Federal Register / Vol. 73, No. 181 / Wednesday, September 17, 2008 / Rules and Regulations 53997 

agency chief acquisition officer. An 

attachment to the Administrator’s May 

31, 2007 memorandum entitled, 

Enhancing Competition in Federal 

Acquisition, contains a list of questions 

designed to assist competition advocates 

in assessing the quality of competitive 

practices at their agencies. The policy 

memorandum and attachment can be 

found at http://www.whitehouse.gov/ 

omb/procurement/complcontracting/ 

competitionlmemol053107.pdf. This 

FAR case implements this policy 

change. 

This is not a significant regulatory 

action and, therefore, was not subject to 

review under Section 6(b) of Executive 

Order 12866, Regulatory Planning and 

Review, dated September 30, 1993. This 

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

804. 

B. Regulatory Flexibility Act 

The Regulatory Flexibility Act does 

not apply to this rule. This final rule 

does not constitute a significant FAR 

revision within the meaning of FAR 

1.501 and Public Law98–577, and 

publication for public comments is not 

required. However, the Councils will 

consider comments from small entities 

concerning the affected FAR Part 6 in 

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

parties must submit such comments 

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

et seq. (FAC 2005–27, FAR case 2007– 

007), in correspondence. 

C. Paperwork Reduction Act 

The Paperwork Reduction Act does 

not apply because the changes to the 

FAR do not impose information 

collection requirements that require the 

approval of the Office of Management 

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

seq. 

List of Subjects in 48 CFR Part 6 

Government procurement. 

Dated: September 9, 2008. 

Al Matera, 

Director, Office of Acquisition Policy. 

■ Therefore, DoD, GSA, and NASA 

amend 48 CFR part 6 as set forth below: 

PART 6—COMPETITION 

REQUIREMENTS 

■ 1. The authority citation for 48 CFR 

part 6 continues to read as follows: 

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

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

■ 2. Amend section 6.502 by— 

■ a. Revising the introductory text of 

paragraphs (b)(1) and (b)(2); 

■ b. Removing from the end of the 

paragraph (b)(2)(v) the word ‘‘and’’; 

■ c. Adding to the end of paragraph 

(b)(2)(vi) the word ‘‘and’’; 

■ d. Adding a new paragraph (b)(2)(vii); 

and 

■ e. Revising paragraphs (b)(3) and 

(b)(4) to read as follows: 

6.502 Duties and Responsibilities. 

* * * * * 

(b) * * * 

(1) Review the contracting operations 

of the agency and identify and report to 

the agency senior procurement 

executive and the chief acquisition 

officer— 

* * * * * 

(2) Prepare and submit an annual 

report to the agency senior procurement 

executive and the chief acquisition 

officer in accordance with agency 

procedures, describing— 

* * * * * 

(vii) Initiatives that ensure task and 

delivery orders over $1,000,000 issued 

under multiple award contracts are 

properly planned, issued, and comply 

with 8.405 and 16.505. 

(3) Recommend goals and plans for 

increasing competition on a fiscal year 

basis to the agency senior procurement 

executive and the chief acquisition 

officer; and 

(4) Recommend to the agency senior 

procurement executive and the chief 

acquisition officer a system of personal 

and organizational accountability for 

competition, which may include the use 

of recognition and awards to motivate 

program managers, contracting officers, 

and others in authority to promote 

competition in acquisition. 

[FR Doc. E8–21388 Filed 9–16–08; 8:45 am] 

BILLING CODE 6820–EP–S 

DEPARTMENT OF DEFENSE 

GENERAL SERVICES 

ADMINISTRATION 

NATIONAL AERONAUTICS AND 

SPACE ADMINISTRATION 

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

52 

[FAC 2005–27; FAR Case 2005–018; Item 

VI; Docket 2006–0020; Sequence 11] 

RIN 9000–AK59 

Federal Acquisition Regulation; FAR 

Case 2005–018, Contract Debts 

AGENCIES: Department of Defense (DoD), 

General Services Administration (GSA), 

and National Aeronautics and Space 

Administration (NASA). 

ACTION: Final rule. 

SUMMARY: The Civilian Agency 

Acquisition Council and the Defense 

Acquisition Regulations Council 

(Councils) have agreed on a final rule 

amending the Federal Acquisition 

Regulation (FAR) to revise the policies 

and procedures for contract debts. 

DATES: Effective Date: October 17, 2008 

FOR FURTHER INFORMATION CONTACT: Ms. 

Meredith Murphy, Procurement 

Analyst, at (202) 208–6925 for 

clarification of content. For information 

pertaining to status or publication 

schedules, contact the FAR Secretariat 

at (202) 501–4755. Please cite FAC 

2005–27, FAR case 2005–018. 

SUPPLEMENTARY INFORMATION: 

A. Background 

In 2003, the DoD Comptroller 

established the DoD Accounts 

Receivable Workgroup to evaluate the 

processes and procedures for reporting 

accounts receivables. This Workgroup 

concluded that contracting officers may 

not be properly reporting contract debts. 

Based on the Workgroup’s 

recommendations, DoD established a 

Contract Debt Integrated Process Team 

(IPT). 

The mission of the IPT was to 

evaluate the adequacy of DoD’s existing 

controls and procedures for ensuring 

that contract debts are identified and 

recovered in a timely manner, properly 

accounted for in DoD’s books and 

records, and properly coordinated with 

the appropriate Government officials. 

Contract debts result from compliance, 

or a failure to comply, with the terms of 

a contract and include debts identified 

by auditors, contracting officers, 

disbursing officials, and contractors. On 

May 26, 2005, a final report was issued 

that included a number of 

recommended FAR changes to improve 

contract debt controls and procedures, 

and to ensure consistency within/ 

between existing regulations. 

The Councils established this case to 

evaluate the DoD recommendations and 

apply them, where appropriate, 

Governmentwide. The rule makes the 

following changes: 

1. Reorganizes FAR 32.6. Reorganizes 

FAR 32.6 to add clarity and provide a 

logical sequence. The section has been 

reorganized as follows: 

32.600—Scope of subpart. 

32.601—General. 

32.602—Responsibilities. 

32.603—Debt determination. 

32.604—Demand for payment. 

32.605—Final decisions. 

32.606—Debt collection. 

32.607—Installment payments and 

deferment of collection. 

32.608—Interest. 

32.609—Delays in receipt of notices 

or demands. 


pwalker on PROD1PC71 with RULES3
53998 Federal Register / Vol. 73, No. 181 / Wednesday, September 17, 2008 / Rules and Regulations 

32.610—Compromising debts. 

32.611—Contract clause. 

2. Scope of Subpart. Revises FAR 

32.600 to provide a more accurate 

description of the scope of this FAR 

subpart. FAR Subpart 32.6 prescribes 

policies and procedures for identifying, 

collecting, and deferring collection of 

contract debts (including interest, if 

applicable). 

3. Responsible Official. Replaces the 

term ‘‘responsible official’’ with the 

specific individual/organization 

responsible for fulfilling the FAR 

requirement. Some of the 

responsibilities currently listed are 

assigned to one individual/organization 

(e.g., the Procuring Contracting Officer) 

and other responsibilities are assigned 

to another individual/organization (e.g., 

the payment office). To assure a clear 

understanding of the process and 

applicable duties, the rule specifies the 

responsible party for each required 

action (e.g., the Procuring Contracting 

Officer, the Administrative Contracting 

Officer, the payment office, etc.) rather 

than referring to all parties as 

‘‘responsible officials.’’ 

4. Contract Debt—General. Revises 

FAR 32.601 to specify what constitutes 

a contract debt, rather than how a 

contract debt may arise. In addition, this 

section is amended to include payments 

determined to be in excess of contract 

limitations for commercial financing, 

because such payments constitute a 

contract debt. 

5. Contract Debt Responsibilities— 

Identifying, Demanding Payment, 

Collecting, and Liquidating. Adds a 

section to clearly define the 

responsibilities of the contracting officer 

and the payment officials to assure an 

efficient and non-duplicative process. 

Under the rule— 

a. The contracting officer is 

responsible for identifying a contract 

debt and demanding payment of a 

contract debt. The contracting officer is 

prohibited from collecting contract 

debts or otherwise liquidating contract 

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

debt against existing unpaid bills due 

the contractor or allowing contractors to 

retain contract debts to cover amounts 

that may be payable to the contractor in 

the future); and 

b. The payment office is responsible 

for collecting payment of the contract 

debt and liquidating the contract debt. 

6. Contract Debt Determinations. 

Consolidates all discussions of contract 

debt determinations in FAR 32.603, 

Debt Determinations, including the 

responsibility of the contracting officer 

in making debt determinations. 

7. Tax Credit. Deletes the current FAR 

32.607 because the referenced tax credit 

(Sec. 1481) was repealed on November 

5, 1990, by Public Law 101–508. 

