FAR Part 32

Question 1

Part 32

Answer 1

Contract Financing

Question 2

FAR Part 32: Contract Financing

Overview of FAR Part 32 - Contract Financing

Purpose: Provides policies and procedures for contract financing (FAR 32.000).

Key Sections:

Answer 2

32.1 Non-Commercial Item Purchase Financing

32.2 Commercial Item Purchase Financing

32.3 Loan Guarantees for Defense Production

32.4 Advance Payments for Non-Commercial Items

32.5 Progress Payments Based on Costs

32.6 Contract Debts

32.7 Contract Funding

32.8 Assignment of Claims

32.9 Prompt Payment

32.10 Performance-Based Payments

32.11 Electronic Funds Transfer

Question 3

FAR Part 32: Contract Financing

Subpart 32.1 - Non-Commercial Item Purchase Financing

Purpose: Provides financing methods for non-commercial item purchases (FAR 32.100).

Key Features:

Answer 3

Use of advance payments and progress payments (FAR 32.101).

Criteria for approving financing requests (FAR 32.102).

Ensuring funds are available before authorizing payments (FAR 32.103).

Question 4

Overview of FAR Part 32 - Contract Financing

Instructor Dialogue:

Answer 4

“FAR Part 32 focuses on the policies and procedures for contract financing.“

“This part helps manage financial risks associated with contract performance.“

“Understanding these financing mechanisms is crucial for ensuring smooth contract execution and mitigating financial issues.”

Question 5

Overview of FAR Part 32 - Contract Financing

Subpart 32.1 - Non-Commercial Item Purchase Financing

Instructor Dialogue:

Answer 5

Subpart 32.1 provides financing methods for non-commercial item purchases.“

“This includes the use of advance payments and progress payments.“

“Criteria for approving financing requests ensure that funds are used appropriately.“

“Ensuring funds are available before authorizing payments helps mitigate financial risks

Question 6

Overview of FAR Part 32 - Contract Financing

Subpart 32.2 - Commercial Item

Purchase Financing
Purpose: Establishes financing options for commercial item purchases (FAR 32.200).

Key Features:

Answer 6

Use of commercial interim payments and commercial advance payments (FAR 32.202-1).

Conditions for commercial item financing (FAR 32.202-2).

Limiting the amount and timing of payments to reduce risk (FAR 32.202-3).

Question 7

Overview of FAR Part 32 - Contract Financing

Subpart 32.2 - Commercial Item

Instructor Dialogue

Answer 7

“Subpart 32.2 establishes financing options for commercial item purchases.“

“It includes the use of commercial interim payments and commercial advance payments.“

“Conditions for commercial item financing ensure that the terms are beneficial for both parties.“

“Limiting the amount and timing of payments helps reduce financial risk.”

Question 8

Overview of FAR Part 32 - Contract Financing

Subpart 32.3 - Loan Guarantees for Defense Production

Purpose: Provides loan guarantees to contractors for defense production (FAR 32.300).

Key Features:

Answer 8

Eligibility criteria for loan guarantees (FAR 32.301).

Procedures for applying for and obtaining loan guarantees (FAR 32.302).

Conditions for the use of loan guarantees (FAR 32.303).

Question 9

Overview of FAR Part 32 - Contract Financing

Subpart 32.3 - Loan Guarantees for Defense Production

Instructor Dialogue:

Answer 9

“Subpart 32.3 provides loan guarantees to contractors for defense production.“

“Eligibility criteria ensure that only qualified contractors receive these guarantees.“

“Procedures for applying for and obtaining loan guarantees are clearly outlined.“

“Conditions for the use of loan guarantees help manage financial risk.”

Question 10

Overview of FAR Part 32 - Contract Financing

Subpart 32.4 - Advance Payments for Non-Commercial Items

Purpose: Allows advance payments for non-commercial items to facilitate contract performance (FAR 32.400).

Key Features:

Answer 10

Criteria for authorizing advance payments (FAR 32.401).

Safeguards to protect government interests (FAR 32.402).

