FAR 32.608—Interest.

Interest charges.

FAR 32.608-1 explains when the Government may assess interest on a contract debt and when it may not. It ties the interest rule to the standard contract clause at 52.232-17, Interest, and states the default timing: interest begins to apply to an unpaid contract debt after 30 days from the issuance of a demand. The section also identifies two exceptions: debts under contract types excluded by FAR 32.611 and debts or contracts that an agency has exempted from interest charges under its own procedures. In practice, this provision matters because it affects how quickly unpaid debts grow, how agencies manage collection actions, and how contractors evaluate the cost of delaying payment or disputing a debt. It also signals that interest is not automatic in every case; the contract clause, the contract type, and agency-level exemptions all matter.

Interest credits.

FAR 32.608-2 explains when the Government must give a contractor an equitable credit for interest after a debt has been collected or withheld and later turns out to be smaller than first determined. It covers four trigger situations: a reduced debt after appeal or other later determination, an overcollection by the Government, an overcollection caused by the collection method used, and undue Government delay in paying the contractor on the same contract during the period the interest charge applied when no late-payment interest penalty was paid. The section also explains how to compute the credit, including charging interest on the reduced debt from the date of collection until the refund is made, limiting any reduction for periods covered by a deferment unless the contract has an interest clause, and capping the credit so the contractor does not receive more back than the Government actually collected or withheld. In practice, this provision prevents the Government from keeping interest on amounts it was not ultimately entitled to retain and ensures the contractor is made whole only to the extent of the actual overcollection. It is a corrective rule tied to debt collection, disputes, deferments, and late-payment behavior on the same contract.