after October 1, 1989, a penalty amount

(calculated in accordance with

subparagraph (g)(3) of this section) shall

be paid, in addition to the interest

penalty amount, only if the contractor—

(i) Is owed an interest penalty of $1

or more;

(ii) Is not paid the interest penalty

within 10 days after the date the invoice

amount is paid; and

(iii) Makes a written demand to the

designated payment office for additional

penalty payment in accordance with

paragraph (g)(2) of this section,

postmarked not later than 40 days after

the date the invoice amount is paid.

(2)(i) Contractors shall support

written demands for additional penalty

payments with the following data. No

additional data shall be required.

Contractors shall—

(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

was due; and

(C) State that payment of the principal

has been received, including the date of

receipt.

(ii) Demands must be postmarked on

or before the 40th day after payment was

made, except that—

(A) If the postmark is illegible or

nonexistent, the demand must have

been received and annotated with the

date of receipt by the designated

payment office on or before the 40th day

after payment was made; or

(B) If the postmark is illegible or

nonexistent and the designated payment

office fails to make the required

annotation, the demand’s validity will

be determined by the date the contractor

has placed on the demand; provided

such date is no later than the 40th day

after payment was made.

(3)(i) The additional penalty shall be

equal to 100 percent of any original late

payment interest penalty that is due on

or after January 22, 1990, except—

(A) For additional penalties due on or

before January 22, 1992, such penalties

shall not exceed $2,500;

(B) After January 22, 1992, the

additional penalty shall not exceed

$5,000;

(C) The additional penalty shall never

be less than $25; and

(D) No additional penalty is owed if

the amount of the underlying interest

penalty is less than $1.

(ii) If the interest penalty ceases to

accrue in accordance with the limits

stated in paragraphs (e)(1) and (e)(2) of

this section, the amount of the

additional penalty shall be calculated

on the amount of interest penalty that

would have accrued in the absence of

these limits, but shall not exceed the

limits specified in paragraph (g)(3)(i) of

this subsection.

(iii) For determining the maximum

and minimum additional penalties, the

test shall be the interest penalty due on

each separate payment made for each

separate contract. The maximum and

minimum additional penalty shall not

be based upon individual invoices

unless the invoices are paid separately.

Where payments are consolidated for

disbursing purposes, the maximum and

minimum additional penalty

determination shall be made separately

for each contract therein.

(iv) The additional penalty does not

apply to payments regulated by other

Government regulations (e.g., payments

under utility contracts subject to tariffs

and regulation).

7. Section 32.908 is revised to read as

follows:

§ 32.908 Contract clauses.

(a) The contracting officer shall insert

the clause at 52.232–26, Prompt

Payment for Fixed-Price ArchitectEngineer Contracts, in solicitations and

contracts that contain the clause at

52.232–10, Payments Under Fixed-Price

Architect-Engineer Contracts.

(1) As authorized in 32.905(b)(4), the

contracting officer may modify the date

in paragraph (a)(4)(i) of the clause to

specify a period longer than 7 days for

constructive acceptance or constructive

approval, if required to afford the

Government a practicable opportunity

to inspect and test the supplies

furnished or evaluate the services

performed.

(2) If applicable, as authorized in

32.906(a) and only as permitted by

agency policies and procedures, the

contracting officer may insert in

paragraph (b) of the clause a period

shorter than 30 days (but not less than

7 days) for making contract financing

payments.

(b) The contracting officer shall insert

the clause at 52.232–27, Prompt

Payment for Construction Contracts, in

all solicitations and contracts for

construction (see part 36).

(1) As authorized in 32.905(c)(1)(i),

the contracting officer may modify the

date in paragraph (a)(1)(i)(A) of the

clause to specify a period longer than 14
Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Rules and Regulations 12711

days if required to afford the

Government a reasonable opportunity to

adequately inspect the work and to

determine the adequacy of the

Contractor’s performance under the

contract.

(2) As authorized in 32.905(c)(1)(v),

the contracting officer may modify the

date in paragraph (a)(4)(i) of the clause

to specify a period longer than 7 days

for constructive acceptance or

constructive approval if required to

afford the Government a reasonable

opportunity to inspect and test the

supplies furnished or evaluate the

services performed.

(3) If applicable, as authorized in

32.906(a) and only as permitted by

agency policies and procedures, the

contracting officer may insert in

paragraph (b) of the clause a period

shorter than 30 days (but not less than

7 days) for making contract financing

payments.

(c) The contracting officer shall insert

the clause at 52.232–25, Prompt

Payment, in all other solicitations and

contracts (including contracts at or

below the simplified acquisition

threshold), except where the clause at

52.212–4, Contract Terms and

Conditions—Commercial Items, applies,

and except as indicated in 32.901.

(1) As authorized in 32.905(a)(1)(ii),

the contracting officer may modify the

date in paragraph (a)(5)(i) of the clause

to specify a period longer than 7 days

for constructive acceptance, if required

to afford the Government a reasonable

opportunity to inspect and test the

supplies furnished or to evaluate the

services performed, except in the case of

a contract for the purchase of a

commercial item as defined in 2.101,

including a brand-name commercial

item for authorized resale (e.g.,

commissary items).

(2) As authorized in 32.906(a) and

only as permitted by agency policies

and procedures, the contracting officer

may insert in paragraph (b) of the clause

a period shorter than 30 days (but not

less than 7 days) for making contract

financing payments.

PART 52—SOLICITATION PROVISIONS

AND CONTRACT CLAUSES

8. Section 52.212–4 is amended by

revising the clause date and the

undesignated paragraph following

paragraph (g)(8) to read as follows:

52.212–4 Contract Terms and

Conditions—Commercial Items.

* * * * *

CONTRACT TERMS AND CONDITIONS—

COMMERCIAL ITEMS (MAY 1997)

* * * * *

(g) * * *

Invoices will be handled in accordance

with the Prompt Payment Act (31 U.S.C.

3903) and Office of Management and Budget

(OMB) Circular A–125, Prompt Payment.

Contractors are encouraged to assign an

identification number to each invoice.

* * * * *

9. Section 52.232–5 is amended by—

(a) Revising the clause date, and

paragraphs (a), (b), and (c);

(b) By adding a paragraph heading at

the beginning of the introductory text of

paragraph (d) and revising paragraph

(d)(2);

(c) Adding paragraph headings to

paragraph (e), the introductory text of

paragraph (f), paragraph (g), and the

introductory text of paragraph (h) and

paragraph (i); and

(d) Adding paragraph (j).

The revised and added text reads as

follows:

52.232–5 Payments under Fixed-Price

Construction Contracts.

* * * * *

PAYMENTS UNDER FIXED-PRICE

CONSTRUCTION CONTRACTS (MAY 1997)

(a) Payment of price. The Government shall

pay the Contractor the contract price as

provided in this contract.

(b) Progress payments. The Government

shall make progress payments monthly as the

work proceeds, or at more frequent intervals

as determined by the Contracting Officer, on

estimates of work accomplished which meets

the standards of quality established under the

contract, as approved by the Contracting

Officer.

(1) The Contractor’s request for progress

payments shall include the following

substantiation:

(i) An itemization of the amounts

requested, related to the various elements of

work required by the contract covered by the

payment requested.

(ii) A listing of the amount included for

work performed by each subcontractor under

the contract.

(iii) A listing of the total amount of each

subcontract under the contract.

(iv) A listing of the amounts previously

paid to each such subcontractor under the

contract.

(v) Additional supporting data in a form

and detail required by the Contracting

Officer.

