Interest Rate

For the period starting January 1, 2008, and ending June 30, 2008, the US Treasury has set the interest rate used to calculate interest due on claims under the Contract Disputes Act and the Prompt Payment Act at 4.75 percent per annum, a decrease of 1 percent from the previous six-month period.  72 FR 74408.

Performance-Based Payment (PBP)

PBP is a contract financing technique pursuant to which payments are based on specifically described events, or measurable criteria of performance, other than the signing of the contract or modification, the exercise of options, or the passage of time.  Effective January 25, 2008, COs may use PBPs when the parties agree to the PBP terms, the contract or line item is fixed price, and the contract does not provide for progress payments.  PBPs are prohibited for cost-type line items and contracts awarded through sealed bidding.  PBPs are not limited to actual incurred costs, but the Government must be able to verify that the payment criteria have been successfully met.  FAR Case 2005-016.

Allowable Airfare

The FAR Councils are proposing to amend the limitation on the allowable airfare costs set forth in FAR 31.205-46, which currently limits such costs to "the lowest customary standard, coach, or equivalent airfare offered during normal business hours."  The proposal would delete the word "standard" since it does not refer to an existing class of service.  The proposal would also “clarify” that the airfare at issue is the lowest airfare available to the contractor, as opposed to that available to the general public.  This proposal is hardly a clarification and, if adopted, would be extraordinarily difficult to implement and should be expected to spawn numerous disagreements with respect discount and rebate agreements negotiated between contractors and airlines.  Companies with multiple airline agreements would need to reconcile the fare against each of those agreements.  Companies with flight-by-flight discount agreements might find themselves disadvantaged cost-wise in comparison to contractors whose travel discounts are triggered by periodic volume traffic that results in one-time, lump sum rebates.  The proposed rule does not come to grips with such disparate circumstances or the potential inequities inherent in the application of the rule to those differing circumstances.  Comments on the proposed rule are due February 19, 2008.  FAR Case 2006-024.

Authored by:

John W. Chierichella



Aleksander Lamvol