FAR 32.607-2—Deferment of collection.
Plain-English Summary
FAR 32.607-2 explains how a contractor can ask the Government to defer collection of a debt, what information must accompany the request, how the contracting officer must process it, and what the agency decision-maker may authorize. It covers written submission requirements, the difference between requests made with a pending Disputes clause appeal and those made without one, the contractor information needed to support the request, and the contracting officer’s duty to notify the payment office and forward a recommendation package. It also addresses when deferment may be granted to avoid overcollections, special consideration for small businesses and financially weak contractors, and the rule that a dispute does not automatically stop collection. The section further sets mandatory terms for any deferment agreement, including debt description, first demand date, interest notice, payment instructions, access to records, default and bankruptcy acceleration rights, and other protective provisions. If an appeal is pending, the agreement must also require diligent prosecution of the appeal and payment when the dispute is resolved. In practice, this section is about balancing Government debt recovery with fairness, cash-flow realities, and protection against overcollection or undue hardship.
Key Rules
Written request required
A deferment request must be submitted in writing to the contracting officer. Oral requests are not enough, and the written submission starts the formal review process.
Different showing with appeal
If the contractor has already appealed the debt under the contract’s Disputes clause, the request may focus mainly on the contractor’s financial condition. If no appeal is pending, the contractor must provide broader financial and operational information, including backlog, cash flow, feasibility of immediate payment, and the effect of full payment on operations.
Disputes do not stop collection
Filing an action under the Disputes clause does not by itself suspend or delay collection. The debt remains collectible unless the Government affirmatively grants deferment or otherwise directs collection action.
Payment office must be notified
Once the contracting officer receives the request, the payment office must be promptly told that the request is under consideration. This helps prevent inconsistent collection actions while the deferment request is being evaluated.
Recommendation package forwarded
The contracting officer must assemble and forward the contractor’s request, a written recommendation with reasons, the appeal status and docket number if applicable, and the final decision on the debt. The recommendation should address whether deferment is advisable to avoid possible overcollections.
Agency may authorize deferment
The office designated by agency procedures may approve deferment pending appeal resolution, especially to avoid overcollections. The agency must use unexpired funds to pay interest on overcollections when required.
Special consideration for weak contractors
Deferments pending appeal may be granted to small business concerns and financially weak contractors when the Government balances security interests against loss and undue hardship. This is a discretionary, case-by-case judgment.
No waiver of debt maturity
A deferment agreement cannot say the Government’s claim is not due and payable until the parties agree on the amount or until a dispute is decided. The agreement may delay collection, but it cannot erase or indefinitely postpone the debt’s due status in that way.
Mandatory agreement terms
At a minimum, the deferment agreement must identify the debt, state the first demand date, provide interest notice, identify where payments go, require financial reporting and access to records, allow termination and acceleration on default or bankruptcy, and include other prudent protective terms.
Appeal obligations in agreement
If an appeal of the debt determination is pending, the agreement must require the contractor to diligently prosecute the appeal and to pay the debt in full when the appeal is decided or when the parties reach agreement on the amount.
Early payment and credits allowed
The agreement may allow early payment without prejudice, refunds of overpayments, and crediting of interest. These provisions are optional but can be included to make the arrangement more workable.
Responsibilities
Contractor
Submit any deferment request in writing and provide the required financial and operational information. If an appeal is pending, diligently prosecute the appeal and pay the debt when the appeal is resolved or the parties settle the amount. Also comply with financial reporting, record access, and payment terms in any deferment agreement.
Contracting Officer
Receive the written request, promptly notify the payment office, evaluate the request, and prepare a written recommendation with supporting reasons. Forward the request package, appeal status, docket number if any, and the final debt decision to the office designated by agency procedures.
Payment Office
Be notified that a deferment request is under consideration and coordinate collection activity accordingly. The payment office should avoid actions inconsistent with the pending deferment review.
Office designated in agency procedures
Make the decision on whether to authorize deferment under agency procedures. If deferment is granted, ensure the agreement includes required terms and appropriate protections, and manage interest and collection consequences consistent with the regulation.