Requirements for monitoring and controlling advance payments (FAR 32.403)

Question 11

Overview of FAR Part 32 - Contract Financing

Subpart 32.4 - Advance Payments for Non-Commercial Items

Instructor Dialogue:

Answer 11

Subpart 32.4 allows advance payments for non-commercial items to facilitate contract performance.“

“Criteria for authorizing advance payments ensure they are necessary and justified.“

“Safeguards protect government interests by securing repayment in case of default.“

“Requirements for monitoring and controlling advance payments help mitigate financial risk

Question 12

Overview of FAR Part 32 - Contract Financing

Subpart 32.5 - Progress Payments Based on Costs

Purpose: Provides for progress payments based on costs incurred by the contractor (FAR 32.500).

Key Features:

Answer 12

Establishing progress payment rates (FAR 32.501-1).

Criteria for approving progress payments (FAR 32.501-2).

Monitoring contractor performance to ensure progress (FAR 32.502).

Instructor Dialogue:
“Subpart 32.5 provides for progress payments based on costs incurred by the contractor.”

“Progress payment rates are established to ensure fair and adequate financing.”

“Criteria for approving progress payments ensure funds are used appropriately.”

“Monitoring contractor performance helps ensure that progress is being made and mitigates financial risk.”

Question 13

Overview of FAR Part 32 - Contract Financing

Subpart 32.6 - Contract Debts

Purpose: Establishes procedures for managing and collecting contract debts (FAR 32.600).

Key Features:

Answer 13

Identifying and recording contract debts (FAR 32.601).

Procedures for collecting contract debts (FAR 32.602).

Mitigating financial risks through effective debt management (FAR 32.603).

Instructor Dialogue:
“Subpart 32.6 establishes procedures for managing and collecting contract debts.”

“Identifying and recording contract debts is essential for accurate financial management.”

“Procedures for collecting contract debts ensure timely recovery of funds.”

“Effective debt management helps mitigate financial risks.”

Question 14

Overview of FAR Part 32 - Contract

FinancingSubpart 32.7 - Contract Funding

Purpose: Provides guidelines for ensuring adequate funding for contracts (FAR 32.700).

Key Features:

Answer 14

Availability of funds before contract award (FAR 32.701).

Monitoring funding levels throughout contract performance (FAR 32.702).

Adjusting funding as necessary to meet contract requirements (FAR 32.703).

instructor Dialogue:
“Subpart 32.7 provides guidelines for ensuring adequate funding for contracts.”

“Ensuring the availability of funds before contract award is crucial for financial planning.”

“Monitoring funding levels throughout contract performance helps manage financial risk.”

“Adjusting funding as necessary ensures that contract requirements are met.”

Question 15

Overview of FAR Part 32 - Contract

Subpart 32.8 - Assignment of Claims

Purpose: Allows contractors to assign payment claims to financing institutions (FAR 32.800).

Key Features:

Answer 15

Conditions for assigning claims (FAR 32.801).

Procedures for processing assigned claims (FAR 32.802).

Protecting the government’s interests in assigned claims (FAR 32.803).

instructor Dialogue:
“Subpart 32.8 allows contractors to assign payment claims to financing institutions.”

“Conditions for assigning claims ensure that assignments are valid and enforceable.”

“Procedures for processing assigned claims are clearly outlined.”

“Protecting the government’s interests in assigned claims is crucial for managing financial risk.”

Question 16

Overview of FAR Part 32 - Contract

Subpart 32.9 - Prompt Payment

Purpose: Ensures timely payment to contractors to improve cash flow and reduce interest penalties (FAR 32.900).

Key Features:

Answer 16

Requirements for prompt payment (FAR 32.901).

Procedures for processing payments promptly (FAR 32.902).

Penalties for late payments (FAR 32.903).

instructor Dialogue:
“Subpart 32.9 ensures timely payment to contractors to improve cash flow and reduce interest penalties.”

“Requirements for prompt payment help ensure contractors receive payments on time.”

“Procedures for processing payments promptly are essential for financial management.”

“Penalties for late payments incentivize timely processing and mitigate financial risk.”

Question 17

Overview of FAR Part 32 - Contract

Subpart 32.10 - Performance-Based Payments

Purpose: Provides payment methods based on the performance of the contractor (FAR 32.1000).

Key Features:

Answer 17

Conditions for using performance-based payments (FAR 32.1001).

Criteria for measuring performance (FAR 32.1002).

