Rule allows interest payments on cost-reimbursement deals

Federal agencies must pay an interest penalty to their contractors when they make late payments under cost-reimbursement contracts, according to a final rule published in the Federal Register. The rule went into effect May 23.

The rule requires an agency to pay an interest penalty whenever it makes an interim payment under a cost-reimbursement contract for services more than 30 days after the agency receives a proper invoice from the contractor.

The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council agreed on the rule change, which amends the Federal Acquisition Regulation to adopt an interim rule published in the Federal Register Oct. 22, 2001. The councils had received no public comments on the interim rule.

This FAR amendment eliminates a prohibition on penalty interest for late interim payments under cost-reimbursement contracts for services.

The rule implements the requirements contained in section 1010 of the National Defense Authorization Act of 2001. It applies to cost-reimbursement contracts for services, irrespective of award date, if interim payment requests under such contracts are due on or after Dec. 15, 2000. The rule does not allow agencies to pay penalty interest for any delay in payment that occurred before Dec. 15, 2000.

Click here to link to the rule.