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  • Question

    Using the Treasury rate for determining the rate, how and from what time period does the interest rate need to be calculated? The DCAA audit report for all three contracts is October 10, 2013; I plan on providing my decision today, October 21, 2013. Thank you!


    Answer

    As discussed by telephone on Oct 29th, DCAA combined all three contracts and Delivery Orders to recommend one final quote (grand total) for disallowed costs.  DCAA also provided the disallowed cost amounts for each Contractor Fiscal Year (CFY) 2003, 2004 and 2007. 

    If cost was paid evenly over each CFY 2003, 2004 and 2007, the overpayment should be considered incurred from the mid-point of each CFY.  In accordance with FAR 42.709-4, “Computing interest”, this is also the point where interest should start accumulating.  Interest should be computed from the mid-point of each CFY to the date of the demand letter for payment of the penalty.  If cost was not paid evenly over each CFY an alternative equitable method may be used to consider the starting point to accumulate interest.  For example, if all payments for CFY 2007 were made in the last month of the CFY 2007, it may be considered equitable to start computing interest from the last month of CFY 2007 instead of the midpoint. 

    FAR 42.709 implements 10 U.S.C. 2324(a) through (d) and 41 U.S.C. 256(a) through (d), regarding the assessment of penalties against contractors.  However, be sure to also consult with your policy and legal departments to determine if there is guidance specific to your organization.


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