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CHAPTER 40 - PAYMENTS
45 - NON-PERSONAL-SERVICE PAYMENTS
Payments of Interest on Claims Against the United States
1. Basic Principal - United States Does Not Pay Interest.
The basic principal is, interest is not recoverable against U.S. unless it is expressly authorized in
a relevant statute or contract. The principal does not permit payment of interest on "equitable"
grounds and applies even where the Government has unreasonably delayed payment.
2. Court Judgements
a. General - Payment Not Authorized. If a court judgment is silent as to interest,
settlement process will not include payment of interest except where Congress has provided for
interest on judgment. Examples are:
31 USC 227 (Refund of Amount offset against a judgment.)
40 USC 258a (Declaration of Taking Act.)
41 USC 601 (Contract Disputes Act.)
31 USC 3901 (Prompt Payment Act.)
b. Post Judgment Interest Payments. The Claims Court is not allowed to authorize
interest on a claim; however, 28 USC 2516(b) allows a post judgment interest payment where
Government appeals a judgment and loses. Interest occurs from date a copy of the judgment is
filed with GAO to date of the Supreme Court mandate of affirmation. The rate of interest is
based upon the yield of 52-week Treasury Bills at time judgment is filed with GAO. However,
28 USC 2671(b) does not apply if interest is payable under other statutes or by provisions of the
contract. District Courts under 31 USC 724a have post judgment interest payment abilities the
same as the Claims Court.
While payment of post judgment interest is contingent upon the Government appealing and
losing a judgment, responsibility for filing with GAO is the plaintiff's. As a practical matter,
GAO will not disallow interest if the judgement is filed by other than the plaintiff.
3. Contractual Provisions for Payment of Interest
a. Large Payment Charge. Until 1971, GAO's position was interest could be
provided for in the contract only if there was some statutory authority for it. In 1972, a
Comptroller General Decision 51CG251 overruled previous rationale. Although a purchase order
prepared by the Forest does not have a provision for payment of interest, the Forest Service
would still be liable to pay late payment charges/interent charges for overdue accounts. For a
contract to exist there has to be an offer and an acceptance.
An AD-838B, Invoice Receipt Certification, acknowledges that the offer has been accepted and
usually occurs upon delivery of goods. Therefore, if Government has notice of the interest charge
at or before delivery and the charge is accepted by an authorized official, then payment of
interest is authorized. For example, if notice of a late payment charge is included on a delivery
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receipt and Government receipts for the goods, the Government has accepted the adjusted offer.
However, if first notice is after delivery, (i.e., on claimant's invoice) then payment of late
payment charges is not authorized. To avoid liability for late payment charges, the Government
is obligated to issue and mail its checks sufficiently in advance to assure receipt in the regular
course of the mails, on or before the delinquent date.
Public utilities commonly levy late payment charges on overdue accounts. The Government is
liable only if terms of the published rate schedule so provides for late payment charges.
As a point of clarification, while most decisions use the terms "late payment charge" and
"interest charge" interchangeably, the Comptroller General has ruled even in the face of a
specific contract provision prohibiting the payment of any penalty or interest, the Government
may be liable for late payment charges contained in a utilities published rate schedule or by
counteroffer such as described above on an AD-838-9, Purchase Order.
Where a contract for goods and/or services does not provide for late payment charges, the
Prompt Payment Act of 1982, P.L. 97-177 applies.
b. The Prompt Payment Act. The Prompt Payment Act (PPA) effective October 1, 1982,
requires the payment of interest on over-due payments and improperly taken discounts.
Payments will be made as close as possible to, but not later than, the 30th day after receipt of a
proper invoice or the acceptance of goods or services except as follows:
(1) When a specified payment date is provided in the contract, payment will be
made as close as possible to, but not later than that date.
(2) Payment for meat or meat products as defined by the Packers and Stockyard
Act (1/2 carload or more order) will be made as close as possible to, but not later than 7 days
after receipt of meat or meat products.
(3) Payment for perishable agriculture commodities, as defined by Perishable
Agriculture Commodities Act (1/2 carload of more order) will be made as close as possible to,
but not later than 10 days after receipt of the perishable agriculture commodities.
(4) When a time discount is taken, payment will be made as close as possible to,
but not later than the discount date.
An interest penalty will be paid under PPA automatically when all the following conditions are
met:
(a) A valid contract or purchase order has been issued.
(b) The Government accepts the goods or services without disagreement.
(c) A proper invoice, if required, has been received or if agency fails to give notice
of deficiencies within 15 days of receipt of an invoice (3 days for meat and 5 days for
perishables).
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(d) Payment is made to business concern more than 15 days after the due date (3
days for meat and 5 days for perishable).
Also, an interest penalty will be paid when a discount period has expired, and failure to correct
the underpayment within 15 days of expiration of the discount period (3 days for meat and 5
days for perishables).
Interest will be included with the payment at the interest rate applicable on the date whenever a
proper invoice, if required, is paid after the due date plus 15 days (3 days for meat and 5 days for
perishables). Interest is computed from the day after the due date through the payment date.
When an interest penalty owed is not paid, interest will accrue on the unpaid amount until paid.
Interest penalties unpaid for any 30-day period will be added to the principal and interest
penalties, thereafter, will accrue monthly on total of principal and previously accrued interest.
Interest penalties under PPA will not continue to accrue (1) after filing of claims for such
penalties under Contract Disputes Act (CDA) provision or, (2) for more than 1 year. Interest
penalties of less than $1 need not be paid.