Benefits of performance-based payments for managing financial risk (FAR 32.1003).

Instructor Dialogue:
“Subpart 32.10 provides payment methods based on the performance of the contractor.”

“Conditions for using performance-based payments ensure that they are appropriate.”

“Criteria for measuring performance help ensure that payments are linked to successful outcomes.”

“Benefits of performance-based payments include improved cash flow and reduced financial risk.”

Question 18

Overview of FAR Part 32 - Contract

Subpart 32.11 - Electronic Funds Transfer

Purpose: Mandates the use of electronic funds transfer (EFT) for payments to contractors (FAR 32.1100).

Key Features:

Answer 18

Requirements for contractors to provide EFT information (FAR 32.1101).

Procedures for making EFT payments (FAR 32.1102).

Benefits of using EFT for payments, including increased security and efficiency (FAR 32.1103).

Instructor Dialogue:
“Subpart 32.11 mandates the use of electronic funds transfer (EFT) for payments to contractors.”

“Contractors are required to provide EFT information to facilitate these payments.”

“Procedures for making EFT payments ensure that the process is secure and efficient.”

“Using EFT for payments offers benefits such as increased security and efficiency, reducing the risk of payment delays and fraud.”
risk.”

Question 19

Contract Financing Methods

The most commonly used financing
methods include:

Answer 19

Advance payments
Advances of money by the government to a prime contractor

Loan guarantees
Guarantees backed by the Federal Reserve designed to enable contractors to obtain financing from private sources

Performance-based payments
Made on the basis of performance measured by objective, quantifiable methods, accomplishment of defined events, or other quantifiable measures of results

Question 20

MorePaymentMethods

Payment methods also include:

Answer 20

Administration of debts arising out of contracts,

Contract funding, including the use of contract clauses limiting costs or funds,

Assignment of claims to aid in private financing,

Selected payment clauses,

Financing of purchases of commercial items,

Performance-based payments, and * Electronic funds transfer payments.

Question 21

Noncommercial Item Purchase Financing

Government financing

Answer 21

is only to be provided to the extent
actually needed for prompt and efficient performance, considering the availability of private financing.

Self-liquidating
* Able to earn back its original cost out of income over a fixed period
* Contract financing is intended ot be self-liquidating through contract performance

Contract financing is intended to be self-liquidating through contract performance

Agencies may finance contractor working capital

Agencies may not finance expansion of contractor- owned facilities or acquisition of fixed assets

Question 22

Order of Preference

Answer 22

Private financing without government guarantee

Customary contract financing

Loan guarantees

Unusual contract financing

Advance payments

Question 23

Small Business Concerns
The contracting officer must give special

Answer 23

attention to meeting the contractor’s financial need.

A contractor’s receipt of a Certificate of Competency from the SBA has no bearing on the contractor’s need for or entitlement ot financing.

Question 24

Commercial Item Purchase Financing

Answer 24

Financing for the purchase of
commercial items is normally the contractor’s responsibility.

Commercial advance payment
* The payment is made before any performance of work
* The payment shall not exceed 15% of the contract price
* Payments are not subject to advance payments for noncommercial items

Commercial interim payment
* A payment that is not a commercial advance payment or a delivery payment
* Payment is given to the contractor after some work has been done

Delivery payment
*Payment for accepted supplies or services, including payments for accepted partial deliveries

Question 25

Commercial interim payments and commercial advance payments may be made under the following circumstances:

Answer 25

The contract item financed is a commercial supply or service,

The contract price exceeds the Simplified Acquisition Threshold,

The contracting officer determine it is appropriate/customary in the
commercial marketplace to make financing payments for the item and determines it is in the best interest of the government,

Adequate security is obtained,

Aggregate of commercial advance payments shall not exceed 15% of
contract price (competitive environment), and

Sole source, adequate consideration is obtained, and concurrence from the payment office regarding liquidation provisions fi required.

Question 26

Contract Financing in MarketResearch

Contract financing can be a subject included in the market research conducted in agreement with FAR Part 10 to determine:

Answer 26

The extent to which other buyers provide contract financing,

The level of financing normally provided,

The basis for and frequency of payments, and

Methods of liquidation of contract financing payments as well as any special or unusual payment terms applicable to delivery payments.

