Overview
This section establishes the requirements for charging interest on unpaid contract debts and defines the specific circumstances and methods for applying interest credits to a contractor. It serves as the financial framework for ensuring the government is compensated for the time-value of unpaid debts while providing equitable adjustments when debt determinations are reduced or over-collected.
Key Rules
- 30-Day Trigger: Interest charges typically apply to any contract debt that remains unpaid 30 days after the issuance of a demand letter, unless the contract is specifically excluded or exempted.
- Mandatory Credits: The government must apply equitable interest credits if a debt is reduced (e.g., via appeal), if an over-collection occurs, or if the government unduly delayed other payments on the same contract without paying a late penalty.
- Rate Specification: Interest is calculated based on the rate established in the clause at FAR 52.232-17.
- Credit Limitations: Interest credits are strictly capped; they cannot exceed the total amount actually collected or withheld by the government for the debt in question.
- Deferment Restrictions: Interest generally cannot be reduced for the period between the demand due date and a collection deferment unless the contract specifically allows for it.
Practical Implications
- Contractors must prioritize the resolution of demand letters within 30 days to avoid accruing interest costs that can diminish profit margins.
- In the event of a successful claim or appeal, contractors should verify that the government applies the appropriate interest credits to any recovered funds to ensure they are made financially whole.