8. Demand for Payment. Consolidates 

all discussions of the demand for 

payment in a single section, at FAR 

32.604, Demand for payment, to 

include— 

a. A requirement to issue the demand 

letter except in specific circumstances; 

b. A requirement that the demand 

letter include accounting information to 

enable the payment office to correctly 

record the amounts in the proper 

accounts; 

c. A requirement that the demand 

letter include the amount of interest 

owed under statutes that require interest 

assessments from the date of 

noncompliance to the date of repayment 

(CAS and TINA). 

d. A paragraph implementing the 

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

the Debt Collection Improvement Act of 

1996; and 

e. A paragraph addressing instances 

where overpayments exist but a demand 

for payment is not necessary. 

9. Final Decisions. Consolidates all 

discussions of final decisions in a single 

section at FAR 32.605, Final Decisions, 

to include— 

a. When a final decision must be 

issued; 

b. A statement that the due date for a 

demand letter is not extended simply 

because a final decision is being issued; 

and 

c. A need to obtain evidence of receipt 

by the contractor to establish the 

starting date for interest computations 

and the statute of limitations. 

10. Debt Collection. Consolidates all 

discussions of debt collection in a single 

section, at FAR 32.606, Debt Collection, 

to include— 

a. The current requirements at FAR 

32.612; 

b. The current requirements for 

transferring debts to the Department of 

Treasury; and 

c. A requirement to assure the debt is 

being collected by maintaining 

communication between the contracting 

officer and the payment office. 

11. Installment Payments and 

Deferment of Collection. Clarifies 

procedures for processing installment 

payments and deferment of collection 

requests. 

12. Interest. Consolidates and 

simplifies all discussions of interest in 

a single section, at FAR 32.608, Interest, 

to include— 

a. The substance of the current 

language at FAR 32.614; and 

b. Computing interest credits. The 

discussion focuses on how to compute 

the interest, i.e., from the time of 

overcollection until the time the 

overcollection is remitted to the 

contractor. 

13. Revises FAR 12.215 and 32.008 to 

refer to the responsibilities of the 

contracting officer at 32.604 when 

notified by the contractor of an 

overpayment. 

14. FAR Contract Clauses—Payment. 

Revises the contract clauses at FAR 

52.212–4(i)(5) and (6); 52.232–25(d); 

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

assure that the contractor remits 

payment to the payment office (rather 

than the contracting officer) and the 

payment office is able to properly 

account for the remittance. Also, revises 

Alternate I of the clause at FAR 52.212– 

4 to be consistent with the requirements 

of the basic clause. 

15. FAR 52.232–17, Interest. Revises 

FAR 52.232–17 to conform with the 

other revisions. 

16. FAR 52.212–4 and 52.232–17. 

Revises the subject clauses to be 

consistent with the policy at FAR Part 

32: 

a. The Government’s right to make a 

demand for payment and start the 

interest clock running under the 

contract is ensured by adding a 

procedure to the Interest Clause 

permitting a demand for payment. 

b. The Government’s right to make a 

demand for payment without first 

issuing a final decision of the 

contracting officer is ensured by 

incorporating the procedure into the 

interest clause. A final decision is 

required only if the contractor disagrees 

with the demand for payment. 

DoD, GSA, and NASA published a 

proposed rule in the Federal Register at 

71 FR 62230, October 24, 2006. 

Comments were received from three 

respondents in response to the proposed 

rule. The Councils considered all of the 

comments and recommendations in 

developing the final rule. A discussion 

of the comments is provided below. 

B. Disposition of Comments: 

1. Comment. One commenter 

recommended deleting the requirement 

at FAR 32.607–2(a)(2) for contractors to 

provide contracting officers information 

on the advisability of debt deferment to 

avoid possible over-collections when 

the contractor is not disputing the debt. 

When the contractor does not dispute 

the debt, there can be no overcollection. 

Response. Under the Contract 

Disputes Act of 1978, contractors have 

one year to file an appeal. While a 

contractor may not initially dispute the 

claim, a contractor can subsequently 

decide to file an appeal within the 

statutory time limits. Therefore, overcollections can occur when a contractor 


pwalker on PROD1PC71 with RULES3
Federal Register / Vol. 73, No. 181 / Wednesday, September 17, 2008 / Rules and Regulations 53999 

does not initially dispute the claim but 

subsequently files a claim. However, the 

office designated in agency procedures 

is responsible for determining whether 

the deferment of collection should be 

granted to avoid possible overcollections. That determination does not 

require input from the contractor. 

Therefore, the Councils deleted the 

requirement as recommended. In 

addition, the proposed rule also 

required contractors to provide the same 

information when the contractor is 

disputing the debt. The Councils also 

deleted that requirement since the 

determination does not require input 

from the contractor. 

2. Comment. One commenter 

recommended moving the requirement 

at FAR 32.607–2(c)(2) for contracting 

officers to consider any information 

necessary to develop a recommendation 

on a deferment request before the 

requirement for the contracting officer 

to forward the recommendation on the 

deferment request to the office 

designated in agency procedures since 

the contracting officer should consider 

the information before developing and 

sending the recommendation. 

Response. The Councils agreed and 

revised the rule as recommended. 

3. Comment. One commenter said the 

statement at FAR 32.607–2(d) that an 

agency is required to use current year 

unexpired funds to pay interest on overcollections is unnecessary since the 

information is related to a financial 

management matter, not a contracting 

matter. 

Response. The rule requires 

contracting officers to provide a 

recommendation on the contractor’s 

request for a deferment of collection, 

including the advisability of deferment 

to avoid possible over-collections. 

Contracting officers need to know the 

possible ramifications of overcollections to make an informed 

recommendation. 

4. Comment. One commenter stated 

that ‘‘actions filed by contractors shall 

not suspend or delay collection’’ in the 

last paragraph at FAR 32.607–2(j), 

‘‘deferment of collection,’’ made no 

sense since the subsection provides the 

rule for processing a deferment to 

suspend or defer collection. The 

commenter recommended rewording 

the requirement to say ‘‘the filing of an 

action under the Disputes clause does 

not suspend or delay the need for 

collection of a debt’’ and moving the 

requirement to the beginning of the 

subsection. 

Response. The Councils agree and 

revised the rule as recommended. 

5. Comment. One commenter said the 

statement in FAR 32.607–2(j) that ‘‘until 

the action is decided’’ was unnecessary 

and confusing since contractors do not 

have to file an ‘‘action’’ or appeal in 

order to be eligible for a deferment of 

collection. 

Response. The Councils agree and 

deleted the statement. 

6. Comment. One commenter 

recommended deleting the requirement 

at FAR 32.607–2(j) for contractors to 

present ‘‘a good and sufficient bond or 

other acceptable collateral in the 

amount of the claim’’ for a deferment of 

collection because the requirement 

conflicts with the requirements that 

allow deferment of collections when a 

claim is not filed. The contractor’s 

financial condition and promise to pay 

are considered ‘‘other acceptable 

collateral.’’ Also, the requirement for the 

contractor to present the collateral to the 

contracting officer within 30 days of 

filing a dispute makes no sense because 

there is no time limit requirement for 

filing a dispute. 

Response. A contractor’s financial 

condition and promise to pay are not 

‘‘other acceptable collateral.’’ Collateral 

is property pledged by a contractor to 

protect the interests of the Government. 

However, the office designated in 

agency procedure, not the contracting 

officer, is responsible for determining 

whether a bond or other acceptable 

collateral is needed. Therefore, the 

Councils deleted the statement as 

recommended. 

7. Comment. One commenter said the 

statement at FAR 32.607–2(j) that ‘‘any 

amount collected by the Government in 

excess of the amount found to be due on 

appeal shall be refunded to the 

contractor with interest’’ was misplaced 

since there can be no excess collection 

if payment is deferred. Also, this 

requirement would apply to cases where 

there is no deferment of collection but 

including it only in the subpart on 

deferment of collection means it would 

only apply to cases with deferments of 

collection. The requirement should be 

addressed in subsection FAR 32.608–2 

on ‘‘interest credits.’’ Further, the 

requirement says interest will be 

refunded to the contractor for any 

amounts collected by the Government in 

excess of the amount found due on 

appeal from ‘‘the date of collection’’ 

conflicts with the requirements in the 

subsection on ‘‘interest credits’’ that 

says the interest will be computed from 

the ‘‘date specified in the first demand 

for payment.’’ If the requirement is 

addressed in the subsection on ‘‘interest 

credits,’’ the last sentence of subpart 

FAR 32.607–2(j) that includes 

additional requirements for calculating 

interest on excess amounts collected by 

the Government becomes unnecessary 

and should be deleted. 

Response. The requirements of the 

subpart apply to all contractor requests 

for deferment of collections, not just to 

deferments granted by the Government. 

Therefore, there can be over-collections 

when the Government does not grant 

the deferment of collections. In 

addition, the requirements apply to all 

Government over-collections, not just 

those involving deferment of 

collections. Therefore, the coverage was 

relocated to the subsection on interest 

credits, and the last sentence of subpart 

32.607–2(j) was deleted as 

recommended. Also, the methodology 

for calculating interest in the subpart 

did conflict with the methodology in the 

subpart on ‘‘interest credits.’’ Therefore, 

the rule was revised to make the 

requirements consistent. Interest on 

Government over-collections begins on 

the date of over-collection, not the date 

of the first demand for payment. 