Question 27

Loan Guarantees for Defense Production

Answer 27

Federal Reserve Banks are authorized to act, on behalf of guaranteeing agencies, such as the DoD, as fiscal agents of the U.S. in the making of loan guarantees for defense
production.

Same as conventional loans made by banks, except:
* The guaranteeing agency is obligated, on demand of the lender, to purchase a stated percentage of the loan
* To share any losses in the amount of the guaranteed percentage

Question 28

Advance payments for commercial items

Answer 28

are the least preferred method of financing

Should not be authorized if other types of financing are reasonable available to the contractor

Question 29

Progress Payments

Answer 29

Customary
Uses customary rates, cost bases, payment methods, and methods
of liquidation

Unusual
Used ni exceptional circumstances

Customary progress payment rate is:
80% for large business

85% for small business concerns concerns

Any percentage greater than these is considered unusual.

Question 30

Unusual progress payments may be applied only when:

Answer 30

• The contract necessitates predelivery expenditures that are large in relation to the contract price and in relation to the contractor’s working capital and credit,
• The contractor fully documents an actual need to supplement any private financing available, and
• The contractor’s request is approved by the head of the contracting activity.

Question 31

Progress Payments: Exceptions

Answer 31

The contracting officer must reject as nonresponsive bids conditioned on progress payments when the solicitation did not provide for progress payments.

Each contractor request for progress payment must be for $2,500 or more, unless agency procedures authorize a lower amount.

Question 32

Contract Funding

Anti-Deficiency Act:

Answer 32

• No officer or employee of the government may create or
  authorize an obligation in excess of the funds available, or in advance of appropriations unless otherwise authorized by law
• Before executing a contract, the contracting officer must obtain written assurance from responsible fiscal authority that adequate funds are available, or expressly condition the contract upon availability of funds

Question 33

Contract Funding

For contract performance in multiple fiscal years:

Answer 33

May be initiated for continuing needs before these funds are
available, provided that the contract includes the prescribed Availability of Funds clause

Generally may not cross fiscal years

IDIQ may extend beyond the fiscal year in which they begin,
provided that any specified minimum quantities are ordered in the initial fiscal year and the contract includes the prescribed Availability of Funds for the Next Fiscal Year clause

Question 34

Limitation of Cost or Funds

Contracts that contain the Limitation of Cost

Answer 34

or Funds clause must be monitored closely

The contracting officer, upon learning that the contractor is approaching the estimated cost or limit of the funds allotted must promptly notify the
contractor in writing that:
* Additional funds have been allotted or the estimated cost increased,
* The contract will not be further funded,
* The contract is to be terminated, or
* The government si considering whether to allot additional funds or increase the estimated cost.

Question 35

Assignment of claims

Answer 35

The transfer or making over by the contractor to a bank, trust company or other financing institution, as security for a loan to the contractor, of its right to be paid by the government for contract performance

A contractor may assign monies due or to become due under a government contract
only when:
* The value exceeds $1,000,
* The assignment is made to a bank, trust company, or other
financing institution,
* The contractual document does not prohibit the assignment, and
* The assignee sends a written notice of the assignment to the contracting officer or the agency head.

Question 36

Prompt Payment

Answer 36

Solicitations and contracts must specify:
* Payment procedures,
* Payment due dates, and
* Interest penalties for late invoice payments.

Payments are generally made on the 30th day after the designated
billing office receives a proper invoice from the contractor or the 30th day after government acceptance of supplies delivered or services
performed by the contractor, whichever is later.

Payment will be based on receipt of a proper invoice and satisfactory performance.

Discounts for prompt payment may be taken only when payments are made within the discount period specified by the contractor.

Question 37

Performance-based payments are

Answer 37

the preferred financing method when the contracting officer finds them practical and the contractor agrees to their use.