(2) In the preparation of estimates, the

Contracting Officer may authorize material

delivered on the site and preparatory work

done to be taken into consideration. Material

delivered to the Contractor at locations other

than the site also may be taken into

consideration if—

(i) Consideration is specifically authorized

by this contract; and

(ii) The Contractor furnishes satisfactory

evidence that it has acquired title to such

material and that the material will be used

to perform this contract.

(c) Contractor certification. Along with

each request for progress payments, the

Contractor shall furnish the following

certification, or payment shall not be made:

(However, if the Contractor elects to delete

paragraph (c)(4) from the certification, the

certification is still acceptable.)

I hereby certify, to the best of my

knowledge and belief, that—

(1) The amounts requested are only for

performance in accordance with the

specifications, terms, and conditions of the

contract;

(2) Payments to subcontractors and

suppliers have been made from previous

payments received under the contract, and

timely payments will be made from the

proceeds of the payment covered by this

certification, in accordance with subcontract

agreements and the requirements of chapter

39 of Title 31, United States Code;

(3) This request for progress payments does

not include any amounts which the prime

contractor intends to withhold or retain from

a subcontractor or supplier in accordance

with the terms and conditions of the

subcontract; and

(4) This certification is not to be construed

as final acceptance of a subcontractor’s

performance.

lllllllllllllllllllll

(Name)

lllllllllllllllllllll

(Title)

lllllllllllllllllllll

(Date)

(d) Refund of unearned amounts. * * *

* * * * *

(2) Be obligated to pay the Government an

amount (computed by the Contracting Officer

in the manner provided in paragraph (j) of

this clause) equal to interest on the unearned

amount from the 8th day after the date of

receipt of the unearned amount until—

* * * * *

(e) Retainage. * * *

* * * * *

(f) Title, liability, and reservation of rights.

* * *

* * * * *

(g) Reimbursement for bond premiums.

* * *

* * * * *

(h) Final payment. * * *

* * * * *

(i) Limitation because of undefinitized

work. * * *

* * * * *

(j) Interest computation on unearned

amounts. In accordance with 31 U.S.C.

3903(c)(1), the amount payable under

subparagraph (d)(2) of this clause shall be—

(1) Computed at the rate of average bond

equivalent rates of 91-day Treasury bills

auctioned at the most recent auction of such

bills prior to the date the Contractor receives

the unearned amount; and

(2) Deducted from the next available

payment to the Contractor.

(End of clause)

11. Section 52.232–8 is amended by

revising the clause date and paragraph

(b) to read as follows:
12712 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Rules and Regulations

52.232–8 Discounts for Prompt Payment.

* * * * *

DISCOUNTS FOR PROMPT PAYMENT

(MAY 1997)

* * * * *

(b) In connection with any discount offered

for prompt payment, time shall be computed

from the date of the invoice. If the Contractor

has not placed a date on the invoice, the due

date shall be calculated from the date the

designated billing office receives a proper

invoice, provided the agency annotates such

invoice with the date of receipt at the time

of receipt. For the purpose of computing the

discount earned, payment shall be

considered to have been made on the date

that appears on the payment check or, for an

electronic funds transfer, the specified

payment date. When the discount date falls

on a Saturday, Sunday, or legal holiday when

Federal Government offices are closed and

Government business is not expected to be

conducted, payment may be made on the

following business day.

(End of clause)

12. Sections 52.232–25, 52.232–26,

and 52.232–27 are revised to read as

follows:

52.232–25 Prompt Payment.

As prescribed in 32.908(c), insert the

following clause:

PROMPT PAYMENT (MAY 1997)

Notwithstanding any other payment clause

in this contract, the Government will make

invoice payments and contract financing

payments under the terms and conditions

specified in this clause. Payment shall be

considered as being made on the day a check

is dated or the date of an electronic funds

transfer. Definitions of pertinent terms are set

forth in section 32.902 of the Federal

Acquisition Regulation. All days referred to

in this clause are calendar days, unless

otherwise specified. (However, see

subparagraph (a)(4) of this clause concerning

payments due on Saturdays, Sundays, and

legal holidays.)

(a) Invoice payments (1) Due Date. (i)

Except as indicated in subparagraph (a)(2)

and paragraph (c) of this clause, the due date

for making invoice payments by the

designated payment office shall be the later

of the following two events:

(A) The 30th day after the designated

billing office has received a proper invoice

from the Contractor (except as provided in

subdivision (a)(1)(ii) of this clause).

(B) The 30th day after Government

acceptance of supplies delivered or services

performed by the Contractor. On a final

invoice where the payment amount is subject

to contract settlement actions, acceptance

shall be deemed to have occurred on the

effective date of the contract settlement.

(ii) If the designated billing office fails to

annotate the invoice with the actual date of

receipt at the time of receipt, the invoice

payment due date shall be the 30th day after

the date of the Contractor’s invoice; provided

a proper invoice is received and there is no

disagreement over quantity, quality, or

Contractor compliance with contract

requirements.

(2) Certain food products and other

payments. (i) Due dates on Contractor

invoices for meat, meat food products, or

fish; perishable agricultural commodities;

and dairy products, edible fats or oils, and

food products prepared from edible fats or

oils are—

(A) For meat or meat food products, as

defined in section 2(a)(3) of the Packers and

Stockyard Act of 1921 (7 U.S.C. 182(3)), and

as further defined in Pub. L. 98–181,

including any edible fresh or frozen poultry

meat, any perishable poultry meat food

product, fresh eggs, and any perishable egg

product, as close as possible to, but not later

than, the 7th day after product delivery.

(B) For fresh or frozen fish, as defined in

section 204(3) of the Fish and Seafood

Promotion Act of 1986 (16 U.S.C. 4003(3)), as

close as possible to, but not later than, the

7th day after product delivery.

(C) For perishable agricultural

commodities, as defined in section 1(4) of the

Perishable Agricultural Commodities Act of

1930 (7 U.S.C. 499a(4)), as close as possible

to, but not later than, the 10th day after

product delivery, unless another date is

specified in the contract.

(D) For dairy products, as defined in

section 111(e) of the Dairy Production

Stabilization Act of 1983 (7 U.S.C. 4502(e)),

edible fats or oils, and food products

prepared from edible fats or oils, as close as

possible to, but not later than, the 10th day

after the date on which a proper invoice has

been received. Liquid milk, cheese, certain

processed cheese products, butter, yogurt, ice

cream, mayonnaise, salad dressings, and

other similar products, fall within this

classification. Nothing in the Act limits this

classification to refrigerated products. When

questions arise regarding the proper

classification of a specific product, prevailing

industry practices will be followed in

specifying a contract payment due date. The

burden of proof that a classification of a

specific product is, in fact, prevailing

industry practice is upon the Contractor

making the representation.

(ii) If the contract does not require

submission of an invoice for payment (e.g.,

periodic lease payments), the due date will

be as specified in the contract.

(3) Contractor’s invoice. The Contractor

shall prepare and submit invoices to the

designated billing office specified in the

contract. A proper invoice must include the

items listed in paragraph (a)(3)(i) through

(a)(3)(viii) of this clause. If the invoice does

not comply with these requirements, it shall

be returned within 7 days after the date the

designated billing office received the invoice

(3 days for meat, meat food products, or fish;

5 days for perishable agricultural

commodities, edible fats or oils, and food

products prepared from edible fats or oils),

with a statement of the reasons why it is not

a proper invoice. Untimely notification will

be taken into account in computing any

interest penalty owed the Contractor in the

manner described in subparagraph (a)(5) of

this clause.

(i) Name and address of the Contractor.

