B-131925, JUL. 13, 1964

B-131925, JUL. 13, 1964

TO THE SECRETARY OF DEFENSE:

REFERENCE IS MADE TO LETTER DATED MARCH 11, 1964, FROM THE CHAIRMAN, CONTRACT FINANCE COMMITTEE, OFFICE OF THE ASSISTANT SECRETARY OF DEFENSE, INSTALLATIONS AND LOGISTICS, RELATIVE TO ADMINISTRATIVE INTEREST CHARGES ON CONTRACT DEBTS PURSUANT TO DEPARTMENT OF DEFENSE DIRECTIVE NO. 7800.3.

IT HAS BEEN THE PRACTICE OF OUR OFFICE, IN THE ABSENCE OF A STATUTORY OR CONTRACTUAL PROVISION, NOT TO DEMAND INTEREST ON DEBTS DUE THE GOVERNMENT BY CONTRACTORS WHETHER BY REASON OF OVERPAYMENTS OR OTHERWISE. WE HAVE, HOWEVER, RECOMMENDED THAT INTEREST BE PAYED FOR IN THOSE CASES WHICH WERE REFERRED TO THE DEPARTMENT OF JUSTICE FOR COLLECTION BY LITIGATION.

IN SWARTZBAUGH V. UNITED STATES, 289 F.2D 81, IT WAS HELD THAT INTEREST WAS PROPERLY CHARGEABLE BY THE DEPARTMENT OF THE ARMY ON A CONTRACT OVERPAYMENT FROM THE DATE THAT THE CONTRACTING OFFICER UNILATERALLY DETERMINED THAT THE CONTRACTOR WAS INDEBTED TO THE GOVERNMENT RATHER THAN FROM THE DATE OF A SUBSEQUENT DECISION BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS REDUCING THE AMOUNT OF THE INDEBTEDNESS. ACCORDINGLY, IN 41 COMP. GEN. 222, INVOLVING SIMILAR CIRCUMSTANCES, WE HELD THAT A CHARGE OF INTEREST BY THE DEPARTMENT OF THE ARMY ON A CONTRACT INDEBTEDNESS FROM THE DATE OF ORIGINAL DEMAND WAS PROPER, NOTWITHSTANDING THE CONTRACTOR HAD FILED AN APPEAL WITH THE ARMED SERVICES BOARD OF CONTRACT APPEALS.

CONSISTENT WITH OUR HOLDING IN 41 COMP. GEN. 222, AND THE SWARTZBAUGH DECISION, WE HAVE TODAY INSTRUCTED OUR CLAIMS DIVISION TO DEMAND ADMINISTRATIVELY PRESCRIBED INTEREST CHARGES IN ALL CONTRACT DEBT CASES HEREAFTER REPORTED TO OUR OFFICE AS UNCOLLECTIBLE, AND TO INCLUDE SUCH INTEREST IN CERTIFICATES OF INDEBTEDNESS OR OTHER STATEMENTS ISSUED IN CONNECTION THEREWITH.