Learn more about each of the sections of the interest calculator in the sections below.
Step 1: Select type of interest calculation
Defective Pricing Simple Interest
Determine the Base and Simple Interest Computation on a Firm-Fixed-Price Contract Action Required Under Section 952 on the FY 1987 Authorization Act and FAR 15.407-1(b)(7). This option should only be selected for cases prior to October 1st 2011. Rates current through: 12/31/2024.
Defective Pricing Interest Compounded Daily
Determine the Base and Compound Interest Computation on a Firm-Fixed-Price Contract Action Required Under Section 952 of the FY 1987 Authorization Act and FAR 15.407-1(b)(7). Rates current through: 12/31/2024.
Claim / Termination
Compute the Amount of Interest Due on a Termination for Default or a Valid CDA Claim, as Defined in FAR 52.233-1, as Required by the Contract Disputes Act (CDA) of 1978 (41 U.S.C. 601-613).
COMMENT
Claims filed under the Contract Disputes Act and terminations for default receive simple interest regardless if the contractor owes the Government interest or if the Government owes the contractor interest. Request for equitable adjustment proposals and termination settlement proposals do not receive interest unless they are converted to a claim. Rates current through: 12/31/2024.
Step 2. Enter contract information
Recommended Price Adjustment (B)
The total amount the contract price was increased because the contractor submitted defective cost or pricing data. It includes the defective data, and the associated costs and profit.
Calculate Interest Through Date
This is the expected date of repayment.
Settlement Date
This is the receipt/demand date.
Step 3. Enter payment information
Payment Dates
This date represents the actual date of payment to the contractor. Note: If payments have been combined, the note should state that this is the period midpoint date which represents the date on which 50 percent of the total value of items delivered in each period is reached.
Total value of items delivered
Total dollar amount will differ from contract price if performance has not been completed. Note: For cost-type actions, the value of this column will relate to the total amount of defective fee and/or the amount of the subcontract defect.
Pro-Rata Base Allocation Factor
This is the ratio of the recommended adjustment to the total contract price. Used to allocate the adjustment amount to specific payments. Does not apply to Claims/Terminations.
Computation of the Pro-Rata Base Allocation Factor is as follows:
Total Contract Price (A): $5,000,000
Recommended Price Adjustment (B): $250,000
Pro-Rata Base Allocation Factor (B/A): 5%
Allocated Interest Base
For Defective Pricing, this is the Allocated Interest Base - the amount representing the allocated portion of the adjustment in each payment (total value of items delivered times the pro-rata base allocation factor).
Simple interest shall be applied to the allocated interest base for each payment date at the applicable rates prescribed by the Secretary of the Treasury under Section 6621 of the Internal Revenue Code of 1986. Treasury rates are issued quarterly, and for convienence of computation, the quarterly interest periods may be combined if the interest rate does not change.
Interest (Simple)
Simple interest on each payment is computed up to (but not including) the repayment date. However, if the contractor and contracting officer have not agreed on a repayment date, the contracting officer may also request that the auditor recompute the interest once a repayment date has been established.
Interest (Compounded)
Compound interest on each payment is computed up to (but not including) the repayment date. However, if the contractor and contracting officer have not agreed on a repayment date, the contracting officer may also be required that the auditor recompute the interest once a repayment date has been established.
Interest (Claim/Determination)
The amount of interest shall be computed at the interest rate established by the Secretary of the Treasury as provided in Section 611 of the Contract Disputes Act of 1978 (Public Law 95-563) (see FAR 52.232-17(a)).
Using the statutory interest rate which can be found at CAM 8-414.2, the amount of simple interest is calculated on the interest base from the date the contracting officer received the contractor's claim or the date the Government demanded payment from the contractor on a termination for default up to (but not including) the payment date.
If the auditor is uncertain about the payment date, he or she should coordinate with the contracting officer or Government attorney to verify the appropriate payment date.
Receipt/Demand Date
This date represents the date the contracting officer received the contractor's claim (see FAR 52.233-1(h)). For a termination for default, the date represents the date of any demand for payment issued to the contractor by the Government (see FAR 52.232-17(e)(2)).
Settlement Amount
This amount represents the settlement amount of a claim. For a termination for default, the amount represents the Government's demand for payment from the contractor for advance/partial payments associated with the undelivered work that have been paid to the contractor.
Interest Base
For Claims and Terminations, this is equal to the Settlement Amount. Simple interest shall be applied to the interest base, which for claims is the settlement amount. For a termination for default, the interest base is the amount of each payment made to the contractor that is over the amount that is allowable to the contractor.