(ii) Invoice date. (The Contractor is

encouraged to date invoices as close as

possible to the date of the mailing or

transmission.)

(iii) Contract number or other authorization

for supplies delivered or services performed

(including order number and contract line

item number).

(iv) Description, quantity, unit of measure,

unit price, and extended price of supplies

delivered or services performed.

(v) Shipping and payment terms (e.g.,

shipment number and date of shipment,

prompt payment discount terms). Bill of

lading number and weight of shipment will

be shown for shipments on Government bills

of lading.

(vi) Name and address of Contractor

official to whom payment is to be sent (must

be the same as that in the contract or in a

proper notice of assignment).

(vii) Name (where practicable), title, phone

number, and mailing address of person to be

notified in the event of a defective invoice.

(viii) Any other information or

documentation required by the contract (such

as evidence of shipment).

(ix) While not required, the Contractor is

strongly encouraged to assign an

identification number to each invoice.

(4) Interest penalty. An interest penalty

shall be paid automatically by the designated

payment office, without request from the

Contractor, if payment is not made by the

due date and the conditions listed in

paragraphs (a)(4)(i) through (a)(4)(iii) of this

clause are met, if applicable. However, when

the due date falls on a Saturday, Sunday, or

legal holiday when Federal Government

offices are closed and Government business

is not expected to be conducted, payment

may be made on the following business day

without incurring a late payment interest

penalty.

(i) A proper invoice was received by the

designated billing office.

(ii) A receiving report or other Government

documentation authorizing payment was

processed, and there was no disagreement

over quantity, quality, or Contractor

compliance with any contract term or

condition.

(iii) In the case of a final invoice for any

balance of funds due the Contractor for

supplies delivered or services performed, the

amount was not subject to further contract

settlement actions between the Government

and the Contractor.

(5) Computing penalty amount. The

interest penalty shall be at the rate

established by the Secretary of the Treasury

under section 12 of the Contract Disputes Act

of 1978 (41 U.S.C. 611) that is in effect on

the day after the due date, except where the

interest penalty is prescribed by other

governmental authority (e.g., tariffs). This

rate is referred to as the ‘‘Renegotiation Board

Interest Rate,’’ and it is published in the

Federal Register semiannually on or about

January 1 and July 1. The interest penalty

shall accrue daily on the invoice principal

payment amount approved by the

Government until the payment date of such

approved principal amount; and will be

compounded in 30-day increments inclusive

from the first day after the due date through

the payment date. That is, interest accrued at

the end of any 30-day period will be added

to the approved invoice principal payment

amount and will be subject to interest
Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Rules and Regulations 12713

penalties if not paid in the succeeding 30-day

period. If the designated billing office failed

to notify the Contractor of a defective invoice

within the periods prescribed in

subparagraph (a)(3) of this clause, the due

date on the corrected invoice will be adjusted

by subtracting from such date the number of

days taken beyond the prescribed notification

of defects period. Any interest penalty owed

the Contractor will be based on this adjusted

due date. Adjustments will be made by the

designated payment office for errors in

calculating interest penalties.

(i) For the sole purpose of computing an

interest penalty that might be due the

Contractor, Government acceptance shall be

deemed to have occurred constructively on

the 7th day (unless otherwise specified in

this contract) after the Contractor delivered

the supplies or performed the services in

accordance with the terms and conditions of

the contract, unless there is a disagreement

over quantity, quality, or Contractor

compliance with a contract provision. In the

event that actual acceptance occurs within

the constructive acceptance period, the

determination of an interest penalty shall be

based on the actual date of acceptance. The

constructive acceptance requirement does

not, however, compel Government officials to

accept supplies or services, perform contract

administration functions, or make payment

prior to fulfilling their responsibilities.

(ii) The following periods of time will not

be included in the determination of an

interest penalty:

(A) The period taken to notify the

Contractor of defects in invoices submitted to

the Government, but this may not exceed 7

days (3 days for meat, meat food products, or

fish; 5 days for perishable agricultural

commodities, dairy products, edible fats or

oils, and food products prepared from edible

fats or oils).

(B) The period between the defects notice

and resubmission of the corrected invoice by

the Contractor.

(C) For incorrect electronic funds transfer

(EFT) information, in accordance with the

EFT clause of this contract.

(iii) Interest penalties will not continue to

accrue after the filing of a claim for such

penalties under the clause at 52.233–1,

Disputes, or for more than 1 year. Interest

penalties of less than $1 need not be paid.

(iv) Interest penalties are not required on

payment delays due to disagreement between

the Government and the Contractor over the

payment amount or other issues involving

contract compliance or on amounts

temporarily withheld or retained in

accordance with the terms of the contract.

Claims involving disputes, and any interest

that may be payable, will be resolved in

accordance with the clause at 52.233–1,

Disputes.

(6) Prompt payment discounts. An interest

penalty also shall be paid automatically by

the designated payment office, without

request from the Contractor, if a discount for

prompt payment is taken improperly. The

interest penalty will be calculated as

described in subparagraph (a)(5) of this

clause on the amount of discount taken for

the period beginning with the first day after

the end of the discount period through the

date when the Contractor is paid.

(7) Additional interest penalty. (i) If this

contract was awarded on or after October 1,

1989, a penalty amount, calculated in

accordance with paragraph (a)(7)(iii) of this

clause, shall be paid in addition to the

interest penalty amount if the Contractor—

(A) Is owed an interest penalty of $1 or

more;

(B) Is not paid the interest penalty within

10 days after the date the invoice amount is

paid; and

(C) Makes a written demand to the

designated payment office for additional

penalty payment, in accordance with

paragraph (a)(7)(ii) of this clause, postmarked

not later than 40 days after the invoice

amount is paid.

(ii)(A) Contractors shall support written

demands for additional penalty payments

with the following data. No additional data

shall be required. Contractors shall—

(1) 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;

(2) Attach a copy of the invoice on which

the unpaid late payment interest was due;

and

(3) State that payment of the principal has

been received, including the date of receipt.

(B) Demands must be postmarked on or

before the 40th day after payment was made,

except that—

(1) If the postmark is illegible or

nonexistent, the demand must have been

received and annotated with the date of

receipt by the designated payment office on

or before the 40th day after payment was

made; or

(2) If the postmark is illegible or

nonexistent and the designated payment

office fails to make the required annotation,

the demand’s validity will be determined by

the date the Contractor has placed on the

demand; provided such date is no later than

the 40th day after payment was made.

(iii)(A) The additional penalty shall be

equal to 100 percent of any original late

payment interest penalty that is due on or

after January 22, 1990, except—

(1) For additional penalties due on or

before January 22, 1992, such penalties shall

not exceed $2,500;

(2) After January 22, 1992, the additional

penalty shall not exceed $5,000;

(3) The additional penalty shall never be

less than $25; and

(4) No additional penalty is owed if the

amount of the underlying interest penalty is

less than $1.

(B) If the interest penalty ceases to accrue

in accordance with the limits stated in

paragraph (a)(5)(iii) of this clause, the

amount of the additional penalty shall be

calculated on the amount of interest penalty

that would have accrued in the absence of

these limits, subject to the overall limits on

the additional penalty specified in paragraph

(a)(7)(iii)(A) of this clause.

(C) For determining the maximum and

minimum additional penalties, the test shall

be the interest penalty due on each separate

payment made for each separate contract.

The maximum and minimum additional

penalty shall not be based upon individual

invoices unless the invoices are paid

separately. Where payments are consolidated

for disbursing purposes, the maximum and

minimum additional penalty determination

shall be made separately for each contract

therein.