8. Comment. One commenter 

recommending deleting the 

methodology for computing interest 

charges from 32.608–1(a)(2) because it 

duplicates coverage in the clause at FAR 

52.232–7, Interest. 

Response. The Councils agree the 

language is redundant and deleted the 

text as recommended. 

9. Comment. One commenter 

recommended adding the requirement 

for making interest on contract debts 

part of the required elements for 

deferment agreements at 32.608–2(g) 

and deleting the requirement at 32.608– 

1(b) because it duplicates coverage at 

32.607(c) on installment payments and 

deferment of collection. 

Response. The Councils agree and 

revised the rule as recommended. 

10. Comment. One commenter 

recommended revising the coverage at 

32.608–2(b)(1) on interest credits to say 

interest ‘‘to be credited’’ instead of 

interest ‘‘to be charged’’ since the 

subsection deals with ‘‘interest credits.’’ 

Response. The Councils disagree and 

leave the rule as is. 

11. Comment. One commenter said 

including information such as lines of 

accounting in the demand for payment 

is excessive and not particularly 

relevant to the contractor. Instead, 

require the contracting officer to provide 

the distribution of the debt by line of 

accounting and ‘‘additional 

information’’ to allow the payment or 

finance office to identify the affected 

lines of accounting, appropriations, and 

contracts, when the demand for 

payment is forwarded to the payment 

office. Finance offices have procedures 

for debt collection or other recovery of 

monies owed that are in accordance 


pwalker on PROD1PC71 with RULES3
54000 Federal Register / Vol. 73, No. 181 / Wednesday, September 17, 2008 / Rules and Regulations 

with Department of Treasury regulations 

and policy. Most payment offices also 

know how to apply payments. Some of 

these procedures may overlap other 

policy or regulations such as those 

issued by the Department of Treasury. 

Response. The lines of accounting are 

required for agency finance or payment 

offices to properly record the debt. If the 

lines of accounting are not readily 

available, the rule authorizes issuing the 

demand for payment without the lines 

of accounting. The Councils see no 

reason to require contracting officers to 

separately report the lines of accounting 

if the information is readily available 

when the demand for payment is made. 

In addition, the Councils are unaware of 

any conflict with Treasury or other 

agency’s policy or regulations. 

12. Comment. One commenter 

recommended combining the 

requirements of FAR 32.604(b)(4)(iii) 

and (i). 

Response. The Councils believe the 

commenter is recommending combining 

the requirements at FAR 32.604(b)(4)(iii) 

and FAR 32.604(b)(4)(i). Both references 

discuss the methodology for calculating 

interest on contract debts that result 

from specific contract terms. The 

Councils agree and have revised the rule 

as recommended. 

13. Comment. One commenter said 

the rule should also allow contractors to 

remit checks ‘‘payable to the agency,’’ 

instead of requiring that the checks be 

‘‘payable to the Treasurer of the United 

States’’ because payments due an 

agency are made payable to the agency. 

Response. Section 2015 of the 

Treasury Financial Manual (TFM) says 

checks should be made payable to the 

organization maintaining the account to 

be credited, not to the Department of 

Treasury. Therefore, the Councils 

revised the rule to be consistent with 

the TFM. 

14. Comment. One commenter asked 

whether the required notification at 

32.604(b)(6) that the payment office may 

offset the debt against any payments 

otherwise due the contractor means any 

payment owed to the contractor by any 

Federal agency under any contract or 

only payments under the cognizant 

contract or other contracts awarded by 

the agency issuing the demand for 

payment. 

Response. For the first 180 days after 

the demand for payment, the agency 

issuing the demand for payment will 

attempt to offset the debt against any 

payments otherwise due from the 

agency to the contractor. If an agency is 

unable to recover the debt within 180 

days, agencies are required to transfer 

the debt to the Department of Treasury 

in accordance with the Debt Collection 

Improvement Act of 1996. The 

Department of Treasury will then offset 

the debt against any payment made by 

a Federal agency under any contract and 

other Federal payments to the 

delinquent debt holder under the 

cognizant contract or other contracts 

awarded by the agency issuing the 

demand letter. 

15. Comment. One commenter 

recommended including a statement in 

the required notice at FAR 32.604(b)(8) 

that requests for installment payments 

or deferment of collection must be 

written, provided to the contracting 

officer, and include ‘‘any information 

required.’’ 

Response. The commenter did not 

provide rationale for the change; 

however, the rule already requires that 

requests for installment payments or 

deferment of collection be written (see 

32.607–1 and 32.607–2(a)). The rule also 

identifies to whom the contractor 

should submits its request, i.e., payment 

office for installment payments and 

contracting officer for deferment of 

collections. Finally, nothing in the rule 

precludes agencies from requiring 

contractors to provide additional 

information to make a decision on a 

request for installment payments or 

deferment. 

16. Comment. One commenter asked 

if there was a point in time that the 

contracting officer is expected to do 

more than follow up with the payment 

office to determine whether the debt has 

been collected and credited to the 

correct appropriations. 

Response. The payment office is 

responsible for collecting debts 

identified by the contracting officer. As 

discussed above, agencies are required 

to transfer any debt that is delinquent 

more than 180 days to the Department 

of Treasury for collection. The 

Department of Treasury then offsets the 

debt against any payment made by a 

Federal agency under any contract and 

other Federal payments to the 

delinquent debt holder. As stated in the 

rule, contracting officers are not 

authorized to collect contract debts or 

otherwise agree to liquidate contract 

debts. 

17. Comment. One commenter said 

the requirement at 32.607(a) that the 

contracting officer cannot approve or 

deny a contractor’s request for 

installment payments or deferment of 

collections appears to contradict the 

requirement at FAR 32.605(a)(3) for the 

contracting officer to issue a final 

decision if the contractor requests a 

deferment of collection on a debt 

previously demanded by the contracting 

officer. 

Response. Approving or denying a 

contractor’s request for installment 

payments or deferment of collections is 

not the same as issuing a final decision. 

The contracting officer is required to 

issue a demand for payment as soon as 

the contracting officer has determined 

the existence and amount of a debt. In 

most cases, contractors willingly repay 

the debt after receiving the demand for 

payment. If a contractor instead requests 

a deferment of collection or otherwise 

does not repay the debt in accordance 

with the demand for payment, the 

Government is required to initiate a 

claim against the contractor to ensure 

the debt is repaid. Government claims 

require a contracting officer’s final 

decision under the Contract Disputes 

Act. 

18. Comment. One commenter said 

the proposed coverage at 32.607(b)(1) on 

the circumstances that might justify 

debt deferment or installment payments 

when the contractor has not appealed 

the debt or filed an action under the 

disputes clause appears to be 

information necessary for agency 

financing offices, not contracting 

officers, since the office designed to 

approve or deny these actions is 

probably the payment or finance office. 

The commenter questioned the purpose 

of and need for its inclusion in the FAR. 

Response. Contracting officers are 

required to provide the office designated 

in agency procedures for a decision on 

a deferment request a recommendation 

on the requests. Therefore, contracting 

officers need to understand the 

circumstances that might justify a 

deferment of collection. In addition, if 

the contractor’s operations under 

national defense contracts will be 

seriously impaired by immediate 

repayment, the contracting officer 

should provide the payment or finance 

office information that will be 

considered for an installment payment 

agreement or debt deferment. The 

Councils note the subject requirements 

are not changed by this rule. 

19. Comment. One commenter 

questioned the need for the deferment/ 

installment agreement requirements at 

32.607(b)(2) in the FAR since 

contracting officers are not authorized to 

approve or deny requests for deferments 

or installment payments. 

Response. The Councils note the 

subject requirements are not changed by 

this rule. The Councils believe it is 

appropriate to include the language so 

contracting officers and contractors 

understand what will be required if an 

agreement is reached. While the 

contracting officers do not approve or 

deny these requests, contracting officers 


pwalker on PROD1PC71 with RULES3
Federal Register / Vol. 73, No. 181 / Wednesday, September 17, 2008 / Rules and Regulations 54001 

routinely provide contractors assistance 

when preparing the requests. 

20. Comment. One commenter 

questioned how the requirement for the 

contracting officer to forward to the 

office designated in agency procedures 

for a decision (a) a copy of the 

contractor’s request for a deferment of 

collection, (b) a recommendation on that 

request, (c) a statement as to whether 

the contractor has an appeal pending or 

action filed under the disputes clause, 

and (d) a copy of the contracting 

officer’s final decision (see 32.607– 

2(c)(1)) is different from the contracting 

officer’s final decision. 

Response. The contracting officer’s 

final decision is one of the four items 

the contracting officer is required to 

forward to the office designated in 

agency procedure for a decision on the 

deferment request. The other required 

items provide additional information 

used by the office designated in agency 

procedure for a decision on the 

deferment request. Finally, a contracting 

officer has sole authority to determine 

the existence and amount of contract 

debts and to issue the final decision. 

That contracting officer’s final decision 

is not subject to any other office’s 

decision. 

