FAR 52.232-17—Interest.
Plain-English Summary
FAR 52.232-17, Interest, tells the parties what happens when the contractor owes money to the Government under the contract. It covers when a debt starts to accrue interest, the applicable interest rate, when the Government may issue a demand for payment, when the contracting officer must issue a final decision, how the due date is determined, how interest is calculated, when interest stops, and when the interest charge may be reduced under FAR 32.608-2. In practice, this clause gives the Government a financial remedy for unpaid contract debts and creates a strong incentive for contractors to resolve debts quickly. It also ties the clause to the Contract Disputes Act interest rate in 41 U.S.C. 7109 and to the debt collection procedures in FAR Part 32 and the final decision procedures in FAR 33.211. The clause is important because it applies simple interest, not compound interest, and because the due date can be triggered either by the contract itself or by the first written demand for payment, including a demand tied to default termination. For contractors, the clause means that unresolved debts can grow over time and may be collected through withholding, offset, installment agreements, or other debt collection actions. For contracting officers, it provides the procedural framework for asserting and documenting the debt and for moving from demand to final decision when needed.
Key Rules
Interest applies to contractor debts
All amounts payable by the contractor to the Government under the contract bear simple interest unless another clause controls, such as a Price Reduction for Defective Certified Cost or Pricing Data clause or a Cost Accounting Standards clause. Interest begins on the date the amount is due and continues until paid, subject to the 30-day grace period.
Treasury rate controls
The interest rate is the rate established by the Secretary of the Treasury under 41 U.S.C. 7109. The applicable rate is the one in effect for the period when the amount becomes due, and then the rate changes every six months as set by Treasury until the debt is paid.
Government may demand payment
The Government may issue a demand for payment once it determines that a debt is due under the contract. The demand starts the collection process and may also establish the due date if the contract does not already fix one.
Final decision may be required
The contracting officer must issue a final decision under FAR 33.211 if the parties cannot agree on whether a debt exists or how much is owed, if the contractor does not pay within the demand timeline, or if the contractor requests a deferment of collection on a previously demanded debt.
Due date is the earliest trigger
Amounts are due on the earliest of the date fixed by the contract or the date of the first written demand for payment, including a demand resulting from default termination. This means the Government does not have to wait for a later administrative step to establish when interest starts.
Interest is computed by calendar days
Interest is calculated for the actual number of calendar days from the due date through the date payment is received by the designated office, the date a Government check is issued when withholding is used as a credit, or the date withheld funds would otherwise have become payable to the contractor.
Interest may be reduced
The interest charge may be reduced under the procedures in FAR 32.608-2, as in effect on the contract date. Any reduction is discretionary and must follow the applicable debt collection procedures.
Responsibilities
Contracting Officer
Determine whether a debt is due, issue a demand for payment, track the contractor’s response, and issue a final decision when required by FAR 33.211. The contracting officer must also ensure the demand and final decision use the correct due date and support the Government’s interest calculation and collection actions.
Contractor
Pay amounts owed to the Government within the required time, respond promptly to any demand for payment, and seek installment payment agreements or deferment only through the procedures allowed by the FAR. If the contractor disputes the debt, it must raise the dispute in a timely manner to avoid continued interest accrual and escalation to a final decision.
Government payment office or designated office
Receive payments, apply withheld amounts or offsets correctly, and identify the date payment is received or credited for purposes of stopping interest accrual. The office’s receipt or issuance date is critical to calculating the end of the interest period.
Treasury Department
Establish and publish the applicable interest rates used under 41 U.S.C. 7109. Those rates govern the interest charged on contract debts under this clause.
Agency debt collection officials
Support collection actions, including withholding, offset, installment agreements, deferments, and any reduction of interest under the applicable FAR procedures. They help ensure the debt is handled consistently with Part 32 requirements.
Practical Implications
Contractors should treat any written demand for payment as time-sensitive, because interest can start from the due date and continue until the debt is actually paid or credited.
The 30-day period matters: if the debt is not paid within 30 days of becoming due, interest generally begins to accrue unless another clause or exception applies.
A dispute over the amount owed does not stop the process by itself; if the parties cannot agree, the contracting officer may have to issue a final decision, and interest may continue to run.
When the Government uses withholding or offset, the exact date of receipt, issuance, or when funds would otherwise have been payable can affect the interest stop date, so recordkeeping is important.
Contractors should watch for the interaction with other clauses and debt procedures, especially defective pricing, CAS, installment agreements, deferments, and default termination demands, because those can change how the debt and interest are handled.
Official Regulatory Text
As prescribed in 32.611 (a) and (b), insert the following clause: Interest (May 2014) (a) Except as otherwise provided in this contract under a Price Reduction for Defective Certified Cost or Pricing Data clause or a Cost Accounting Standards clause, all amounts that become payable by the Contractor to the Government under this contract shall bear simple interest from the date due until paid unless paid within 30 days of becoming due. The interest rate shall be the interest rate established by the Secretary of the Treasury as provided in 41 U.S.C. 7109 , which is applicable to the period in which the amount becomes due, as provided in paragraph (e) of this clause, and then at the rate applicable for each six-month period as fixed by the Secretary until the amount is paid. (b) The Government may issue a demand for payment to the Contractor upon finding a debt is due under the contract. (c) Final Decisions . The Contracting Officer will issue a final decision as required by 33.211 if- (1) The Contracting Officer and the Contractor are unable to reach agreement on the existence or amount of a debt in a timely manner; (2) The Contractor fails to liquidate a debt previously demanded by the Contracting Officer within the timeline specified in the demand for payment unless the amounts were not repaid because the Contractor has requested an installment payment agreement; or (3) The Contractor requests a deferment of collection on a debt previously demanded by the Contracting Officer (see 32.607-2 ). (d) If a demand for payment was previously issued for the debt, the demand for payment included in the final decision shall identify the same due date as the original demand for payment. (e) Amounts shall be due at the earliest of the following dates: (1) The date fixed under this contract. (2) The date of the first written demand for payment, including any demand for payment resulting from a default termination. (f) The interest charge shall be computed for the actual number of calendar days involved beginning on the due date and ending on- (1) The date on which the designated office receives payment from the Contractor; (2) The date of issuance of a Government check to the Contractor from which an amount otherwise payable has been withheld as a credit against the contract debt; or (3) The date on which an amount withheld and applied to the contract debt would otherwise have become payable to the Contractor. (g) The interest charge made under this clause may be reduced under the procedures prescribed in 32.608-2 of the Federal Acquisition Regulation in effect on the date of this contract. (End of clause)