(D) The additional penalty does not apply

to payments regulated by other Government

regulations (e.g., payments under utility

contracts subject to tariffs and regulation).

(b) Contract financing payments—(1) Due

dates for recurring financing payments. If

this contract provides for contract financing,

requests for payment shall be submitted to

the designated billing office as specified in

this contract or as directed by the Contracting

Officer. Contract financing payments shall be

made on the (insert day as prescribed by

Agency head; if not prescribed, insert 30th

day) day after receipt of a proper contract

financing request by the designated billing

office. In the event that an audit or other

review of a specific financing request is

required to ensure compliance with the terms

and conditions of the contract, the designated

payment office is not compelled to make

payment by the due date specified.

(2) Due dates for other contract financing.

For advance payments, loans, or other

arrangements that do not involve recurring

submissions of contract financing requests,

payment shall be made in accordance with

the corresponding contract terms or as

directed by the Contracting Officer.

(3) Interest penalty not applicable. Contract

financing payments shall not be assessed an

interest penalty for payment delays.

(c) Fast payment procedure due dates. If

this contract contains the clause at 52.213–

1, Fast Payment Procedure, payments will be

made within 15 days after the date of receipt

of the invoice.

(End of clause)

52.232–26 Prompt Payment for Fixed-Price

Architect-Engineer Contracts.

As prescribed in 32.908(a), insert the

following clause:

PROMPT PAYMENT FOR FIXED-PRICE

ARCHITECT-ENGINEER CONTRACTS (MAY

1997)

Notwithstanding any other payment terms

in this contract, the Government will make

invoice payments and contract financing

payments under the terms and conditions

specified in this clause. Payment shall be

considered as being made on the day a check

is dated or the date of an electronic funds

transfer. Definitions of pertinent terms are set

forth in section 32.902 of the Federal

Acquisition Regulation. All days referred to

in this clause are calendar days, unless

otherwise specified. (However, see

subparagraph (a)(3) of this clause concerning

payments due on Saturdays, Sundays, and

legal holidays.)

(a) Invoice payments.—(1) Due date. The

due date for making invoice payments shall

be—

(i) For work or services completed by the

Contractor, the later of the following two

events:

(A) The 30th day after the designated

billing office has received a proper invoice

from the Contractor (except as provided in

paragraph (a)(1)(iii) of this clause).
12714 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Rules and Regulations

(B) The 30th day after Government

acceptance of the work or services completed

by the Contractor. On a final invoice where

the payment amount is subject to contract

settlement actions (e.g., release of claims),

acceptance shall be deemed to have occurred

on the effective date of the contract

settlement.

(ii) The due date for progress payments

shall be the 30th day after Government

approval of Contractor estimates of work or

services accomplished.

(iii) If the designated billing office fails to

annotate the invoice or payment request with

the actual date of receipt at the time of

receipt, the payment due date shall be the

30th day after the date of the Contractor’s

invoice or payment request, provided a

proper invoice or payment request is

received and there is no disagreement over

quantity, quality, or Contractor compliance

with contract requirements.

(2) Contractor’s invoice. The Contractor

shall prepare and submit invoices to the

designated billing office specified in the

contract. A proper invoice must include the

items listed in paragraphs (a)(2)(i) through

(a)(2)(viii) of this clause. If the invoice does

not comply with these requirements, it shall

be returned within 7 days after the date the

designated billing office received the invoice,

with a statement of the reasons why it is not

a proper invoice. Untimely notification will

be taken into account in computing any

interest penalty owed the Contractor in the

manner described in subparagraph (a)(4) of

this clause:

(i) Name and address of the Contractor.

(ii) Invoice date. (The Contractor is

encouraged to date invoices as close as

possible to the date of mailing or

transmission.)

(iii) Contract number or other authorization

for work or services performed (including

order number and contract line item

number).

(iv) Description of work or services

performed.

(v) Delivery and payment terms (e.g.,

prompt payment discount terms).

(vi) Name and address of Contractor

official to whom payment is to be sent (must

be the same as that in the contract or in a

proper notice of assignment).

(vii) Name (where practicable), title, phone

number, and mailing address of person to be

notified in the event of a defective invoice.

(viii) Any other information or

documentation required by the contract.

(ix) While not required, the Contractor is

strongly encouraged to assign an

identification number to each invoice.

(3) Interest penalty. An interest penalty

shall be paid automatically by the designated

payment office, without request from the

Contractor, if payment is not made by the

due date and the conditions listed in

paragraphs (a)(3)(i) through (a)(3)(iii) of this

clause are met, if applicable. However, when

the due date falls on a Saturday, Sunday, or

legal holiday when Federal Government

offices are closed and Government business

is not expected to be conducted, payment

may be made on the following business day

without incurring a late payment interest

penalty.

(i) A proper invoice was received by the

designated billing office.

(ii) A receiving report or other Government

documentation authorizing payment was

processed and there was no disagreement

over quantity, quality, Contractor compliance

with any contract term or condition, or

requested progress payment amount.

(iii) In the case of a final invoice for any

balance of funds due the Contractor for work

or services performed, the amount was not

subject to further contract settlement actions

between the Government and the Contractor.

(4) Computing penalty amount. The

interest penalty shall be at the rate

established by the Secretary of the Treasury

under section 12 of the Contract Disputes Act

of 1978 (41 U.S.C. 611) that is in effect on

the day after the due date, except where the

interest penalty is prescribed by other

governmental authority (e.g., tariffs). This

rate is referred to as the ‘‘Renegotiation Board

Interest Rate,’’ and it is published in the

Federal Register semiannually on or about

January 1 and July 1. The interest penalty

shall accrue daily on the invoice principal

payment amount approved by the

Government until the payment date of such

approved principal amount; and will be

compounded in 30-day increments inclusive

from the first day after the due date through

the payment date. That is, interest accrued at

the end of any 30-day period will be added

to the approved invoice principal payment

amount and will be subject to interest

penalties if not paid in the succeeding 30-day

period. If the designated billing office failed

to notify the Contractor of a defective invoice

within the periods prescribed in

subparagraph (a)(2) of this clause, the due

date on the corrected invoice will be adjusted

by subtracting from such date the number of

days taken beyond the prescribed notification

of defects period. Any interest penalty owed

the Contractor will be based on this adjusted

due date. Adjustments will be made by the

designated payment office for errors in

calculating interest penalties.

(i) For the sole purpose of computing an

interest penalty that might be due the

Contractor, Government acceptance or

approval shall be deemed to have occurred

constructively as shown in paragraphs

(a)(4)(i) (A) and (B) of this clause. In the

event that actual acceptance or approval

occurs within the constructive acceptance or

approval period, the determination of an

interest penalty shall be based on the actual

date of acceptance or approval. Constructive

acceptance or constructive approval

requirements do not apply if there is a

disagreement over quantity, quality,

Contractor compliance with a contract

provision, or requested progress payment

amounts. These requirements also do not

compel Government officials to accept work

or services, approve Contractor estimates,

perform contract administration functions, or

make payment prior to fulfilling their

responsibilities.

(A) For work or services completed by the

Contractor, Government acceptance shall be

deemed to have occurred constructively on

the 7th day after the Contractor has

completed the work or services in accordance

with the terms and conditions of the contract.

(B) For progress payments, Government

approval shall be deemed to have occurred

on the 7th day after Contractor estimates

have been received by the designated billing

office.

(ii) The following periods of time will not

be included in the determination of an

interest penalty:

(A) The period taken to notify the

Contractor of defects in invoices submitted to

the Government, but this may not exceed 7

days.