21. Comment. One commenter said 

the coverage at 32.607–2(f) that states 

contracts and arrangements for 

deferment shall not provide that a claim 

of the Government will not become due 

and payable pending mutual agreement 

on the amount of the claim or, in the 

case of dispute, until a decision is 

reached is confusing and unclear as to 

its meaning. 

Response. The Councils note that the 

coverage is not changed by this rule. 

However, the Councils believe stating 

‘contracts and arrangements for 

deferments’ could be confusing since 

deferment agreements are binding 

contracts between the contractor and the 

Government. Therefore, the Councils 

deleted the reference to ‘‘contracts’’ and 

changed ‘‘arrangements for deferment’’ 

to ‘‘deferment agreements’’ to clarify the 

requirement. The remaining coverage 

says that the Government retains the 

right to collect the debt at any time. The 

Councils are unaware of any problems 

with this coverage. 

22. Comment. One commenter asked 

if the deferment agreement is a contract 

or whether the agreement should be 

incorporated into the contract to ensure 

the agreement is legally binding. 

Response. There is no need to 

incorporate the agreements into the 

affected contracts because the 

agreements themselves are legally 

binding contracts between the 

contractor and the Government. 

23. Comment. One commenter 

recommended revising the coverage on 

‘‘compromise’’ at 32.610 because the 

contracting officer has the authority to 

settle any Government claim under the 

Contract Disputes Act at any time 

except for claims pending litigation, 

which are the responsibility of the 

Attorney General. While the term 

‘‘compromise’’ is not defined in the 

Federal Claims Collection Act or the 

implementing regulations at 31 CFR 

900.2, Black’s Law Dictionary defines 

‘‘compromise’’ as settlement. The 

commenter recommended revising the 

coverage to allow contracting officers to 

‘‘compromise’’ debt claims that fall 

under the Contract Disputes Act to be 

consistent with FAR 33.204 and 33.210. 

Response. Contracting officers have 

the authority to resolve all contractual 

issues in controversy. Contracting 

officers do not have the authority to 

compromise any resulting debt after the 

controversial issues have been resolved. 

24. Comment. One commenter 

recommended requiring contracting 

officers to attempt to resolve any 

disputes over the existence of a debt or 

the amount through negotiations as part 

of the initial debt determination at FAR 

32.605(a) to be consistent with the 

requirements at FAR 33.204. 

Response. The rule is consistent with 

FAR 33.204, which requires contracting 

officers to use reasonable efforts to 

resolve controversies prior to the 

submission of a claim. Making a debt 

determination does not constitute 

submission of a claim. A Government 

claim is submitted when the contracting 

officer issues a final decision on the 

claim. Nothing in the rule prevents the 

Government from attempting to resolve 

controversies prior to the contracting 

officer’s final decision. 

25. Comment. One commenter said 

the coverage on final decisions at FAR 

32.605 duplicates the coverage on 

contracting officer’s decisions at FAR 

33.211. The commenter also said all 

coverage on final decisions should be 

addressed in one FAR section and that 

section should be FAR Subpart 33.2, 

Disputes and Appeals. 

Response. FAR 32.6 prescribes the 

policies and procedures for identifying, 

collecting, and deferring contract debts. 

Part 33 prescribes policies and 

procedures for processing contract 

disputes and appeals. Contracting 

officer’s final decisions are key to both 

processes. Therefore, the Councils 

believe it is appropriate to include 

coverage in both subparts. 

This is not a significant regulatory 

action and, therefore, was not subject to 

review under Section 6(b) of Executive 

Order 12866, Regulatory Planning and 

Review, dated September 30, 1993. This 

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

804. 

C. Regulatory Flexibility Act 

The Department of Defense, the 

General Services Administration, and 

the National Aeronautics and Space 

Administration certify that this final 

rule will not have a significant 

economic impact on a substantial 

number of small entities within the 

meaning of the Regulatory Flexibility 

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

regulatory changes are predominantly 

internal operating procedures for 

contracting officers and will not 

significantly change duties of small 

entities under their contract. 

D. Paperwork Reduction Act 

The Paperwork Reduction Act does 

not apply because the changes to the 

FAR do not impose information 

collection requirements that require the 

approval of the Office of Management 

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

seq. 

List of Subjects in 48 CFR Parts 12, 13, 

32, 33, 36, 42, and 52 

Government procurement. 

Dated: September 9, 2008. 

Al Matera, 

Director, Office of Acquisition Policy. 

■ Therefore, DoD, GSA, and NASA 

amend 48 CFR parts 12, 13, 32, 33, 36, 

42, and 52 as set forth below: 

■ 1. The authority citation for 48 CFR 

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

continues to read as follows: 

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

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

PART 12—ACQUISITION OF 

COMMERCIAL ITEMS 

■ 2. Revise section 12.215 to read as 

follows: 

12.215 Notification of overpayment. 

If the contractor notifies the 

contracting officer of a duplicate 

payment or that the Government has 

otherwise overpaid, the contracting 

officer shall follow the procedures at 

32.604. 

PART 13—SIMPLIFIED ACQUISITION 

PROCEDURES 

■ 3. Amend section 13.401 by revising 

paragraph (b) to read as follows: 

13.401 General. 

* * * * * 

(b) The contracting officer shall be 

primarily responsible for determining 

the amount of debts resulting from 

failure of contractors to properly 


pwalker on PROD1PC71 with RULES3
54002 Federal Register / Vol. 73, No. 181 / Wednesday, September 17, 2008 / Rules and Regulations 

replace, repair, or correct supplies lost, 

damaged, or not conforming to purchase 

requirements (see 32.602 and 32.603). 

PART 32—CONTRACT FINANCING 

■ 4. Revise section 32.008 to read as 

follows: 

32.008 Notification of overpayment. 

If the contractor notifies the 

contracting officer of a duplicate 

payment or that the Government has 

otherwise overpaid, the contracting 

officer shall follow the procedures at 

32.604. 

■ 5. Revise Subpart 32.6 to read as 

follows: 

Sec. 

32.600 Scope of subpart. 

32.601 General. 

32.602 Responsibilities. 

32.603 Debt determination. 

32.604 Demand for payment. 

32.605 Final decisions. 

32.606 Debt collection. 

32.607 Installment payments and 

deferment of collection. 

32.607–1 Installment payments. 

32.607–2 Deferment of collection. 

32.608 Interest. 

32.608–1 Interest charges. 

32.608–2 Interest credits. 

32.609 Delays in receipt of notices or 

demands. 

32.610 Compromising debts. 

32.611 Contract clause. 

Subpart 32.6—Contract Debts 

32.600 Scope of subpart. 

This subpart prescribes policies and 

procedures for identifying, collecting, 

and deferring collection of contract 

debts (including interest, if applicable). 

Sections 32.607, 32.608, and 32.610 of 

this subpart do not apply to claims 

against common carriers for 

transportation overcharges and freight 

and cargo losses (31 U.S.C. 3726). 

32.601 General. 

(a) Contract debts are amounts that— 

(1) Have been paid to a contractor to 

which the contractor is not currently 

entitled under the terms and conditions 

of the contract; or 

(2) Are otherwise due from the 

contractor under the terms and 

conditions of the contract. 

(b) Contract debts include, but are not 

limited to, the following: 

(1) Billing and price reductions 

resulting from contract terms for price 

redetermination or for determination of 

prices under incentive type contracts. 

(2) Price or cost reductions for 

defective cost or pricing data. 

(3) Financing payments determined to 

be in excess of the contract limitations 

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

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

Payments, or any contract clause for 

commercial item financing. 

(4) Increases to financing payment 

liquidation rates. 

(5) Overpayments disclosed by 

quarterly statements required under 

price redetermination or incentive 

contracts. 

(6) Price adjustments resulting from 

Cost Accounting Standards (CAS) 

noncompliances or changes in cost 

accounting practice. 

(7) Reinspection costs for 

nonconforming supplies or services. 

(8) Duplicate or erroneous payments. 

(9) Damages or excess costs related to 

defaults in performance. 

(10) Breach of contract obligations 

concerning progress payments, 

performance-based payments, advance 

payments, commercial item financing, 

or Government-furnished property. 

(11) Government expense of 

correcting defects. 

(12) Overpayments related to errors in 

quantity or billing or deficiencies in 

quality. 

(13) Delinquency in contractor 

payments due under agreements or 

arrangements for deferral or 

postponement of collections. 

(14) Reimbursement of amounts due 

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

32.602 Responsibilities. 

(a) The contracting officer has primary 

responsibility for identifying and 

demanding payment of contract debts 

except those resulting from errors made 

by the payment office. The contracting 

officer shall not collect contract debts or 

otherwise agree to liquidate contract 

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

against existing unpaid bills due the 

contractor, or allow contractors to retain 

contract debts to cover amounts that 

may become payable in future periods). 

(b) The payment office has primary 

responsibility for— 

(1) Collecting contract debts identified 

by contracting officers; 

(2) Identifying and collecting 

duplicate and erroneous payments; and 

(3) Authorizing the liquidation of 

contract debts in accordance with 

agency procedures. 

