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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: August 29, 2002

SUBJECT: Federal Acquisition Regulation (FAR); Notification of Contract Financing Overpayments

SOURCE: Federal Register, August 29, 2002, Vol. 67, No. 168, page 55675

AGENCIES: Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA)

ACTION: Proposed Rule

SYNOPSIS: It is proposed that the Federal Acquisition Regulation (FAR) prompt payment clauses be amended to require the contractor to notify the contracting officer if the government overpays the contractor when making a contract financing payment under both commercial item and non-commercial item contracts.

DATES: Comments on the proposed rule must be submitted no later than October 28, 2002.

ADDRESSES: Submit comments to General Services Administration, FAR Secretariat (MVP), 1800 F Street, NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405, or by e-mail to farcase.2001-005@gsa.gov. Cite FAR case 2001-005 in all correspondence related to this proposed rule.

FOR FURTHER INFORMATION CONTACT: Jeremy Olson at 202-501-3221.

SUPPLEMENTAL INFORMATION: In July 1999, the General Accounting Office (GAO) published report GAO/NSIAD-99-131, Greater Attention Needed to Identify and Recover Overpayments, in which it pointed out that "under current law, there is no requirement for contractors who have been overpaid to notify the government of overpayments or to return overpayments prior to the government issuing a demand letter." In response, FAR 52.232-25, Prompt Payment; FAR 52.232-26, Prompt Payment for Fixed-Price Architect-Engineer Contracts; and FAR 52.232-27, Prompt Payment for Construction Contracts, were revised to require the contractor to notify the contracting officer if the contractor becomes aware of an invoice overpayment (see the December 18, 2001, FEDERAL CONTRACTS DISPATCH "Federal Acquisition Circular (FAC) 2001-02, Miscellaneous Amendments").

One of the respondents who submitted comments on the proposed rule that led to the December 18, 2001, final rule recommended that overpayments on financing payments be provided similar treatment as overpayments on invoice payments -- the contractor should be required to notify the contracting officer of overpayments on contract financing payments as well as overpayments on invoices. This proposed rule is issued to solicit and consider comments on the recommendation to extend the overpayments policy to contract financing payments. Also, the proposed rule would make the policy applicable to both contract financing and invoice payments under contracts for commercial items.

This proposed rule would revise FAR 52.232-25(d), FAR 52.232-26(c), and FAR 52.232-27(l), by adding the words in brackets, and add the entire paragraph as part of paragraph (i) of FAR 52.212-4, Contract Terms and Conditions -- Commercial Items:

Overpayments. If the contractor becomes aware of a duplicate [contract financing or invoice] payment or that the government has otherwise overpaid on a [contract financing or] invoice payment, the contractor shall immediately notify the contracting officer and request instructions for disposition of the overpayment.

In addition, the following would be added as new FAR 12.215, Notification of Overpayment, and new FAR 32.008, Notification of Overpayment:

If the contractor notifies the contracting officer of a duplicate contract financing or invoice payment or that the government has otherwise overpaid on a contract financing or invoice payment, the contracting officer must provide instructions to the contractor, in coordination with the cognizant payment office, regarding disposition of the overpayment.

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2002 by Panoptic Enterprises. All Rights Reserved.

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