(B) The period between the defects notice

and resubmission of the corrected invoice by

the Contractor.

(C) For incorrect electronic funds transfer

(EFT) information, in accordance with the

EFT clause of this contract.

(iii) Interest penalties will not continue to

accrue after the filing of a claim for such

penalties under the clause at 52.233–1,

Disputes, or for more than 1 year. Interest

penalties of less than $1 need not be paid.

(iv) Interest penalties are not required on

payment delays due to disagreement between

the Government and the Contractor over the

payment amount or other issues involving

contract compliance, or on amounts

temporarily withheld or retained in

accordance with the terms of the contract.

Claims involving disputes, and any interest

that may be payable will be resolved in

accordance with the clause at 52.233–1,

Disputes.

(5) Prompt payment discounts. An interest

penalty also shall also be paid automatically

by the designated payment office, without

request from the Contractor, if a discount for

prompt payment is taken improperly. The

interest penalty will be calculated on the

amount of discount taken for the period

beginning with the first day after the end of

the discount period through the date when

the Contractor is paid.

(6) Additional interest penalty. (i) If this

contract was awarded on or after October 1,

1989, a penalty amount, calculated in

accordance with paragraph (a)(6)(iii) of this

clause, shall be paid in addition to the

interest penalty amount if the Contractor—

(A) Is owed an interest penalty of $1 or

more;

(B) Is not paid the interest penalty within

10 days after the date the invoice amount is

paid; and

(C) Makes a written demand to the

designated payment office for additional

penalty payment, in accordance with

paragraph (a)(6)(ii) of this clause, postmarked

not later than 40 days after the date the

invoice amount is paid.

(ii)(A) Contractors shall support written

demands for additional penalty payments

with the following data. No additional data

shall be required. Contractors shall—

(1) 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;

(2) Attach a copy of the invoice on which

the unpaid late payment interest was due;

and

(3) State that payment of the principal has

been received, including the date of receipt.
Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Rules and Regulations 12715

(B) Demands must be postmarked on or

before the 40th day after payment was made,

except that—

(1) If the postmark is illegible or

nonexistent, the demand must have been

received and annotated with the date of

receipt by the designated payment office on

or before the 40th day after payment was

made; or

(2) If the postmark is illegible or

nonexistent and the designated payment

office fails to make the required annotation,

the demand’s validity will be determined by

the date the Contractor has placed on the

demand; provided such date is no later than

the 40th day after payment was made.

(iii)(A) The additional penalty shall be

equal to 100 percent of any original late

payment interest penalty that is due on or

after January 22, 1990, except—

(1) For additional penalties due on or

before January 22, 1992, such penalties shall

not exceed $2,500;

(2) After January 22, 1992, the additional

penalty shall not exceed $5,000;

(3) The additional penalty shall never be

less than $25; and

(4) No additional penalty is owed if the

amount of the underlying interest penalty is

less than $1.

(B) If the interest penalty ceases to accrue

in accordance with the limits stated in

paragraph (a)(4)(iii) of this clause, the

amount of the additional penalty shall be

calculated on the amount of interest penalty

that would have accrued in the absence of

these limits, subject to the overall limits on

the additional penalty specified in paragraph

(a)(6)(iii)(A) of this clause.

(C) For determining the maximum and

minimum additional penalties, the test shall

be the interest penalty due on each separate

payment made for each separate contract.

The maximum and minimum additional

penalty shall not be based upon individual

invoices unless the invoices are paid

separately. Where payments are consolidated

for disbursing purposes, the maximum and

minimum additional penalty determination

shall be made separately for each contract

therein.

(D) The additional penalty does not apply

to payments regulated by other Government

regulations (e.g., payments under utility

contracts subject to tariffs and regulation).

(b) Contract financing payments—(1) Due

dates for recurring financing payments. If

this contract provides for contract financing,

requests for payment shall be submitted to

the designated billing office as specified in

this contract or as directed by the Contracting

Officer. Contract financing payments shall be

made on the (insert day as prescribed by

Agency head; if not prescribed, insert 30th

day) day after receipt of a proper contract

financing request by the designated billing

office. In the event that an audit or other

review of a specific financing request is

required to ensure compliance with the terms

and conditions of the contract, the designated

payment office is not compelled to make

payment by the due date specified.

(2) Due dates for other contract financing.

For advance payments, loans, or other

arrangements that do not involve recurring

submissions of contract financing requests,

payment shall be made in accordance with

the corresponding contract terms or as

directed by the Contracting Officer.

(3) Interest penalty not applicable. Contract

financing payments shall not be assessed an

interest penalty for payment delays.

(End of clause)

52.232–27 Prompt Payment for

Construction Contracts.

As prescribed in 32.908(b), insert the

following clause:

PROMPT PAYMENT FOR CONSTRUCTION

CONTRACTS (MAY 1997)

Notwithstanding any other payment terms

in this contract, the Government will make

invoice payments and contract financing

payments under the terms and conditions

specified in this clause. Payment shall be

considered as being made on the day a check

is dated or the date of an electronic funds

transfer. Definitions of pertinent terms are set

forth in section 32.902 of the Federal

Acquisition Regulation. All days referred to

in this clause are calendar days, unless

otherwise specified. (However, see

subparagraph (a)(3) concerning payments due

on Saturdays, Sundays, and legal holidays.)

(a) Invoice payments—(1) Types of invoice

payments. For purposes of this clause, there

are several types of invoice payments that

may occur under this contract, as follows:

(i) Progress payments, if provided for

elsewhere in this contract, based on

Contracting Officer approval of the estimated

amount and value of work or services

performed, including payments for reaching

milestones in any project:

(A) The due date for making such

payments shall be 14 days after receipt of the

payment request by the designated billing

office. If the designated billing office fails to

annotate the payment request with the actual

date of receipt at the time of receipt, the

payment due date shall be the 14th day after

the date of the Contractor’s payment request,

provided a proper payment request is

received and there is no disagreement over

quantity, quality, or Contractor compliance

with contract requirements.

(B) The due date for payment of any

amounts retained by the Contracting Officer

in accordance with the clause at 52.232–5,

Payments Under Fixed-Price Construction

Contracts, shall be as specified in the

contract or, if not specified, 30 days after

approval for release to the Contractor by the

Contracting Officer.

(ii) Final payments based on completion

and acceptance of all work and presentation

of release of all claims against the

Government arising by virtue of the contract,

and payments for partial deliveries that have

been accepted by the Government (e.g., each

separate building, public work, or other

division of the contract for which the price

is stated separately in the contract):

(A) The due date for making such

payments shall be either the 30th day after

receipt by the designated billing office of a

proper invoice from the Contractor, or the

30th day after Government acceptance of the

work or services completed by the

Contractor, whichever is later. If the

designated billing office fails to annotate the

invoice with the date of actual receipt at the

time of receipt, the invoice payment due date

shall be the 30th day after the date of the

Contractor’s invoice, provided a proper

invoice is received and there is no

disagreement over quantity, quality, or

Contractor compliance with contract

requirements.

(B) On a final invoice where the payment

amount is subject to contract settlement

actions (e.g., release of claims), acceptance

shall be deemed to have occurred on the

effective date of the contract settlement.

(2) Contractor’s invoice. The Contractor

shall prepare and submit invoices to the

designated billing office specified in the

contract. A proper invoice must include the

items listed in paragraphs (a)(2)(i) through

(a)(2)(ix) of this clause. If the invoice does

not comply with these requirements, it shall

be returned within 7 days after the date the

designated billing office received the invoice,

with a statement of the reasons why it is not

a proper invoice. Untimely notification will

be taken into account in computing any

interest penalty owed the Contractor in the

manner described in subparagraph (a)(4) of

this clause.