32.603 Debt determination. 

(a) If the contracting officer has any 

indication that a contractor owes money 

to the Government under a contract, the 

contracting officer shall determine 

promptly whether an actual debt is due 

and the amount. Any unnecessary delay 

may contribute to— 

(1) Loss of timely availability of the 

funds to the program for which the 

funds were initially provided; 

(2) Increased difficulty in collecting 

the debt; or 

(3) Actual monetary loss to the 

Government. 

(b) The amount of indebtedness 

determined by the contracting officer 

shall be an amount that— 

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

and 

(2) Is consistent with the contract 

terms. 

32.604 Demand for payment. 

(a) Except as provided in paragraph 

(c) of this section, the contracting officer 

shall take the following actions: 

(1) Issue the demand for payment as 

soon as the contracting officer has 

determined that an actual debt is due 

the Government and the amount. 

(2) Issue the demand for payment 

even if— 

(i) The debt is or will be the subject 

of a bilateral modification; 

(ii) The contractor is otherwise 

obligated to pay the money under the 

existing contract terms; or 

(iii) The contractor has agreed to 

repay the debt. 

(3) Issue the demand for payment as 

a part of the final decision, if a final 

decision is required by 32.605(a). 

(b) The demand for payment shall 

include the following: 

(1) A description of the debt, 

including the debt amount. 

(2) A distribution of the principal 

amount of the debt by line(s) of 

accounting subject to the following: 

(i) If the debt affects multiple lines of 

accounting, the contracting officer shall, 

to the maximum extent practicable, 

identify all affected lines of accounting. 

If it is not practicable to identify all 

affected lines of accounting, the 

contracting officer may select 

representative lines of accounting in 

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

this section. 

(ii) In selecting representative lines of 

accounting, the contracting officer 

shall— 

(A) Consider the affected departments 

or agencies, years of appropriations, and 

the predominant types of 

appropriations; and 

(B) Not distribute to any line of 

accounting an amount of the principal 

in excess of the total obligation for the 

line of accounting; and 

(iii) Include the lines of accounting 

even if the associated funds are expired 

or cancelled. While cancelled funds will 

be deposited in a miscellaneous receipt 

account of the Treasury if collected, the 

funds are tracked under the closed year 

appropriation(s) to comply with the 

Anti-Deficiency Act. 

(iv) If the debt affects multiple 

contracts and the lines of accounting are 

not readily available, the contracting 

officer shall— 


pwalker on PROD1PC71 with RULES3
Federal Register / Vol. 73, No. 181 / Wednesday, September 17, 2008 / Rules and Regulations 54003 

(A) Issue the demand for payment 

without the distribution of the principal 

amount to the affected lines of 

accounting; 

(B) Include a statement in the demand 

for payment advising when the 

distribution will be provided; and 

(C) Provide the distribution by the 

date identified in the demand for 

payment. 

(3) The basis for and amount of any 

accrued interest or penalty. 

(4)(i) For debts resulting from specific 

contract terms (e.g., debts resulting from 

incentive clause provisions, Quarterly 

Limitation on Payments Statement, Cost 

Accounting Standards, price reduction 

for defective pricing), a notification 

stating that payment should be made 

promptly, and that interest is due in 

accordance with the terms of the 

contract. Interest shall be computed 

from the date specified in the applicable 

contract clause until repayment by the 

contractor. The interest rate shall be the 

rate specified in the applicable contract 

clause. In the case of a debt arising from 

a price reduction for defective pricing, 

or as specifically set forth in a Cost 

Accounting Standards (CAS) clause in 

the contract, interest is computed from 

the date of overpayment by the 

Government until repayment by the 

contractor at the underpayment rate 

established by the Secretary of the 

Treasury, for the periods affected, under 

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

(ii) For all other contract debts, a 

notification stating that any amounts not 

paid within 30 days from the date of the 

demand for payment will bear interest. 

Interest shall be computed from the date 

of the demand for payment until 

repayment by the contractor. The 

interest rate shall be the interest rate 

established by the Secretary of the 

Treasury, as provided in Section 611 of 

the Contract Disputes Act of 1978 

(Public Law 95–563), which is 

applicable to the period in which the 

amount becomes due, and then at the 

rate applicable for each six-month 

period as established by the Secretary 

until the amount is paid. 

(5) A statement advising the 

contractor— 

(i) To contact the contracting officer if 

the contractor believes the debt is 

invalid or the amount is incorrect; and 

(ii) If the contractor agrees, to remit a 

check payable to the agency’s payment 

office annotated with the contract 

number along with a copy of the 

demand for payment to the payment 

office identified in the contract or as 

otherwise specified in the demand letter 

in accordance with agency procedures. 

(6) Notification that the payment 

office may initiate procedures, in 

accordance with the applicable statutory 

and regulatory requirements, to offset 

the debt against any payments otherwise 

due the contractor. 

(7) Notification that the debt may be 

subject to administrative charges in 

accordance with the requirements of 31 

U.S.C. 3717(e) and the Debt Collection 

Improvement Act of 1996. 

(8) Notification that the contractor 

may submit a request for installment 

payments or deferment of collection if 

immediate payment is not practicable or 

if the amount is disputed. 

(c) Except as provided in paragraph 

(d) of this section, the contracting officer 

should not issue a demand for payment 

if the contracting officer only becomes 

aware of the debt when the contractor— 

(1) Provides a lump sum payment or 

submits a credit invoice. (A credit 

invoice is a contractor’s request to 

liquidate the debt against existing 

unpaid bills due the contractor); or 

(2) Notifies the contracting officer that 

the payment office overpaid on an 

invoice payment. When the contractor 

provides the notification, the 

contracting officer shall notify the 

payment office of the overpayment. 

(d) If a demand for payment was not 

issued as provided for in paragraph (c) 

of this section, the contracting officer 

shall issue a demand for payment no 

sooner than 30 days after the contracting 

officer becomes aware of the debt 

unless— 

(1) The contractor has liquidated the 

debt; 

(2) The contractor has requested an 

installment payment agreement; or 

(3) The payment office has issued a 

demand for payment. 

(e) The contracting officer shall— 

(1) Furnish a copy of the demand for 

payment to the contractor by certified 

mail, return receipt requested, or by any 

other method that provides evidence of 

receipt; and 

(2) Forward a copy of the demand to 

the payment office. 

32.605 Final decisions. 

(a) The contracting officer shall issue 

a final decision as required by 33.211 

if— 

(1) The contracting officer and the 

contractor are unable to reach agreement 

on the existence or amount of a debt in 

a timely manner; 

(2) The contractor fails to liquidate a 

debt previously demanded by the 

contracting officer within the timeline 

specified in the demand for payment 

unless the amounts were not repaid 

because the contractor has requested an 

installment payment agreement; or 

(3) The contractor requests a 

deferment of collection on a debt 

previously demanded by the contracting 

officer (see 32.607–2). 

(b) If a demand for payment was 

previously issued for the debt, the 

demand for payment included in the 

final decision shall identify the same 

due date as the original demand for 

payment. 

(c) The contracting officer shall— 

(1) Furnish the decision to the 

contractor by certified mail, return 

receipt requested, or by any other 

method that provides evidence of 

receipt; and 

(2) Forward a copy to the payment 

office identified in the contract. 

32.606 Debt collection. 

(a) If the contractor has not liquidated 

the debt within 30 days of the date due 

or requested installment payments or 

deferment of collection, the payment 

office shall initiate withholding of 

principal, interest, penalties, and 

administrative charges. In the event the 

contract is assigned under the 

Assignment of Claims Act of 1940 (31 

U.S.C. 3727 and 41 U.S.C. 15), the rights 

of the assignee will be scrupulously 

respected and withholding of payments 

shall be consistent with those rights. For 

additional information on assignment of 

claims, see Subpart 32.8. 

(b) As provided for in the Debt 

Collection Improvement Act of 1996 (31 

U.S.C. 3711(g)(1)), payment offices are 

required to transfer any debt that is 

delinquent more than 180 days to the 

Department of Treasury for collection. 

(c) The contracting officer shall 

periodically follow up with the payment 

office to determine whether the debt has 

been collected and credited to the 

correct appropriation(s). 

32.607 Installment payments and 

deferment of collection. 

(a) The contracting officer shall not 

approve or deny a contractor’s request 

for installment payments or deferment 

of collections. The office designated in 

agency procedures is responsible for 

approving or denying requests for 

installment payments or deferment of 

collections. 

(b) If a contractor has not appealed the 

debt or filed an action under the 

Disputes clause of the contract and the 

contractor has submitted a proposal for 

debt deferment or installment 

payments— 

(1) The office designated in agency 

procedures may arrange for deferment/ 

installment payments if the contractor is 

unable to pay at once in full or the 

contractor’s operations under national 

defense contracts would be seriously 

impaired. The arrangement shall 

include appropriate covenants and 


pwalker on PROD1PC71 with RULES3
54004 Federal Register / Vol. 73, No. 181 / Wednesday, September 17, 2008 / Rules and Regulations 

securities and should be limited to the 

shortest practicable maturity; and 

(2) The deferment/installment 

agreement shall include a specific 

schedule or plan for payment. It should 

permit the Government to make 

periodic financial reviews of the 

contractor and to require payments 

earlier than required by the agreement if 

the Government considers the 

contractor’s ability to pay improved. It 

should also provide for required stated 

or measurable payments on the 

occurrence of specific events or 

contingencies that improve the 

contractor’s ability to pay. 