• The contracting officer and offeror agree on payment terms * The contract is a fixed-price type contract
• For IDIQ, the individual order does not provide for progress payments
• For other than IDIQ contracts, the contract does not provide for progress payments

Question 38

Electronic Funds Transfer (EFT)

Answer 38

The electronic transfer of money from one bank account to another, either within a single financial institution or across multiple institutions, through computer-based systems and without the direct intervention of bank staff

Question 39

FAR PART 32. CONTRACT
FINANCING

This part prescribes policies and procedures for contract financing and other payment matters. This includes:

Answer 39

Payment methods, including partial payments and progress payments based on percentage or stage of completion;

Loan guarantees, advance payments, and progress payments based on costs;

Administration of debts to the government arising out of contracts;

Contract funding, including the use of contract clauses limiting costs or funds;
*
Assignment of claims to aid in private financing;

Selected payment clauses;

Financing of purchases of commercial items;

Performance-based payments; and

Electronic funds transfer payments.

Question 40

A. NON-COMMERCIAL ITEM PURCHASE
FINANCING (FAR 32.1)

Government financing is to be provided only

Answer 40

to the extent actually needed for prompt and efficient performance, considering the availability of private financing.

Contract financing is intended to be self-liquidating through contract performance; consequently, agencies may finance contractor working capital, but not expansion of contractor-owned facilities or acquisition of fixed assets.

Question 41

CONTRACT FINANCING METHODS

Answer 41

• Advance payments advances of money by the government to a prime contractor;
• Progress payments based on costs-made on the basis of costs incurred by the contract or as work progresses;
• Loan guarantees guarantees backed by the Federal Reserve designed to enable contractors to obtain financing from private sources;

*Partial payments for accepted supplies and services-more of a payment versus financing method;

• Progress payments based on a percentage or stage of completion-again, more of a payment versus financing method

Performance-based payments-made on the basis of performance measured by objective, quantifiable methods, accomplishment of defined events, or other quantifiable measures of results

Question 42

ORDER OF PREFERENCE

Answer 42

Private financing without government guarantee (it is not intended, however, that the con-tractor be required to obtain private financing at unreasonable terms or from other agencies); customary contract financing; loan guarantees; unusual contract financing; advance payments.

Unusual contract financing is any contract financing arrangement that deviates from customary contract financing procedures delineated in
Offerors may propose only the customary contract financing specified in the solicitation.

If the contractor is a small business concern, the contracting officer must give special attention to meeting the contractor’s financial need. A contractor’s receipt of a CoC from the Small Business Administration has no bearing on the contractor’s need for or entitle-ment to contract financing

The contracting officer is not to treat the contractor’s need for contract financing as a handicap in making the contract award; e.g, as a responsibility factor or evaluation criterion, as long as the contractor or offeror meets the standards prescribed for responsible prospective contractors at 9.104. Also, if a contractor failed to indicate a need for contract financing before the contract was awarded, it does not disqualify them from seeking contract financing after award.

Question 43

B. COMMERCIAL ITEM PURCHASE
FINANCING (FAR 32.2)

For purchases of commercial items, financing of the contract is normally the contractor’s responsibility

Answer 43

However, in some markets, the provision of financing by the buyer is a commercial practice. In these circumstances, the contracting officer may include appropriate financing terms in contracts for commercial purchases when doing so will be in the best interest of the government.

Question 44

Commercial interim payments and commercial advance payments may be made under the following circumstances:

Answer 44

contract item financed is a commercial supply or service; contract price exceeds the simplified acquisition threshold; contracting officer determines it is appropriate/customary in the commercial marketplace to make financing payments for the item and determines it is in the best interest of the government; adequate security is obtained; or prior to any performance of work under the contract, the aggregate of commercial advance payments shall not exceed 15 percent of contract price (competitive environment). If contract is sole source, adequate consideration obtained; and concurrence from the payment office regarding liquidation provisions, if required.

Question 45

TYPES OF PAYMENTS FOR COMMERCIAL ITEM
PURCHASES (FAR 32.202-2)

COMMERCIAL ADVANCE PAYMENT:

Answer 45

Payment made before any performance of work under the contract; aggregate payments shall not exceed 15 percent of the contract price; payments are not subject to FAR 32.4, Advance Payments for Non-Commercial Items.

Question 46

TYPES OF PAYMENTS FOR COMMERCIAL ITEM
PURCHASES (FAR 32.202-2)

COMMERCIAL INTERIM PAYMENT:

Answer 46

Payment that is not a commercial advance payment or a delivery payment; interim payment is given to the contractor after some work has been

Question 47

TYPES OF PAYMENTS FOR COMMERCIAL ITEM
PURCHASES (FAR 32.202-2)

DELIVERY PAYMENT:

Answer 47

Payment for accepted supplies or services, including payments for accepted partial deliveries.