(i) Name and address of the Contractor.

(ii) Invoice date. (The Contractor is

encouraged to date invoices as close as

possible to the date of mailing or

transmission.)

(iii) Contract number or other authorization

for work or services performed (including

order number and contract line item

number).

(iv) Description of work or services

performed.

(v) Delivery and payment terms (e.g.,

prompt payment discount terms).

(vi) Name and address of Contractor

official to whom payment is to be sent (must

be the same as that in the contract or in a

proper notice of assignment).

(vii) Name (where practicable), title, phone

number, and mailing address of person to be

notified in the event of a defective invoice.

(viii) For payments described in paragraph

(a)(1)(i) of this clause, substantiation of the

amounts requested and certification in

accordance with the requirements of the

clause at 52.232–5, Payments Under FixedPrice Construction Contracts.

(ix) Any other information or

documentation required by the contract.

(x) While not required, the Contractor is

strongly encouraged to assign an

identification number to each invoice.

(3) Interest penalty. An interest penalty

shall be paid automatically by the designated

payment office, without request from the

Contractor, if payment is not made by the

due date and the conditions listed in

paragraphs (a)(3)(i) through (a)(3)(iii) of this

clause are met, if applicable. However, when

the due date falls on a Saturday, Sunday, or

legal holiday when Federal Government

offices are closed and Government business

is not expected to be conducted, payment

may be made on the following business day

without incurring a late payment interest

penalty.

(i) A proper invoice was received by the

designated billing office.

(ii) A receiving report or other Government

documentation authorizing payment was
12716 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Rules and Regulations

processed and there was no disagreement

over quantity, quality, Contractor compliance

with any contract term or condition, or

requested progress payment amount.

(iii) In the case of a final invoice for any

balance of funds due the Contractor for work

or services performed, the amount was not

subject to further contract settlement actions

between the Government and the Contractor.

(4) Computing penalty amount. The

interest penalty shall be at the rate

established by the Secretary of the Treasury

under section 12 of the Contract Disputes Act

of 1978 (41 U.S.C. 611) that is in effect on

the day after the due date, except where the

interest penalty is prescribed by other

governmental authority (e.g., tariffs). This

rate is referred to as the ‘‘Renegotiation Board

Interest Rate,’’ and it is published in the

Federal Register semiannually on or about

January 1 and July 1. The interest penalty

shall accrue daily on the invoice principal

payment amount approved by the

Government until the payment date of such

approved principal amount; and will be

compounded in 30-day increments inclusive

from the first day after the due date through

the payment date. That is, interest accrued at

the end of any 30-day period will be added

to the approved invoice principal payment

amount and will be subject to interest

penalties if not paid in the succeeding 30-day

period. If the designated billing office failed

to notify the Contractor of a defective invoice

within the periods prescribed in

subparagraph (a)(2) of this clause, the due

date on the corrected invoice will be adjusted

by subtracting from such date the number of

days taken beyond the prescribed notification

of defects period. Any interest penalty owed

the Contractor will be based on this adjusted

due date. Adjustments will be made by the

designated payment office for errors in

calculating interest penalties.

(i) For the sole purpose of computing an

interest penalty that might be due the

Contractor for payments described in

paragraph (a)(1)(ii) of this clause,

Government acceptance or approval shall be

deemed to have occurred constructively on

the 7th day after the Contractor has

completed the work or services in accordance

with the terms and conditions of the contract.

In the event that actual acceptance or

approval occurs within the constructive

acceptance or approval period, the

determination of an interest penalty shall be

based on the actual date of acceptance or

approval. Constructive acceptance or

constructive approval requirements do not

apply if there is a disagreement over

quantity, quality, or Contractor compliance

with a contract provision. These

requirements also do not compel Government

officials to accept work or services, approve

Contractor estimates, perform contract

administration functions, or make payment

prior to fulfilling their responsibilities.

(ii) The following periods of time will not

be included in the determination of an

interest penalty:

(A) The period taken to notify the

Contractor of defects in invoices submitted to

the Government, but this may not exceed 7

days.

(B) The period between the defects notice

and resubmission of the corrected invoice by

the Contractor.

(C) For incorrect electronic funds transfer

(EFT) information, in accordance with the

EFT clause of this contract.

(iii) Interest penalties will not continue to

accrue after the filing of a claim for such

penalties under the clause at 52.233–1,

Disputes, or for more than 1 year. Interest

penalties of less than $1 need not be paid.

(iv) Interest penalties are not required on

payment delays due to disagreement between

the Government and the Contractor over the

payment amount or other issues involving

contract compliance, or on amounts

temporarily withheld or retained in

accordance with the terms of the contract.

Claims involving disputes, and any interest

that may be payable, will be resolved in

accordance with the clause at 52.233–1,

Disputes.

(5) Prompt payment discounts. An interest

penalty also shall be paid automatically by

the designated payment office, without

request from the Contractor, if a discount for

prompt payment is taken improperly. The

interest penalty will be calculated on the

amount of discount taken for the period

beginning with the first day after the end of

the discount period through the date when

the Contractor is paid.

(6) Additional interest penalty. (i) If this

contract was awarded on or after October 1,

1989, a penalty amount, calculated in

accordance with subdivision (a)(6)(iii) of this

clause, shall be paid in addition to the

interest penalty amount if the Contractor—

(A) Is owed an interest penalty of $1 or

more;

(B) Is not paid the interest penalty within

10 days after the date the invoice amount is

paid; and

(C) Makes a written demand to the

designated payment office for additional

penalty payment, in accordance with

subdivision (a)(6)(ii) of this clause,

postmarked not later than 40 days after the

date the invoice amount is paid.

(ii)(A) Contractors shall support written

demands for additional penalty payments

with the following data. No additional data

shall be required. Contractors shall—

(1) 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;

(2) Attach a copy of the invoice on which

the unpaid late payment interest was due;

and

(3) State that payment of the principal has

been received, including the date of receipt.

(B) Demands must be postmarked on or

before the 40th day after payment was made,

except that—

(1) If the postmark is illegible or

nonexistent, the demand must have been

received and annotated with the date of

receipt by the designated payment office on

or before the 40th day after payment was

made; or

(2) If the postmark is illegible or

nonexistent and the designated payment

office fails to make the required annotation,

the demand’s validity will be determined by

the date the Contractor has placed on the

demand; provided such date is no later than

the 40th day after payment was made.

(iii)(A) The additional penalty shall be

equal to 100 percent of any original late

payment interest penalty that is due on or

after January 22, 1990, except—

(1) For additional penalties due on or

before January 22, 1992, such penalties shall

not exceed $2,500;

(2) After January 22, 1992, the additional

penalty shall not exceed $5,000;

(3) The additional penalty shall never be

less than $25; and

(4) No additional penalty is owed if the

amount of the underlying interest penalty is

less than $1.

(B) If the interest penalty ceases to accrue

in accordance with the limits stated in

subdivision (a)(4)(iii) of this clause, the

amount of the additional penalty shall be

calculated on the amount of interest penalty

that would have accrued in the absence of

these limits, subject to the overall limits on

the additional penalty specified in

subdivision (a)(6)(iii)(A) of this clause.

(C) For determining the maximum and

minimum additional penalties, the test shall

be the interest penalty due on each separate

payment made for each separate contract.

The maximum and minimum additional

penalty shall not be based upon individual

invoices unless the invoices are paid

separately. Where payments are consolidated

for disbursing purposes, the maximum and

minimum additional penalty determination

shall be made separately for each contract

therein.

