Record the interest on an unpaid federal agency progress payment

Key facts

Human involvement

Yellow · Close supervision

How AI is used

From the contract and the payment record, set out the unpaid amount and any interest rate the contract states. For a federal agency acquisition, record that the statute uses the Treasury rate published for 41 U.S.C. § 7109(a)(1) and (b), and leave the figure blank for the lawyer. Leave a Virginia rate blank. Do not choose which rate applies and do not calculate a penalty percentage.

What the lawyer must review

31 U.S.C. § 3902 applies where the head of an agency acquiring property or service from a business concern does not pay the concern for each complete delivered item by the required payment date. The agency pays an interest penalty on the amount due. The interest is computed at the rate established by the Secretary of the Treasury, and published in the Federal Register, for interest payments under 41 U.S.C. § 7109(a)(1) and (b), in effect when the agency accrues the obligation. The penalty runs from the day after the required payment date until the date of payment. A concern is entitled to an interest penalty of $1.00 or more, and the penalty is paid without regard to whether the concern has requested it. Each payment for which the penalty is required is accompanied by a notice stating the amount of the interest penalty, the rate, and the period for which it was computed. Under § 3902(c)(3), a concern is entitled to the late-payment interest penalty plus an additional penalty when all four conditions are met: the concern is owed an interest penalty; the penalty is not included in a payment made on or after the date the penalty becomes due; the agency does not pay the penalty within 10 days after that payment; and the concern makes a written demand, not later than 40 days after that payment, that the agency pay the penalty. The additional penalty is a percentage of the late-payment interest penalty specified by regulation by the Director of the Office of Management and Budget. The section does not state the percentage. Temporary unavailability of funds does not relieve the agency. An interest penalty unpaid after any 30-day period is added to the principal, and a penalty accrues on the added amount. 31 U.S.C. § 3903 is the section under which the regulations are prescribed, including interest on an approved construction progress payment that remains unpaid for more than 14 days after receipt of the payment request. You confirm that an agency acquired the property or service, you obtain the Treasury rate, and you adopt the figure. Virginia Code § 11-4.6 refers to interest penalties consistent with § 2.2-4355. That section was not opened, so no Virginia rate is stated here.

Written for / version

United States versionUS