Overview
FAR 32.606 establishes the procedures and timelines for the government to recover outstanding contractor debts, including the mandatory withholding of payments and the transfer of long-term delinquent debts to the Department of the Treasury.
Key Rules
- 30-Day Trigger: If a debt is not liquidated within 30 days of the due date, and no installment or deferment has been requested, the payment office must initiate withholding of principal, interest, penalties, and administrative charges.
- Assignment of Claims: The government must respect the rights of assignees under the Assignment of Claims Act of 1940; withholding actions must be consistent with the legal protections afforded to those assignees.
- Treasury Transfer: Under the Debt Collection Improvement Act of 1996, any debt delinquent for more than 180 days must be transferred to the Department of the Treasury for collection.
- Contracting Officer (CO) Oversight: The CO is responsible for periodically following up with the payment office to ensure the debt is collected and correctly credited to the relevant appropriation accounts.
Practical Implications
- Automatic Offsets: Contractors who fail to address a demand for payment within 30 days may find their payments on other, unrelated contracts being "offset" or withheld to satisfy the debt.
- Loss of Agency Control: Once a debt exceeds 180 days and is transferred to the Treasury, the contracting agency loses direct control over the collection process, often resulting in more aggressive collection tactics and additional fees.