Comments on H.R. 1371, an Act To Amend the Contract Disputes Act of 1978

Pursuant to a congressional request, GAO reviewed H.R. 1371, an amendment to the Contract Disputes Act of 1978. The bill was formulated to amend the section of the act that deals with the payment of interest on amounts found due to contractors on claims. The major change to the bill involves the manner in which interest will be paid to contractors. The bill, as passed by the House of Representatives, states that interest will be paid under a variable-rate method. While GAO concurs that the method of application should be clarified in the legislation, it fails to see any advantage to the variable-rate method proposed. GAO believes that a fixed-rate method of determining interest would be better suited to the bill. GAO held that the fixed-rate method is preferable because the varible method: (1) is inconsistent with prevailing commercial practices; (2) is inconsistent with legislative and administrative precedent; (3) will cause increased federal expenditures with no demonstrable benefit; and (4) will be more administratively burdensome with no offsetting advantage.