(c) If not already applicable under the 

contract terms, interest on contract debt 

shall be made an element of any 

agreement entered into for installment 

payments or deferment of collection. 

32.607–1 Installment payments. 

If a contractor requests an installment 

payment agreement, the contracting 

officer shall notify the contractor to 

send a written request for installment 

payments to the office designated in 

agency procedures. 

32.607–2 Deferment of collection. 

(a) All requests for deferment of 

collection must be submitted in writing 

to the contracting officer. 

(1) If the contractor has appealed the 

debt under the procedures of the 

Disputes clause of the contract, the 

information with the request for 

deferment may be limited to an 

explanation of the contractor’s financial 

condition. 

(2) Actions filed by contractors under 

the Disputes Clause shall not suspend or 

delay collection. 

(3) If there is no appeal pending or 

action filed under the Disputes clause of 

the contract, the following information 

about the contractor should be 

submitted with the request: 

(i) Financial condition. 

(ii) Contract backlog. 

(iii) Projected cash receipts and 

requirements. 

(iv) The feasibility of immediate 

payment of the debt. 

(v) The probable effect on operations 

of immediate payment in full. 

(b) Upon receipt of the contractor’s 

written request, the contracting officer 

shall promptly provide a notification to 

the payment office and advise the 

payment office that the contractor’s 

request is under consideration. 

(c)(1) The contracting officer should 

consider any information necessary to 

develop a recommendation on the 

deferment request. 

(2) The contracting officer shall 

forward the following to the office 

designated in agency procedures for a 

decision: 

(i) A copy of the contractor’s request 

for a deferment of collection. 

(ii) A written recommendation on the 

request and the basis for the 

recommendation including the 

advisability of deferment to avoid 

possible overcollections. 

(iii) A statement as to whether the 

contractor has an appeal pending or 

action filed under the Disputes clause of 

the contract and the docket number if 

the appeal has been filed. 

(iv) A copy of the contracting officer’s 

final decision (see 32.605). 

(d) The office designated in agency 

procedures may authorize a deferment 

pending the resolution of appeal to 

avoid possible overcollections. The 

agency is required to use unexpired 

funds to pay interest on overcollections. 

(e) Deferments pending disposition of 

appeal may be granted to small business 

concerns and financially weak 

contractors, balancing the need for 

Government security against loss and 

undue hardship on the contractor. 

(f) The deferment agreement shall not 

provide that a claim of the Government 

will not become due and payable 

pending mutual agreement on the 

amount of the claim or, in the case of 

a dispute, until the decision is reached. 

(g) At a minimum, the deferment 

agreement shall contain the following: 

(1) A description of the debt. 

(2) The date of first demand for 

payment. 

(3) Notice of an interest charge, in 

conformity with 32.608 and the FAR 

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

case of a debt arising from a defective 

pricing or a CAS noncompliance 

overpayment, interest, as prescribed by 

the applicable Price Reduction for 

Defective Cost or Pricing Data or CAS 

clause (see 32.607(c)). 

(4) Identification of the office to 

which the contractor is to send debt 

payments. 

(5) A requirement for the contractor to 

submit financial information requested 

by the Government and for reasonable 

access to the contractor’s records and 

property by Government 

representatives. 

(6) Provision for the Government to 

terminate the deferment agreement and 

accelerate the maturity of the debt if the 

contractor defaults or if bankruptcy or 

insolvency proceedings are instituted by 

or against the contractor. 

(7) Protective requirements that are 

considered by the Government to be 

prudent and feasible in the specific 

circumstances. The coverage of 

protective terms at 32.409 and 32.501– 

5 may be used as a guide. 

(h) If a contractor appeal of the debt 

determination is pending, the deferment 

agreement shall also include a 

requirement that the contractor shall— 

(1) Diligently prosecute the appeal; 

and 

(2) Pay the debt in full when the 

appeal is decided, or when the parties 

reach agreement on the debt amount. 

(i) The deferment agreement may 

provide for the right to make early 

payments without prejudice, for refund 

of overpayments, and for crediting of 

interest. 

32.608 Interest. 

32.608–1 Interest charges. 

Unless specified otherwise in the 

clause at 52.232–17, Interest, interest 

charges shall apply to any contract debt 

unpaid after 30 days from the issuance 

of a demand unless— 

(a) The contract is a kind excluded 

under 32.611; or 

(b) The contract or debt has been 

exempted from interest charges under 

agency procedures. 

32.608–2 Interest credits. 

(a) An equitable interest credit shall 

be applied under the following 

circumstances: 

(1) When the amount of debt initially 

determined is subsequently reduced; 

e.g., through a successful appeal. 

(2) When any amount collected by the 

Government is in excess of the amount 

found to be due on appeal under the 

Disputes Clause of the contract. 

(3) When the collection procedures 

followed in a given case result in an 

overcollection of the debt due. 

(4) When the responsible official 

determines that the Government has 

unduly delayed payments to the 

contractor on the same contract at some 

time during the period to which the 

interest charge applied, provided an 

interest penalty was not paid for such 

late payment. 

(b) Any appropriate interest credits 

shall be computed under the following 

procedures: 

(1) Interest at the rate under 52.232– 

17 shall be charged on the reduced debt 

from the date of collection by the 

Government until the date the monies 

are remitted to the contractor. 

(2) Interest may not be reduced for 

any time between the due date under 

the demand and the period covered by 

a deferment of collection, unless the 

contract includes an interest clause; e.g., 

the clause prescribed in 32.611. 

(3) Interest shall not be credited in an 

amount that, when added to other 

amounts refunded or released to the 

contractor, exceeds the total amount 


pwalker on PROD1PC71 with RULES3
Federal Register / Vol. 73, No. 181 / Wednesday, September 17, 2008 / Rules and Regulations 54005 

that has been collected, or withheld for 

the purpose of collecting the debt. This 

limitation shall be further reduced by 

the amount of any limitation applicable 

under paragraph (b)(2) of this 

subsection. 

32.609 Delays in receipt of notices or 

demands. 

If interest is accrued based on the date 

of the demand letter and delivery of the 

demand letter is delayed by the 

Government (e.g., undue delay after 

dating at the originating office or delays 

in the mail), the date of the debt and 

accrual of interest shall be extended to 

a time that is fair and reasonable under 

the particular circumstances. 

32.610 Compromising debts. 

For debts under $100,000, excluding 

interest, the designated agency official 

may compromise the debt pursuant to 

the Federal Claims Collection Standards 

(31 CFR part 902) and agency 

regulations. Unless specifically 

authorized by agency procedures, 

contracting officers cannot compromise 

debts. 

32.611 Contract clause. 

(a) The contracting officer shall insert 

the clause at 52.232—17, Interest, in 

solicitations and contracts unless it is 

contemplated that the contract will be 

in one or more of the following 

categories: 

(1) Contracts at or below the 

simplified acquisition threshold. 

(2) Contracts with Government 

agencies. 

(3) Contracts with a State or local 

government or instrumentality. 

(4) Contracts with a foreign 

government or instrumentality. 

(5) Contracts without any provision 

for profit or fee with a nonprofit 

organization. 

(6) Contracts described in Subpart 5.5, 

Paid Advertisements. 

(7) Any other exceptions authorized 

under agency procedures. 

(b) The contracting officer may insert 

the FAR clause at 52.232–17, Interest, in 

solicitations and contracts when it is 

contemplated that the contract will be 

in any of the categories specified in 

32.611(a). 

PART 33—PROTESTS, DISPUTES, 

AND APPEALS 

33.208 [Amended] 

■ 6. Amend section 33.208 by removing 

from paragraph (b) ‘‘32.614’’ and adding 

‘‘the clause at 52.232–17’’ in its place. 

33.211 [Amended] 

■ 7. Amend section 33.211 by removing 

from paragraph (a)(4)(vi) ‘‘32.610(b’’) 

and adding ‘‘32.604 and 32.605’’ in its 

place. 

PART 36—CONSTRUCTION AND 

ARCHITECT-ENGINEER CONTRACTS 

36.608 [Amended] 

■ 8. Amend section 36.608 in the fourth 

sentence by removing ‘‘collect’’ and 

adding ‘‘issue a demand for payment of’’ 

in its place. 

PART 42—CONTRACT 

ADMINISTRATION AND AUDIT 

SERVICES 

■ 9. Amend section 42.302 by revising 

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

42.302 Contract administration functions. 

(a) * * * 

(17) Analyze quarterly limitation on 

payments statements and take action in 

accordance with Subpart 32.6 to recover 

overpayments from the contractor. 