Agency
Establish the office or process that decides deferment requests and ensure unexpired funds are used to pay interest on overcollections when required. The agency must also apply the balancing judgment for small businesses and financially weak contractors.
Practical Implications
A contractor that wants collection delayed must make a formal written case; simply disputing the debt is not enough to stop collection.
The quality of the financial package matters. If there is no pending appeal, the contractor should be ready to show cash flow, backlog, and the operational harm from immediate payment.
Contracting officers should move quickly to notify the payment office and document their recommendation, because delay can create overcollection or inconsistent payment actions.
Any deferment agreement should be drafted carefully. Missing required terms on interest, payment routing, default, bankruptcy, or access to records can weaken the Government’s protection.
Contractors should understand that deferment is not forgiveness. The debt remains due, interest may continue, and the Government can accelerate the debt if the contractor defaults or enters bankruptcy.
Official Regulatory Text
(a) All requests for deferment of collection must be submitted in writing to the contracting officer. (1) If the contractor has appealed the debt under the procedures of the Disputes clause of the contract, the information with the request for deferment may be limited to an explanation of the contractor’s financial condition. (2) Actions filed by contractors under the Disputes Clause shall not suspend or delay collection. (3) If there is no appeal pending or action filed under the Disputes clause of the contract, the following information about the contractor should be submitted with the request: (i) Financial condition. (ii) Contract backlog. (iii) Projected cash receipts and requirements. (iv) The feasibility of immediate payment of the debt. (v) The probable effect on operations of immediate payment in full. (b) Upon receipt of the contractor’s written request, the contracting officer shall promptly provide a notification to the payment office and advise the payment office that the contractor’s request is under consideration. (c) (1) The contracting officer should consider any information necessary to develop a recommendation on the deferment request. (2) The contracting officer shall forward the following to the office designated in agency procedures for a decision: (i) A copy of the contractor’s request for a deferment of collection. (ii) A written recommendation on the request and the basis for the recommendation including the advisability of deferment to avoid possible overcollections. (iii) A statement as to whether the contractor has an appeal pending or action filed under the Disputes clause of the contract and the docket number if the appeal has been filed. (iv) A copy of the contracting officer’s final decision (see 32.605 ). (d) The office designated in agency procedures may authorize a deferment pending the resolution of appeal to avoid possible overcollections. The agency is required to use unexpired funds to pay interest on overcollections. (e) Deferments pending disposition of appeal may be granted to small business concerns and financially weak contractors, balancing the need for Government security against loss and undue hardship on the contractor. (f) The deferment agreement shall not provide that a claim of the Government will not become due and payable pending mutual agreement on the amount of the claim or, in the case of a dispute, until the decision is reached. (g) At a minimum, the deferment agreement shall contain the following: (1) A description of the debt. (2) The date of first demand for payment. (3) Notice of an interest charge, in conformity with 32.608 and the FAR clause at 52.232-17 , Interest; or, in the case of a debt arising from a defective pricing or a CAS noncompliance overpayment, interest, as prescribed by the applicable Price Reduction for Defective Certified Cost or Pricing Data or CAS clause (see 32.607 (c)). (4) Identification of the office to which the contractor is to send debt payments. (5) A requirement for the contractor to submit financial information requested by the Government and for reasonable access to the contractor’s records and property by Government representatives. (6) Provision for the Government to terminate the deferment agreement and accelerate the maturity of the debt if the contractor defaults or if bankruptcy or insolvency proceedings are instituted by or against the contractor. (7) Protective requirements that are considered by the Government to be prudent and feasible in the specific circumstances. The coverage of protective terms at 32.409 and 32.501-5 may be used as a guide. (h) If a contractor appeal of the debt determination is pending, the deferment agreement shall also include a requirement that the contractor shall- (1) Diligently prosecute the appeal; and (2) Pay the debt in full when the appeal is decided, or when the parties reach agreement on the debt amount. (i) The deferment agreement may provide for the right to make early payments without prejudice, for refund of overpayments, and for crediting of interest.