FAR 32.606—Debt collection.
Plain-English Summary
FAR 32.606 explains how the Government collects contract debts after they become due and unpaid. It covers three main topics: mandatory withholding by the payment office when the contractor has not paid, requested installments, or obtained a deferment within 30 days; special handling when the contract payment rights have been assigned under the Assignment of Claims Act, including respect for the assignee’s rights; transfer of debts that remain delinquent for more than 180 days to the Department of the Treasury under the Debt Collection Improvement Act; and the contracting officer’s duty to follow up to confirm the debt was collected and credited to the proper appropriation(s). In practice, this section is about moving delinquent debts from voluntary repayment to enforced collection, while protecting legally assigned payment rights and ensuring the Government’s accounting records are correct. It matters because delays can reduce recoveries, create disputes over who is entitled to payment, and cause misposting of collections to the wrong fund or appropriation. For contractors, it signals that unpaid debts can trigger automatic offsets and Treasury collection action; for contracting officers and payment offices, it creates a coordinated collection and tracking process.
Key Rules
Withhold after 30 days
If the contractor has not paid the debt within 30 days of the due date, or has not requested installment payments or a deferment, the payment office must begin withholding principal, interest, penalties, and administrative charges. This is a mandatory collection step, not a discretionary one.
Respect assigned claims
When the contract is subject to an assignment of claims, the Government must honor the assignee’s rights and apply withholding in a way that is consistent with those rights. The payment office cannot ignore a valid assignment when collecting the debt.
Transfer old debts to Treasury
Debts that remain delinquent for more than 180 days must be transferred by the payment office to the Department of the Treasury for collection. This implements the Debt Collection Improvement Act requirement for centralized delinquent debt collection.
Follow up on collection status
The contracting officer must periodically check with the payment office to confirm whether the debt has been collected and whether the amount collected was credited to the correct appropriation(s). This is an oversight and reconciliation requirement.
Collect all debt components
Withholding is not limited to the principal amount. The payment office must also withhold any applicable interest, penalties, and administrative charges, as authorized by the debt collection rules.
Responsibilities
Payment Office
Initiate withholding of principal, interest, penalties, and administrative charges when the contractor has not liquidated the debt within 30 days of the due date or has not requested installment payments or deferment. Transfer debts delinquent more than 180 days to the Department of Treasury for collection. Apply withholding in a manner consistent with any valid assignment of claims.
Contracting Officer
Periodically follow up with the payment office to determine whether the debt has been collected and whether the collection was credited to the correct appropriation(s). Coordinate as needed to ensure the debt record and funding accounts are properly updated.
Contractor
Pay the debt by the due date, or timely request installment payments or a deferment of collection if unable to pay immediately. Understand that failure to act can result in withholding and eventual Treasury referral.
Assignee
Rely on the Government to respect valid assignment-of-claims rights when payments are withheld or otherwise applied to debt collection. The assignee’s entitlement to payment must be considered in the collection process.
Department of the Treasury
Collect debts transferred by the payment office when they have been delinquent for more than 180 days, using Treasury’s debt collection authorities and processes.
Practical Implications
This section creates a hard collection timeline: after 30 days, withholding should begin; after 180 days delinquent, Treasury gets involved. Contractors should not assume the Government will wait indefinitely before offsetting payments.
Contracting officers should not treat debt collection as a one-time action. They need to monitor whether offsets actually occurred and whether collections were posted to the right appropriation, especially when multiple funds or fiscal years are involved.
A valid assignment of claims can complicate collection because the Government must protect the assignee’s rights. Payment offices should verify the assignment status before offsetting funds to avoid disputes or improper withholding.
Common pitfalls include failing to withhold all components of the debt, missing the 180-day Treasury transfer deadline, and miscrediting collections to the wrong appropriation, which can create accounting and audit problems.
Contractors facing a debt should communicate early if they need installment payments or a deferment; waiting past the due date without action can trigger automatic withholding and escalation to Treasury collection.
Official Regulatory Text
(a) If the contractor has not liquidated the debt within 30 days of the date due or requested installment payments or deferment of collection, the payment office shall initiate withholding of principal, interest, penalties, and administrative charges. In the event the contract is assigned under the Assignment of Claims Act of 1940 (31 U.S .C. 3727 and 41U.S .C. 6305), the rights of the assignee will be scrupulously respected and withholding of payments shall be consistent with those rights. For additional information on assignment of claims, see subpart 32.8 . (b) As provided for in the Debt Collection Improvement Act of 1996 (31 U.S .C. 3711(g)(1)), payment offices are required to transfer any debt that is delinquent more than 180 days to the Department of Treasury for collection. (c) The contracting officer shall periodically follow up with the payment office to determine whether the debt has been collected and credited to the correct appropriation(s).