Are there any statues that prevent us from awarding a contract to a contractor that has delinquent federal debt? In what way can we use this information regarding the award of new contracts?
The answer to this question lies within fiscal law policy. Our advice: Consult with a fiscal law attorney within your command for the precise answer to your question.
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The following is intended to provide you with information that addresses parts of your question. The first (1) is the applicable FAR parts. The Second (2) is some guidance from the Treasury Department. The third (3) is a proposed rule by GAO that addresses your subject. The fourth and last (4) is a fact sheet on the subject from the Office of Legislative and Public Affairs. There is a bit more guidance on the use of Commercial Purchase Card Restrictions, but this guidance may be beyond the scope of your question.
1. FAR citations:
32.600 Scope of subpart.
This subpart prescribes policies and procedures for identifying, collecting, and deferring collection of contract debts (including interest, if applicable). Sections 32.607, 32.608, and 32.610 of this subpart do not apply to claims against common carriers for transportation overcharges and freight and cargo losses (31 U.S.C. 3726).
32.606 Debt collection.
(a) If the contractor has not liquidated the debt within 30 days of the date due or requested installment payments or deferment of collection, the payment office shall initiate withholding of principal, interest, penalties, and administrative charges. In the event the contract is assigned under the Assignment of Claims Act of 1940 (31 U.S.C. 3727 and 41 U.S.C. 15), the rights of the assignee will be scrupulously respected and withholding of payments shall be consistent with those rights. For additional information on assignment of claims, see Subpart 32.8.
(b) As provided for in the Debt Collection Improvement Act of 1996 (31 U.S.C. 3711(g)(1)), payment offices are required to transfer any debt that is delinquent more than 180 days to the Department of Treasury for collection.
(c) The contracting officer shall periodically follow up with the payment office to determine whether the debt has been collected and credited to the correct appropriation(s).
2. The Treasury Department: provides the following guidance that was found from Testimony of Commissioner David A. Lebryk before the House Oversight and Government Reform Subcommittee on Government Organization, Efficiency and Financial Management
March 11, 2011
Red to Black: Improving Collection of Delinquent Debt Owed to the Government
Federal contractors: Federal contracting officers are required to check the General Services Administration Central Contractor Registry (CCR) to determine whether a contractor owes a delinquent debt. When the Government contracts for goods or services and pays with a credit card, those payments are made to the card-issuing bank and cannot legally be intercepted for delinquent debts owed by the contractor. In November 2009, FMS and GSA implemented a process to ensure that contractors who owe delinquent debts to the United States are not paid with a credit card. Instead, those contractors must be paid through a mechanism that can be offset or levied to collect the contractor’s debts.
3. The following is a proposed rule by the GSA:
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 4, 8, 13, 17, 32, and 52
(FAR Case 2006-026; Docket 2007-0001; Sequence 13]
Federal Acquisition Regulation; FAR Case 2006-026, Governmentwide Commercial Purchase Card Restrictions for Treasury Offset Program Debts AGENCIES: Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule.
The Debt Collection Improvement Act of 1996 and other statutes provide the tools for administering a centralized program for the collection of delinquent, non-tax and tax debts. The Financial Management Service (FMS), a bureau of the Department of the Treasury, is charged with implementing the Government's delinquent debt collection program. Since 1996, FMS has collected more than $24.4 billion in delinquent debt. In fiscal year 2006, collections of delinquent debt remained at a constant $3.1 billion.
To collect delinquent debts owed to Federal agencies and states, FMS uses the Treasury Offset Program (TOP). Information on TOP is available at http://fms.treas.gov/debt/index.html. TOP uses both ``offsets'' and ``continuous levies'' to collect delinquent debts.
Offset is a process whereby Federal payments are reduced or ``offset'' to satisfy a person's overdue Federal debt, child support obligation, or state tax debt. A payee's name and taxpayer
identification number are matched against a Treasury/FMS database of delinquent debtors for automatic offset of funds. Offset funds are then used to satisfy payment of the delinquent debt to the extent allowed by law.
Under the continuous levy program, delinquent Federal tax debts are collected by levying non-tax payments until the debt is satisfied, as authorized by the 1997 Taxpayer Relief Act. The
continuous levy program includes levy of some vendor payments (Treasury disbursed and non-Treasury disbursed payments), Federal employee salary payments, the Office of Personnel Management retirement payments, and social security benefit payments. Continuous levy is accomplished through a process almost identical to that of offset. FMS matches delinquent debtor data with payment record data for automated collection of the debt at the time of payment, after the delinquent taxpayer has been afforded due process. To help increase the collection of delinquent debts owed to the Government, the rule proposes to amend the FAR to require contracting officers to determine whether the Central Contractor Registration (CCR) indicates that the contractor has delinquent debt that is subject to collection under the TOP. If a debt indicator is found, the Governmentwide commercial purchase card is not authorized as a method of payment. The contracting officer is required to check for the flag at the time of contract award, order placement, and again before exercising any options. The rule also proposes to amend the applicable Governmentwide commercial purchase card payment clause at 52.232-36 to advise contractors that the Governmentwide commercial purchase card is not authorized as a method of payment if a debt indicator is included in the CCR for the contractor.