* * * * * 

PART 52—SOLICITATION PROVISIONS 

AND CONTRACT CLAUSES 

■ 10. Amend section 52.212–4 by— 

■ a. Revising the date of the clause; 

■ b. Revising paragraph (i)(5); 

■ c. Adding paragraph (i)(6); and 

■ d. Amending Alternate I as follows: 

■ 1. Revising the date of Alternate I; 

■ 2. Revising paragraph (i)(5); and 

■ 3. Redesignating paragraphs (i)(6) 

through (i)(9) as (i)(7) through (i)(10), 

respectively, and adding a new 

paragraph (i)(6). 

The revised and added text reads as 

follows: 

52.212–4 Contract Terms and 

Conditions—Commercial Items. 

* * * * * 

CONTRACT TERMS AND 

CONDITIONS—COMMERCIAL ITEMS 

(OCT 2008) 

* * * * * 

(i) * * * 

(5) Overpayments. If the Contractor 

becomes aware of a duplicate contract 

financing or invoice payment or that the 

Government has otherwise overpaid on a 

contract financing or invoice payment, the 

Contractor shall— 

(i) Remit the overpayment amount to the 

payment office cited in the contract along 

with a description of the overpayment 

including the— 

(A) Circumstances of the overpayment 

(e.g., duplicate payment, erroneous payment, 

liquidation errors, date(s) of overpayment); 

(B) Affected contract number and delivery 

order number, if applicable; 

(C) Affected contract line item or subline 

item, if applicable; and 

(D) Contractor point of contact. 

(ii) Provide a copy of the remittance and 

supporting documentation to the Contracting 

Officer. 

(6) Interest. (i) All amounts that become 

payable by the Contractor to the Government 

under this contract shall bear simple interest 

from the date due until paid unless paid 

within 30 days of becoming due. The interest 

rate shall be the interest rate established by 

the Secretary of the Treasury as provided in 

Section 611 of the Contract Disputes Act of 

1978 (Public Law 95–563), which is 

applicable to the period in which the amount 

becomes due, as provided in (i)(6)(v) of this 

clause, and then at the rate applicable for 

each six-month period as fixed by the 

Secretary until the amount is paid. 

(ii) The Government may issue a demand 

for payment to the Contractor upon finding 

a debt is due under the contract. 

(iii) Final decisions. The Contracting 

Officer will issue a final decision as required 

by 33.211 if— 

(A) The Contracting Officer and the 

Contractor are unable to reach agreement on 

the existence or amount of a debt within 30 

days; 

(B) The Contractor fails to liquidate a debt 

previously demanded by the Contracting 

Officer within the timeline specified in the 

demand for payment unless the amounts 

were not repaid because the Contractor has 

requested an installment payment agreement; 

or 

(C) The Contractor requests a deferment of 

collection on a debt previously demanded by 

the Contracting Officer (see 32.607–2). 

(iv) If a demand for payment was 

previously issued for the debt, the demand 

for payment included in the final decision 

shall identify the same due date as the 

original demand for payment. 

(v) Amounts shall be due at the earliest of 

the following dates: 

(A) The date fixed under this contract. 

(B) The date of the first written demand for 

payment, including any demand for payment 

resulting from a default termination. 

(vi) The interest charge shall be computed 

for the actual number of calendar days 

involved beginning on the due date and 

ending on— 

(A) The date on which the designated 

office receives payment from the Contractor; 

(B) The date of issuance of a Government 

check to the Contractor from which an 

amount otherwise payable has been withheld 

as a credit against the contract debt; or 

(C) The date on which an amount withheld 

and applied to the contract debt would 

otherwise have become payable to the 

Contractor. 

(vii) The interest charge made under this 

clause may be reduced under the procedures 

prescribed in 32.608–2 of the Federal 

Acquisition Regulation in effect on the date 

of this contract. 

* * * * * 

Alternate I (OCT 2008). * * * 

* * * * * 

(i) * * * 

(5) Overpayments/Underpayments. Each 

payment previously made shall be subject to 

reduction to the extent of amounts, on 

preceding invoices, that are found by the 

Contracting Officer not to have been properly 

payable and shall also be subject to reduction 

for overpayments or to increase for 

underpayments. The Contractor shall 


pwalker on PROD1PC71 with RULES3
54006 Federal Register / Vol. 73, No. 181 / Wednesday, September 17, 2008 / Rules and Regulations 

promptly pay any such reduction within 30 

days unless the parties agree otherwise. The 

Government within 30 days will pay any 

such increases, unless the parties agree 

otherwise. The Contractor’s payment will be 

made by check. If the Contractor becomes 

aware of a duplicate invoice payment or that 

the Government has otherwise overpaid on 

an invoice payment, the Contractor shall— 

(i) Remit the overpayment amount to the 

payment office cited in the contract along 

with a description of the overpayment 

including the— 

(A) Circumstances of the overpayment 

(e.g., duplicate payment, erroneous payment, 

liquidation errors, date(s) of overpayment); 

(B) Affected contract number and delivery 

order number, if applicable; 

(C) Affected contract line item or subline 

item, if applicable; and 

(D) Contractor point of contact. 

(ii) Provide a copy of the remittance and 

supporting documentation to the Contracting 

Officer. 

(6)(i) All amounts that become payable by 

the Contractor to the Government under this 

contract shall bear simple interest from the 

date due until paid unless paid within 30 

days of becoming due. The interest rate shall 

be the interest rate established by the 

Secretary of the Treasury, as provided in 

section 611 of the Contract Disputes Act of 

1978 (Public Law 95–563), which is 

applicable to the period in which the amount 

becomes due, and then at the rate applicable 

for each six month period as established by 

the Secretary until the amount is paid. 

(ii) The Government may issue a demand 

for payment to the Contractor upon finding 

a debt is due under the contract. 

(iii) Final Decisions. The Contracting 

Officer will issue a final decision as required 

by 33.211 if— 

(A) The Contracting Officer and the 

Contractor are unable to reach agreement on 

the existence or amount of a debt in a timely 

manner; 

(B) The Contractor fails to liquidate a debt 

previously demanded by the Contracting 

Officer within the timeline specified in the 

demand for payment unless the amounts 

were not repaid because the Contractor has 

requested an installment payment agreement; 

or 

(C) The Contractor requests a deferment of 

collection on a debt previously demanded by 

the Contracting Officer (see FAR 32.607–2). 

(iv) If a demand for payment was 

previously issued for the debt, the demand 

for payment included in the final decision 

shall identify the same due date as the 

original demand for payment. 

(v) Amounts shall be due at the earliest of 

the following dates: 

(A) The date fixed under this contract. 

(B) The date of the first written demand for 

payment, including any demand for payment 

resulting from a default termination. 

(vi) The interest charge shall be computed 

for the actual number of calendar days 

involved beginning on the due date and 

ending on— 

(A) The date on which the designated 

office receives payment from the Contractor; 

(B) The date of issuance of a Government 

check to the Contractor from which an 

amount otherwise payable has been withheld 

as a credit against the contract debt; or 

(C) The date on which an amount withheld 

and applied to the contract debt would 

otherwise have become payable to the 

Contractor. 

(vii) The interest charge made under this 

clause may be reduced under the procedures 

prescribed in 32.608–2 of the Federal 

Acquisition Regulation in effect on the date 

of this contract. 

(viii) Upon receipt and approval of the 

invoice designated by the Contractor as the 

‘‘completion invoice’’ and supporting 

documentation, and upon compliance by the 

Contractor with all terms of this contract, any 

outstanding balances will be paid within 30 

days unless the parties agree otherwise. The 

completion invoice, and supporting 

documentation, shall be submitted by the 

Contractor as promptly as practicable 

following completion of the work under this 

contract, but in no event later than 1 year (or 

such longer period as the Contracting Officer 

may approve in writing) from the date of 

completion. 

* * * * * 

■ 11. Amend section 52.213–4 by 

revising the date of the clause and 

paragraph (a)(2)(iv) to read as follows: 

52.213–4 Terms and Conditions— 

Simplified Acquisitions (Other Than 

Commercial Items). 

* * * * * 

TERMS AND CONDITIONS— 

SIMPLIFIED ACQUISITIONS (OTHER 

THAN COMMERCIAL ITEMS) (OCT 

2008) 

* * * * * 

(a) * * * 

(2) * * * 

(iv) 52.232–25, Prompt Payment (OCT 

2008). 

* * * * * 

■ 12. Revise section 52.232–17 to read 

as follows: 

52.232–17 Interest. 

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

insert the following clause: 

INTEREST (OCT 2008) 

(a) Except as otherwise provided in this 

contract under a Price Reduction for 

Defective Cost or Pricing Data clause or a 

Cost Accounting Standards clause, all 

amounts that become payable by the 

Contractor to the Government under this 

contract shall bear simple interest from the 

date due until paid unless paid within 30 

days of becoming due. The interest rate shall 

be the interest rate established by the 

Secretary of the Treasury as provided in 

Section 611 of the Contract Disputes Act of 

1978 (Public Law 95–563), which is 

applicable to the period in which the amount 

becomes due, as provided in paragraph (e) of 

this clause, and then at the rate applicable for 

each six-month period as fixed by the 

Secretary until the amount is paid. 