(D) The additional penalty does not apply

to payments regulated by other Government

regulations (e.g., payments under utility

contracts subject to tariffs and regulation).

(b) Contract financing payments—(1) Due

dates for recurring financing payments. If

this contract provides for contract financing,

requests for payment shall be submitted to

the designated billing office as specified in

this contract or as directed by the Contracting

Officer. Contract financing payments shall be

made on the (insert day as prescribed by

Agency head; if not prescribed, insert 30th

day) day after receipt of a proper contract

financing request by the designated billing

office. In the event that an audit or other

review of a specific financing request is

required to ensure compliance with the terms

and conditions of the contract, the designated

payment office is not compelled to make

payment by the due date specified.

(2) Due dates for other contract financing.

For advance payments, loans, or other

arrangements that do not involve recurring

submissions of contract financing requests,

payment shall be made in accordance with

the corresponding contract terms or as

directed by the Contracting Officer.

(3) Interest penalty not applicable. Contract

financing payments shall not be assessed an

interest penalty for payment delays.

(c) Subcontract clause requirements. The

Contractor shall include in each subcontract

for property or services (including a material

supplier) for the purpose of performing this

contract the following:

(1) Prompt payment for subcontractors. A

payment clause that obligates the Contractor
Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Rules and Regulations 12717

to pay the subcontractor for satisfactory

performance under its subcontract not later

than 7 days from receipt of payment out of

such amounts as are paid to the Contractor

under this contract.

(2) Interest for subcontractors. An interest

penalty clause that obligates the Contractor to

pay to the subcontractor an interest penalty

for each payment not made in accordance

with the payment clause—

(i) For the period beginning on the day

after the required payment date and ending

on the date on which payment of the amount

due is made; and

(ii) Computed at the rate of interest

established by the Secretary of the Treasury,

and published in the Federal Register, for

interest payments under section 12 of the

Contract Disputes Act of 1978 (41 U.S.C. 611)

in effect at the time the Contractor accrues

the obligation to pay an interest penalty.

(3) Subcontractor clause flowdown. A

clause requiring each subcontractor to

include a payment clause and an interest

penalty clause conforming to the standards

set forth in subparagraphs (c)(1) and (c)(2) of

this clause in each of its subcontracts, and to

require each of its subcontractors to include

such clauses in their subcontracts with each

lower-tier subcontractor or supplier.

(d) Subcontract clause interpretation. The

clauses required by paragraph (c) of this

clause shall not be construed to impair the

right of the Contractor or a subcontractor at

any tier to negotiate, and to include in their

subcontract, provisions that—

(1) Retainage permitted. Permit the

Contractor or a subcontractor to retain

(without cause) a specified percentage of

each progress payment otherwise due to a

subcontractor for satisfactory performance

under the subcontract without incurring any

obligation to pay a late payment interest

penalty, in accordance with terms and

conditions agreed to by the parties to the

subcontract, giving such recognition as the

parties deem appropriate to the ability of a

subcontractor to furnish a performance bond

and a payment bond;

(2) Withholding permitted. Permit the

Contractor or subcontractor to make a

determination that part or all of the

subcontractor’s request for payment may be

withheld in accordance with the subcontract

agreement; and

(3) Withholding requirements. Permit such

withholding without incurring any obligation

to pay a late payment penalty if—

(i) A notice conforming to the standards of

paragraph (g) of this clause previously has

been furnished to the subcontractor; and

(ii) A copy of any notice issued by a

Contractor pursuant to subdivision (d)(3)(i) of

this clause has been furnished to the

Contracting Officer.

(e) Subcontractor withholding procedures.

If a Contractor, after making a request for

payment to the Government but before

making a payment to a subcontractor for the

subcontractor’s performance covered by the

payment request, discovers that all or a

portion of the payment otherwise due such

subcontractor is subject to withholding from

the subcontractor in accordance with the

subcontract agreement, then the Contractor

shall—

(1) Subcontractor notice. Furnish to the

subcontractor a notice conforming to the

standards of paragraph (g) of this clause as

soon as practicable upon ascertaining the

cause giving rise to a withholding, but prior

to the due date for subcontractor payment;

(2) Contracting Officer notice. Furnish to

the Contracting Officer, as soon as

practicable, a copy of the notice furnished to

the subcontractor pursuant to subparagraph

(e)(1) of this clause;

(3) Subcontractor progress payment

reduction. Reduce the subcontractor’s

progress payment by an amount not to

exceed the amount specified in the notice of

withholding furnished under subparagraph

(e)(1) of this clause;

(4) Subsequent subcontractor payment. Pay

the subcontractor as soon as practicable after

the correction of the identified subcontract

performance deficiency, and—

(i) Make such payment within—

(A) Seven days after correction of the

identified subcontract performance

deficiency (unless the funds therefor must be

recovered from the Government because of a

reduction under paragraph (e)(5)(i)) of this

clause; or

(B) Seven days after the Contractor

recovers such funds from the Government; or

(ii) Incur an obligation to pay a late

payment interest penalty computed at the

rate of interest established by the Secretary

of the Treasury, and published in the Federal

Register, for interest payments under section

12 of the Contracts Disputes Act of 1978 (41

U.S.C. 611) in effect at the time the

Contractor accrues the obligation to pay an

interest penalty;

(5) Notice to Contracting Officer. Notify the

Contracting Officer upon—

(i) Reduction of the amount of any

subsequent certified application for payment;

or

(ii) Payment to the subcontractor of any

withheld amounts of a progress payment,

specifying—

(A) The amounts withheld under

subparagraph (e)(1) of this clause; and

(B) The dates that such withholding began

and ended; and

(6) Interest to Government. Be obligated to

pay to the Government an amount equal to

interest on the withheld payments (computed

in the manner provided in 31 U.S.C.

3903(c)(1)), from the 8th day after receipt of

the withheld amounts from the Government

until—

(i) The day the identified subcontractor

performance deficiency is corrected; or

(ii) The date that any subsequent payment

is reduced under subdivision (e)(5)(i) of this

clause.

(f) Third-party deficiency reports—(1)

Withholding from subcontractor. If a

Contractor, after making payment to a firsttier subcontractor, receives from a supplier or

subcontractor of the first-tier subcontractor

(hereafter referred to as a ‘‘second-tier

subcontractor’’) a written notice in

accordance with section 2 of the Act of

August 24, 1935 (40 U.S.C. 270b, Miller Act),

asserting a deficiency in such first-tier

subcontractor’s performance under the

contract for which the Contractor may be

ultimately liable, and the Contractor

determines that all or a portion of future

payments otherwise due such first-tier

subcontractor is subject to withholding in

accordance with the subcontract agreement,

the Contractor may, without incurring an

obligation to pay an interest penalty under

subparagraph (e)(6) of this clause—

(i) Furnish to the first-tier subcontractor a

notice conforming to the standards of

paragraph (g) of this clause as soon as

practicable upon making such determination;

and

(ii) Withhold from the first-tier

subcontractor’s next available progress

payment or payments an amount not to

exceed the amount specified in the notice of

withholding furnished under paragraph

(f)(1)(i) of this clause.

(2) Subsequent payment or interest charge.

As soon as practicable, but not later than 7

days after receipt of satisfactory written

notification that the identified subcontract

performance deficiency has been corrected,

the Contractor shall—

(i) Pay the amount withheld under

paragraph (f)(1)(ii) of this clause to such firsttier subcontractor; or

(ii) Incur an obligation to pay a late

payment interest penalty to such first-tier

subcontractor computed at the rate of interest

established by the Secretary of the Treasury,

and published in the Federal Register, for

interest payments under section 12 of the

Contracts Disputes Act of 1978 (41 U.S.C.