The clause is written to allow contracting officers to unilaterally exercise options without having to bilaterally negotiate revisions to the original contract terms and conditions if the debt indicator is subsequently found during the execution of an option. This rule would not apply to individual travel charge cards or centrally billed accounts for travel/transportation services.
32.1108 Payment by Governmentwide commercial purchase card.
(b)(1) Written contracts to be paid by purchase card should include the clause at 52.232-36, Payment by Third Party, as prescribed by 32.1110(d). However, payment by a purchase card also may be made under a contract that does not contain the clause to the extent the contractor agrees to accept that method of payment.
(2)(i) Contracting officers are required to verify (by looking in CCR) whether the contractor has any delinquent debt subject to collection under the Treasury Offset Program (TOP) program at contract award, order placement, and prior to any option exercise. Information on TOP is available at http://fms.treas.gov/debt/index.html.
(ii) The contracting officer shall not authorize the Governmentwide commercial purchase card as a method of payment when the Central Contractor Registration (CCR) indicates that the contractor has delinquent debt subject to collection under the TOP. In such cases, the contracting officer shall provide alternative payment instructions to the contractor. Contracting officers shall not use the presence of the delinquent debt indicator to exclude a contractor from receipt of the
contract, order, or exercised option.
4. One other fact sheet from The Office of Legislative and Public Affairs is also useful:
The Office of Legislative
and Public Affairs
FMS Debt Collection and The Debt Collection Improvement Act of 1996
In response to a steady increase in the amount of delinquent non-tax debt owed to the United States, and concern that appropriate actions were not being taken to collect this delinquent debt, Congress passed the Debt Collection Improvement Act of 1996 (DCIA). This law centralized the governmentwide collection of delinquent debt and gave Treasury significant new responsibilities in this area. The Financial Management Service (FMS) is responsible for Treasury's implementation of the debt collection provisions of the DCIA.
Prior to passage of the DCIA, Treasury/FMS assisted the Office of Management and Budget (OMB) in providing federal agencies with guidance on collecting debts owed to the federal government. Additionally, FMS assisted agencies in collecting delinquent debts through the Internal Revenue Service (IRS) operated tax refund offset program, collecting debts through salary offset, and using a governmentwide contract available to federal agencies to refer delinquent debts to private collection agencies (PCAs). Due to FMS' accumulated knowledge of debt collection practices and procedures, and its position as the disbursing agency for more than 85 percent of federal payments, FMS was an appropriate agency to conduct centralized debt collection operations for the federal government.
The DCIA centralized the collection of delinquent non-tax debt at Treasury in two significant ways. One of the tools used by FMS to collect debts is its Treasury Offset Program (TOP), initially established under the DCIA. The TOP compares the names and taxpayer identifying numbers (TINs) of debtors with the names and TINs of recipients of federal payments. If there is a match, the federal payment is reduced, or "offset," to satisfy the overdue debt. The DCIA requires federal agencies to refer delinquent non-tax debts to FMS for purposes of collection by offset of non-tax payments. Non-tax payments include vendor, federal retirement, federal salary, and Social Security benefits. Currently, all OPM retirement, vendor, SSA benefit payments and some Federal salary payments are being offset.
TOP has been expanded to incorporate other offset processes, particularly: (1) the tax refund offset program, formerly operated by the Internal Revenue Service, was merged into TOP in January 1999; (2) levies served by the IRS for the collection of delinquent tax debt in accordance with the Taxpayer Relief Act of 1997; and (3) collection of state income tax debts by offset of federal income tax refunds as mandated by the 1998 Internal Revenue Service
Restructuring and Reform Act. Different statutory requirements have made implementation of the entire TOP program very complex.
The other primary debt collection tool operated by FMS is "cross-servicing" which uses a variety of collection tools to encourage debtors to repay the federal government. Federal agencies are required to refer eligible delinquent (over 180 days) non-tax debts to Treasury for debt collection action, if they have not been successful at collecting those debts. The types of debts referred to FMS include unpaid loans, overpayments or duplicate payments made to federal salary or benefit payment recipients, misused grant funds, and fines, penalties or fees assessed by federal agencies. FMS sends demand letters to debtors on Treasury letterhead, and enters into repayment arrangements with debtors. FMS' cross-servicing program administers a contract with PCAs who provide delinquent debt collection services and FMS refers debts to these PCAs.
Last Updated: April 14, 2011