(b) The Government may issue a demand 

for payment to the Contractor upon finding 

a debt is due under the contract. 

(c) Final Decisions. The Contracting Officer 

will issue a final decision as required by 

33.211 if— 

(1) The Contracting Officer and the 

Contractor are unable to reach agreement on 

the existence or amount of a debt in a timely 

manner; 

(2) The Contractor fails to liquidate a debt 

previously demanded by the Contracting 

Officer within the timeline specified in the 

demand for payment unless the amounts 

were not repaid because the Contractor has 

requested an installment payment agreement; 

or 

(3) The Contractor requests a deferment of 

collection on a debt previously demanded by 

the Contracting Officer (see 32.607–2). 

(d) If a demand for payment was 

previously issued for the debt, the demand 

for payment included in the final decision 

shall identify the same due date as the 

original demand for payment. 

(e) Amounts shall be due at the earliest of 

the following dates: 

(1) The date fixed under this contract. 

(2) The date of the first written demand for 

payment, including any demand for payment 

resulting from a default termination. 

(f) The interest charge shall be computed 

for the actual number of calendar days 

involved beginning on the due date and 

ending on— 

(1) The date on which the designated office 

receives payment from the Contractor; 

(2) The date of issuance of a Government 

check to the Contractor from which an 

amount otherwise payable has been withheld 

as a credit against the contract debt; or 

(3) The date on which an amount withheld 

and applied to the contract debt would 

otherwise have become payable to the 

Contractor. 

(g) The interest charge made under this 

clause may be reduced under the procedures 

prescribed in 32.608–2 of the Federal 

Acquisition Regulation in effect on the date 

of this contract. 

(End of clause) 

■ 13. Amend section 52.232–25 by 

revising the date of the clause and 

paragraph (d) to read as follows: 

52.232–25 Prompt Payment. 

* * * * * 

PROMPT PAYMENT (OCT 2008) 

* * * * * 

(d) Overpayments. If the Contractor 

becomes aware of a duplicate contract 

financing or invoice payment or that the 

Government has otherwise overpaid on a 

contract financing or invoice payment, the 

Contractor shall— 

(1) Remit the overpayment amount to the 

payment office cited in the contract along 

with a description of the overpayment 

including the— 

(i) Circumstances of the overpayment (e.g., 

duplicate payment, erroneous payment, 

liquidation errors, date(s) of overpayment); 

(ii) Affected contract number and delivery 

order number if applicable; 

(iii) Affected contract line item or subline 

item, if applicable; and 

(iv) Contractor point of contact. 


pwalker on PROD1PC71 with RULES3
Federal Register / Vol. 73, No. 181 / Wednesday, September 17, 2008 / Rules and Regulations 54007 

(2) Provide a copy of the remittance and 

supporting documentation to the Contracting 

Officer. 

(End of clause) 

* * * * * 

■ 14. Amend section 52.232–26 by 

revising the date of the clause and 

paragraph (c) to read as follows: 

52.232–26 Prompt Payment for Fixed-Price 

Architect-Engineer Contracts. 

* * * * * 

PROMPT PAYMENT FOR FIXEDPRICE ARCHITECT-ENGINEER 

CONTRACTS (OCT 2008) 

* * * * * 

(c) Overpayments. If the Contractor 

becomes aware of a duplicate contract 

financing or invoice payment or that the 

Government has otherwise overpaid on a 

contract financing or invoice payment, the 

Contractor shall— 

(1) Remit the overpayment amount to the 

payment office cited in the contract along 

with a description of the overpayment 

including the— 

(i) Circumstances of the overpayment (e.g., 

duplicate payment, erroneous payment, 

liquidation errors, date(s) of overpayment); 

(ii) Affected contract number and delivery 

order number if applicable; 

(iii) Affected contract line item or subline 

item, if applicable; and 

(iv) Contractor point of contact. 

(2) Provide a copy of the remittance and 

supporting documentation to the Contracting 

Officer. 

(End of clause) 

■ 15. Amend section 52.232–27 by 

revising the date of the clause and 

paragraph (l) to read as follows: 

52.232–27 Prompt Payment for 

Construction Contracts. 

* * * * * 

PROMPT PAYMENT FOR 

CONSTRUCTION CONTRACTS (OCT 

2008) 

* * * * * 

(l) Overpayments. If the Contractor 

becomes aware of a duplicate contract 

financing or invoice payment or that the 

Government has otherwise overpaid on a 

contract financing or invoice payment, the 

Contractor shall— 

(1) Remit the overpayment amount to the 

payment office cited in the contract along 

with a description of the overpayment 

including the— 

(i) Circumstances of the overpayment (e.g., 

duplicate payment, erroneous payment, 

liquidation errors, date(s) of overpayment); 

(ii) Affected contract number and delivery 

order number if applicable; 

(iii) Affected contract line item or subline 

item, if applicable; and 

(iv) Contractor point of contact. 

(2) Provide a copy of the remittance and 

supporting documentation to the Contracting 

Officer. 

(End of clause) 

[FR Doc. E8–21382 Filed 9–16–08; 8:45 am] 

BILLING CODE 6820–EP–S 

DEPARTMENT OF DEFENSE 

GENERAL SERVICES 

ADMINISTRATION 

NATIONAL AERONAUTICS AND 

SPACE ADMINISTRATION 

48 CFR Part 12 

[FAC 2005–27; FAR Case 2007–022; Item 

VII; Docket 2008–0001; Sequence 13] 

RIN 9000–AL03 

Federal Acquisition Regulation; FAR 

Case 2007–022, Subcontractor 

Requests for Bonds 

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 

(Councils) have agreed on a final rule 

amending the Federal Acquisition 

Regulation (FAR) to clarify that the 

clause ‘‘Prospective Subcontractor 

Requests for Bonds’’ does not apply to 

commercial items. 

DATES: Effective Date: September 17, 

2008. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Michael Jackson, Procurement Analyst, 

at (202) 208–4949 for clarification of 

content. For information pertaining to 

status or publication schedules, contact 

the FAR Secretariat at (202) 501–4755. 

Please cite FAC 2005–27, FAR case 

2007–022. 

SUPPLEMENTARY INFORMATION: 

A. Background 

The FAR clause at FAR 52.228–12, 

Prospective Subcontractor Requests for 

Bonds, implemented Section 806(a)(3) 

of Public Law 102–190, as amended, 

which specifies that, upon the request of 

a prospective subcontractor or supplier 

offering to furnish labor or material for 

the performance of a construction 

contract for which a payment bond has 

been furnished to the United States 

pursuant to the Miller Act, the 

contractor shall promptly provide a 

copy of such payment bond to the 

requestor. In conjunction with 

performance bonds, payment bonds are 

used in Government construction 

contracts to secure fulfillment of the 

contractor’s obligations under the 

contract and to assure that the 

contractor makes all payments, as 

required by law, to persons furnishing 

labor or material in performance of the 

contract. The FAR clause at 52.228–12, 

which has an effective date of October 

1, 1995, reflects the addition of Section 

806(a)(3) of Pub L. 102–190, as amended 

by Sections 2091 and 8105 of Pub. L. 

103–355, at FAR 12.503(a) and 

12.504(a). When the implementation of 

FAR 28.106–4 occurred, the appropriate 

incorporation of the FAR clause at 

52.228–12, Prospective Subcontractor 

Requests for Bonds, was accomplished, 

but not the incorporation of the 

associated statutory citation in FAR 

12.503 and 12.504. 

This is not a significant regulatory 

action and, therefore, was not subject to 

review under Section 6(b) of Executive 

Order 12866, Regulatory Planning and 

Review, dated September 30, 1993. This 

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

804. 

B. Regulatory Flexibility Act 

The Regulatory Flexibility Act does 

not apply to this rule. This final rule 

does not constitute a significant FAR 

revision within the meaning of FAR 

1.501 and Pub. L. 98–577, and 

publication for public comments is not 

required. However, the Councils will 

consider comments from small entities 

concerning the affected FAR Part 12 in 

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

parties must submit such comments 

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

et seq. (FAC 2005–27, FAR case 2007– 

022), in correspondence. 

C. Paperwork Reduction Act 

The Paperwork Reduction Act does 

not apply because the changes to the 

FAR do not impose information 

collection requirements that require the 

approval of the Office of Management 

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

seq. 

List of Subjects in 48 CFR Part 12 

Government procurement. 

Dated: September 9, 2008. 

Al Matera, 

Director, Office of Acquisition Policy. 

■ Therefore, DoD, GSA, and NASA 

amend 48 CFR part 12 as set forth 

below: 

PART 12—ACQUISITION OF 

COMMERCIAL ITEMS 

■ 1. The authority citation for 48 CFR 

part 12 continues to read as follows: 

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

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

■ 2. Amend section 12.503 by revising 

the section heading and adding 

paragraph (a)(7) to read as follows: 


pwalker on PROD1PC71 with RULES3