[FEMA and GSA Requests for Opinion Regarding Liability for Prompt Payment Act Interest Penalties]

B-219474: Aug 18, 1986

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The Federal Emergency Management Agency (FEMA) and the General Services Administration (GSA) requested a decision regarding which agency was liable for late-payment interest penalties owed to a private contractor. GSA and FEMA entered an interagency agreement, under which GSA was to provide FEMA with procurement and other administrative support for FEMA field disaster or emergency operations. GSA entered into a contract pursuant to the agreement and failed to timely pay the contractor; the contractor subsequently claimed late-payment interest penalties under the Prompt Payment Act. FEMA contended that it should not be liable for the penalties because: (1) it had no contractual relationship with the claimant; and (2) since a GSA administrative error caused the late payment, GSA should be liable. GAO held that FEMA was liable for the penalties because the interagency agreement stipulated that it would reimburse GSA for all expenses GSA incurred incident to the agreement, despite the fact that FEMA had no contractual relationship with the claimant. Accordingly, FEMA was liable for the late-payment interest penalties.

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