611) in effect at the time the Contractor

accrues the obligation to pay an interest

penalty.

(g) Written notice of subcontractor

withholding. A written notice of any

withholding shall be issued to a

subcontractor (with a copy to the Contracting

Officer of any such notice issued by the

Contractor), specifying—

(1) The amount to be withheld;

(2) The specific causes for the withholding

under the terms of the subcontract; and

(3) The remedial actions to be taken by the

subcontractor in order to receive payment of

the amounts withheld.

(h) Subcontractor payment entitlement.

The Contractor may not request payment

from the Government of any amount

withheld or retained in accordance with

paragraph (d) of this clause until such time

as the Contractor has determined and

certified to the Contracting Officer that the

subcontractor is entitled to the payment of

such amount.

(i) Prime-subcontractor disputes. A dispute

between the Contractor and subcontractor

relating to the amount or entitlement of a

subcontractor to a payment or a late payment

interest penalty under a clause included in

the subcontract pursuant to paragraph (c) of

this clause does not constitute a dispute to

which the United States is a party. The

United States may not be interpleaded in any

judicial or administrative proceeding

involving such a dispute.

(j) Preservation of prime-subcontractor

rights. Except as provided in paragraph (i) of

this clause, this clause shall not limit or

impair any contractual, administrative, or

judicial remedies otherwise available to the

Contractor or a subcontractor in the event of

a dispute involving late payment or
12718 Federal Register / Vol. 62, No. 51 / Monday, March 17, 1997 / Rules and Regulations

nonpayment by the Contractor or deficient

subcontract performance or nonperformance

by a subcontractor.

(k) Non-recourse for prime contractor

interest penalty. The Contractor’s obligation

to pay an interest penalty to a subcontractor

pursuant to the clauses included in a

subcontract under paragraph (c) of this clause

shall not be construed to be an obligation of

the United States for such interest penalty. A

cost-reimbursement claim may not include

any amount for reimbursement of such

interest penalty.

(End of clause)

[FR Doc. 97–6319 Filed 3–14–97; 8:45 am]

BILLING CODE 6820–EP–P

DEPARTMENT OF DEFENSE

GENERAL SERVICES

ADMINISTRATION

NATIONAL AERONAUTICS AND

SPACE ADMINISTRATION

48 CFR Part 33

[FAC 90–46; FAR Case 96–016; Item XI]

RIN 9000–AH38

Federal Acquisition Regulation;

Attorneys’ Fees in GAO Protests

AGENCIES: Department of Defense (DOD),

General Services Administration (GSA),

and National Aeronautics and Space

Administration (NASA).

ACTION: Final rule.

SUMMARY: The Civilian Agency

Acquisition Council and the Defense

Acquisition Regulations Council have

agreed on a final rule amending the

Federal Acquisition Regulation (FAR) to

clarify the effective date of the $150.00

hourly cap on attorneys’ fees imposed

by Section 1403(b)(2) of the Federal

Acquisition Streamlining Act (FASA) of

1994 (Public Law 103–355). The hourly

cap on attorneys’ fees applies only to

those protests filed on or after October

1, 1995. This regulatory action was not

subject to Office of Management and

Budget review under Executive Order

12866, dated September 30, 1993. This

is not a major rule under 5 U.S.C. 804.

EFFECTIVE DATE: May 16, 1997.

FOR FURTHER INFORMATION CONTACT: Mr.

Jack O’Neill at (202) 501–3856 in

reference to this FAR case. For general

information, contact the FAR

Secretariat, Room 4037, GS Building,

Washington, DC 20405, (202) 501–4755.

Please cite FAC 90–46, FAR case 96–

016.

SUPPLEMENTARY INFORMATION:

A. Background

This final rule amends FAR 33.104 to

clarify that the $150.00 hourly cap on

attorneys’ fees applies only to those

protests filed on or after the effective

date of FASA. Protests filed with the

General Accounting Office prior to

October 1, 1995, are not subject to the

hourly cap on attorneys’ fees.

B. Regulatory Flexibility Act

The final rule does not constitute a

significant FAR revision within the

meaning of FAR 1.501 and Public Law

98–577, and publication for public

comments is not required. However,

comments from small entities

concerning the affected FAR subpart

will be considered in accordance with 5

U.S.C. 610. Such comments must be

submitted separately and cite 5 U.S.C.

601, et seq. (FAC 90–46, FAR case 96–

016), in correspondence.

C. Paperwork Reduction Act

The Paperwork Reduction Act does

not apply because the changes to the

FAR do not impose recordkeeping or

information collection requirements, or

collections of information from offerors,

contractors, or members of the public

which 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 33

Government procurement.

Dated: March 7, 1997.

Edward C. Loeb,

Director, Federal Acquisition Policy Division.

Therefore, 48 CFR Part 33 is amended

as set forth below:

PART 33—PROTESTS, DISPUTES,

AND APPEALS

1. The authority citation for 48 CFR

Part 33 continues to read as follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C.

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

2. Section 33.104 is amended by

revising the introductory text of

paragraph (h)(3) to read as follows:

33.104 Protests to GAO.

* * * * *

(h) * * *

(3) For protests filed on or after

October 1, 1995, no agency shall pay a

party, other than a small business

concern within the meaning of section

3(a) of the Small Business Act (see

19.001, Small business concern), costs

under paragraph (h)(2) of this section—

* * * * *

[FR Doc. 97–6320 Filed 3–14–97; 8:45 am]

BILLING CODE 6820–EP–P

DEPARTMENT OF DEFENSE

GENERAL SERVICES

ADMINISTRATION

NATIONAL AERONAUTICS AND

SPACE ADMINISTRATION

48 CFR Part 44

[FAC 90–46; FAR Case 94–605; Item XII]

RIN 9000–AG75

Federal Acquisition Regulation;

Contractors’ Purchasing Systems

Reviews

AGENCIES: Department of Defense (DOD),

General Services Administration (GSA),

and National Aeronautics and Space

Administration (NASA).

ACTION: Final rule.

SUMMARY: The Civilian Agency

Acquisition Council and the Defense

Acquisition Regulations Council have

agreed on a final rule amending the

Federal Acquisition Regulation (FAR) to

revise the requirements relating to

Contractors’ Purchasing Systems

Reviews (CPSRs). This regulatory action

was not subject to Office of Management

and Budget review under Executive

Order 12866, dated September 30, 1993.

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

804.

EFFECTIVE DATE: May 16, 1997.

FOR FURTHER INFORMATION CONTACT: Ms.

Linda Klein at (202) 501–3775 in

reference to this FAR case. For general

information, contact the FAR

Secretariat, Room 4037, GS Building,

Washington, DC 20405, (202) 501–4755.

Please cite FAC 90–46, FAR case 94–

605.

SUPPLEMENTARY INFORMATION:

A. Background

This final rule amends FAR section

44.302, to (1) add a requirement for the

cognizant contract administration

agency to determine the need for a CPSR

based on, but not limited to, the past

performance of the contractor; and

volume, complexity, and dollar value of

the subcontracting activity, and (2)

delete the requirement for a CPSR to be

performed initially and at least every 3

years thereafter, for contractors over a

certain sales level. In addition, sections

44.303 through 44.307 are amended to

conform to the revisions at 44.302.

A proposed rule was published in the

Federal Register at 60 FR 66472,

December 21, 1995. Three sources

submitted public comments. The public

comments were considered in the

development of the final rule.