Agencies could be penalized for late payments to contractors

Agencies that make late interim payments to contractors on cost reimbursement contracts now are required to pay an interest penalty, according to an Office of Management and Budget final rule published in the Federal Register yesterday.

The regulation implements Section 1010 of the National Defense Authorization Act of 2001. OMB has worked on the rule for two years after publishing two interim final rules in December 2000 and October 2001.

Vendors are now eligible for interest payments if agencies do not reconcile invoices in 30 days, the new rule says. All contractors with cost reimbursement contracts for services that include interim payments due after Dec. 15, 2000, are eligible for interest payments. OMB still must publish a regulation on how to compute interest.

An interim payment is defined as allowable costs incurred in the performance of the contract.

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