FAR 32.602—Responsibilities.
Plain-English Summary
FAR 32.602 allocates responsibility for contract debt management between the contracting officer and the payment office. It covers who must identify and demand payment of contract debts, who handles debts caused by payment office errors, who collects debts once identified, who identifies and collects duplicate or erroneous payments, and who may authorize liquidation of debts under agency procedures. The section also makes clear that the contracting officer may not personally collect debts or make informal repayment arrangements such as offsetting debts against unpaid invoices or letting contractors carry debts forward to future periods. In practice, this rule is meant to prevent confusion, preserve internal controls, and ensure debt collection is handled by the office with the proper systems and authority. For contractors, it signals that debt issues should be addressed through the proper government office and process, not through ad hoc side agreements. For contracting officers and payment offices, it establishes a clean division of labor so debts are pursued consistently and in accordance with agency procedures.
Key Rules
CO identifies contract debts
The contracting officer has the primary responsibility to identify contract debts and demand payment, except when the debt resulted from an error made by the payment office. This means the CO is the lead official for recognizing that a debt exists and initiating the collection process.
Payment office error debts excluded
If the debt results from a payment office error, the payment office—not the contracting officer—has the primary responsibility. This exception prevents the CO from being responsible for debts created by incorrect payment processing.
CO may not collect debts
The contracting officer shall not personally collect contract debts. Collection activity is assigned to the payment office, which is better positioned to process receivables, offsets, and related accounting actions.
No informal liquidation agreements
The contracting officer may not agree to liquidate debts through informal arrangements such as offsetting the debt against unpaid bills or allowing the contractor to retain the debt against future amounts payable. Debt liquidation must follow authorized procedures.
Payment office collects identified debts
The payment office has primary responsibility for collecting contract debts identified by contracting officers. Once the debt is identified, the payment office handles the actual collection process.
Payment office handles erroneous payments
The payment office is also responsible for identifying and collecting duplicate and erroneous payments. This centralizes correction of payment mistakes with the office that processes payments.
Liquidation must follow agency procedures
The payment office may authorize liquidation of contract debts, but only in accordance with agency procedures. This ensures debt repayment methods are controlled, documented, and consistent with agency policy.
Responsibilities
Contracting Officer
Identify contract debts and demand payment, except for debts caused by payment office errors. The contracting officer must not personally collect debts or make side agreements to liquidate them through offsets or retention against future payments.
Payment Office
Collect contract debts identified by contracting officers, identify and collect duplicate and erroneous payments, and authorize liquidation of contract debts in accordance with agency procedures.
Agency
Establish and maintain procedures governing how contract debts may be liquidated and how payment office authorities are exercised.
Practical Implications
This section creates a strict division between debt identification and debt collection, so contracting officers should not try to resolve debts informally with contractors.
A common pitfall is using invoice offsets or future payment withholding without proper authority; FAR 32.602 prohibits the contracting officer from agreeing to those arrangements on their own.
If a debt stems from a payment processing mistake, the payment office—not the contracting officer—should take the lead, so the source of the error must be determined early.
Contractors should expect debt matters to be handled through formal government channels, with collection and liquidation controlled by the payment office and agency procedures.
Good documentation matters: the CO should identify and refer the debt promptly, and the payment office should track collection actions and any authorized liquidation method.
Official Regulatory Text
(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.