Summary: Legislation has been proposed that would require the Government to pay interest on overdue payments to agency contractors who, through no fault of their own, experience long delays in receiving payments due from Government agencies. On the basis of prior work, GAO estimates that late payments are costing contractors approximately $150 to $375 million annually. As presently worded, the legislation would generate significant administrative burdens. Agencies would have to develop a system for tracking documentation to determine whether the contractor or the Government was at fault in causing a late payment and a method would have to be provided for computation and verification of any interest amounts due when paying bills. GAO suggests that the pending bill be revised to provide the following: (1) payment of interest only upon receipt of a proper claim of interest within some designated period of time after payment of the underlying amount; (2) limitation of the Government's interest liability to periods of 120 days beyond notifications by the contractor that contract payment has not been received; (3) notification to the contractor within 10 days of receipt of a defective invoice at the appropriate Government installation; (4) interest for each day the required notification is late shall be added to any interest otherwise payable; and (5) provision that Federal monies may be used to pay interest or late payments in accordance with practices applicable to other than Federal grant funds of the grantee. GAO believes that, if the bill is revised to require that interest be paid only upon claim, the administrative costs should not be overwhelming. The liability for interest would serve to curtail the number of late payments made to contractors.