Interest for PPA shall be computed at the rate determined by the Secretary of Treasury for
interest payments under P.L. 92-41 (Renegotiation Act). Interest is computed by applying the
rates in effect for each of the 6-month interest periods (Jan.-Jun, July-Dec.) interest is owing.
These rates are published in the Federal Register and as a GSA FPR bulletin. With one
exception, Forest Service units are not to take time discounts or make penalty payments. Only
the NFC is authorized to make such final determinations in the payments process. See NFC
procedures handbook on how to prepare AD-838's and AD-757's so the NFC can properly apply
PPA requirements. The exception is when discount is allowable on only a portion of total
payment. In this case, units should compute and take the discount using a code 3 to denote
immediate payment. NFC is currently unable to compute a partial discount.
c. Contract Disputes Act
Both procurement and timber sale contracts commonly contain provisions for the payment
of interest under the Contract Disputes Act of 1978. Briefly, the procedure is:
(1) The contractor files a claim in writing with the Contracting Officer. The
Contracting Officer issues a written decision.
(2) If Contracting Officer's decision is adverse to contractor, the contractor may
appeal to agency board of contract appeals or go directly to the Claims Court.
(3) If board decision is adverse to agency, the agency may appeal to the Claims
Court. However, agency appeal requires prior approval by the Attorney General.
Awards by board on Claims Court are paid by GAO from a permanent judgement appropriation.
However, the judgement appropriation must be reimbursed by the agency whose appropriations
were used for the contract. (Note: The Forest Service has often paid claims settled by the
Board or Courts without following the permanent judgement appropriation process. Whether or
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not this action is appropriate will be settled by WO. Continue direct payment process until
notified otherwise. Basis for decision is that an agency payment is faster and less interest
accrues. However, before payment can be made, the claimant must agree in writing the
settlement is final and no further review will be sought.)
The appropriations of the year of the contract are used as this is a settlement under terms of the
contract, i.e., appropriate actions under clauses of a contract do not create new liabilities, but
simply finalize and make certain existing liabilities.
Section 12 of the Contract Disputes Act, 41 USC 611, provides for interest on awards and
judgments under the Act. For claims less than $50,000, interest runs from the date of the
contractor providing a certification that the claim is made in good faith and that supporting data
is accurate and complete.
The interest rate for CDA claims is the same as for PPA described above.
4. Computation of Interest
When interest is payable, a very specific formula is applied. Computation of interest is
calculated for a fractional part of a year on the basis of the actual number of days within the
period involved, using such number of days as the numerator and the actual number of days in
the particular calendar year as the denominator including either the beginning date of the period
of ending date, but not both. Interest is computed on the basis of 365 days per year or 366 days in
a leap year. See B-60952, 7/2/53, for establishment of the formula. This formula will apply only
when some other formula is not specifically prescribed by statute or contract provision. For
example, timber sale clause C4.251 is on a monthly basis rather than a daily basis.
45.8 - Special Non-Personal Service Payments
Payments for Yarding Helicopters Used for fire Suppression Under Terms of Timber Sale
Contracts
There will be occasions where helicopters used for yarding purposes under the terms of a timber
sale contract will be used in meeting the purchaser's initial attack obligations under the sale
contract. These helicopters are not carded and cannot be employed under standard contract rental
agreements. Therefore, they must be paid for under the terms of the individual timber sale
contract. Standard provisions B7.41 and B7.43 of the FS-2400-6 Timber Sale Contract provide
the authorization for making such payments.
Payments should be processed employing the following procedures:
1. The timber purchaser should submit an itemized billing to the Forest indentifying the
fire, the date, and hours the helicopter was in use. The amount on the billing should be based on
the rate established in FSM 2451.74, R-1 supplement, for fires defined in B7.43. For those fires
identified in B7.41, the rate will be based on purchaser's costs. The rates set in FSM
2451.74--R-1 can be used in conjunction with B7.41 if agreed to by the purchaser.
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2. The timber sale contracting officer must approve the bill for payment. This approval
should be on the bill itself and should be in the following format:
Approved for payment under subsection B6.
of the (name of sale)
timber sale contract number (contract number) dated (date of Contract) .
Date
(Contracting Officer's Signature)
(Contracting Officer's Title)
45.92g - Claim for Refund of State or Local Taxes. The States within Region 1 shown below
have the following requirements for refunds on State taxes paid on gasoline used in nonhighway
equipment:
Idaho, South Dakota, and North Dakota.
Gasoline purchases are tax exempt. Exemption certificates should be issued when requested by
vendor.
Montana:
Refund Permit. One permit has been obtained by RO Administration for all Montana claims.
The number is 57-22764.
Filing of Claim
a. Use Application for Refund of Gasoline Tax (State Form MF-27). A Bill for Collection,
Form FS-6500-89, will be prepared and submitted with each claim filed.
b. A notarized Affidavit Form to be Used When the Original Invoice or Invoices Have
Been Lost (State Form MF-28) must be submitted with the claim. This is necessary because the
NFC will not release the original invoice and the State will not accept certified true copies.
Authority to Waive Refund Claim. Forest Supervisors are delegated authority to waive filing a
claim if they determine the work required to obtain a refund is not economically justified.
1. Accounts to be Credited With Tax Refunds. Refunds will be collected to the
prestructured WCF Management Code 901601 of the unit actually purchasing the gasoline.
45.94 - Reports to Taxing Authorities of Payments Made For Services Provided.
The employer's identification number of use on Treasury Department forms is 81-0233315.
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See FSH 6509.31, National Finance Center Procedures Voucher and Invoice Payments Manual,
chapter 6, Section 5, Miscellaneous Payments System for additional instructions on preparation
of forms needed to collect data and make reports to taxing authorities.