Contract financing can be a subject included in the market research conducted in accordance with FAR part 10 to determine the extent to which other buyers provide contract financing, the level of financing normally provided, the basis for and frequency of any payments, and methods of liquidation of contract financing payments, as well as any special or unusual payment terms applicable to delivery payments.

Question 48

C. LOAN GUARANTEES FOR DEFENSE
PRODUCTION (FAR 32.3)

Answer 48

Federal Reserve Banks are autorized to act, on behalf of guaranteeing agencies (e.g., DOD), as fiscal agents of the United States in the making of loan guarantees for defense production.

Guaranteed loans are essentially the same as conventional loans made by private financial institutions, except that the guaranteeing agency is obligated, on demand of the lender, to purchase a stated percentage of the loan and to share any losses in the amount of guaranteed percentage.

Question 49

D. ADVANCE PAYMENTS FOR NONCOMMERCIAL ITEMS (FAR 32.4)

Answer 49

As it is the least preferred method of contract financing, advance payments should not be authorized if other types of financing are reasonably available to the contractor. Applicability is limited to contracts described in FAR 32.403.

Question 50

E. PROGRESS PAYMENTS BASED ON COSTS
(FAR 32.5)
The customary progress payment

Answer 50

rate is 80 percent for large business concerns and 85 percent for small business concerns. Any percentage greater than these is considered unusual.

Unusual progress payments may be applied only when the contract necessitates predelivery expenditures that are large in relation to contract price and in relation to the contractor’s working capital and credit, the contractor fully documents an actual need to supplement any private financing available, and contractor’s request is approved by the head of the contracting activity.
Progress payments may be reduced or suspended when certain conditions exist. (See FAR 32.503-6.)

Progress payments are recouped by the government through the deduction of liquidations from payments that would otherwise be due to the contractor for completed contract items.

The contracting officer must reject as nonresponsive those bids conditioned on progress payments when the solicitation did not provide for progress payments.

Question 51

F. CONTRACT FUNDING (FAR 32.7)

No officer or employee of the government may create or authorize an obligation

Answer 51

in excess of the funds available, or in advance of appropriations unless otherwise authorized by law (Anti-Deficiency Act). Before executing a contract, the contracting officer must obtain written assurance from responsible fiscal authority thatadequate funds are available or expressly condition the contract upon availability of funds.

Contract action in support of operational and maintenance and continuing services require-ments properly chargeable to funds of a new fiscal year may be initiated before these funds are available, provided that the contract includes the prescribed Availability of Funds clause (FAR 52.232-18).

A contract funded by annual appropriations may not generally cross fiscal years; however, indefinite-quantity or requirements contracts for services that are funded by annual appropriations may extend beyond the fiscal year in which they begin, provided that any specified minimum quantities are ordered in the initial fiscal year and the contract includes the prescribed Availability of Funds for the Next Fiscal Year clause (FAR 52.232-19).

Supplies or services under a contract conditioned upon the availability of funds cannot be accepted until after the contracting officer has given the contractor notice that funds are available.

Question 52

The Limitation of Cost clause (FAR 52.232-20) is used in cost-reimbursement contracts that are fully funded.
The Limitation of Funds clause (FAR 52.232-22) is used

Answer 52

in incrementally funded cost-reimbursement contracts.

Contracts that contain a Limitation of Cost or Funds clause must also be monitored closely. The contracting officer, upon learning that the contractor is approaching the estimated cost or limit of funds allotted, must promptly notify the contractor in writing that (1) additional funds have been allotted or the estimated cost increased, (2) the contract will not be further funded, (3) the contract is to be terminated, or (4) the government is considering whether to allot additional funds or increase the estimated cost.

Question 53

G. ASSIGNMENT OF CLAIMS (FAR

Assignment of claims means the

Answer 53

transfer or making over by the contractor to a bank, trust company, or other financing institution, as security for a loan to the contractor, of its right to be paid by the government for contract performance.

A contractor may assign monies due or to become due under a government order/contract only when its value exceeds the amount prescribed in FAR 32.802(a); the assignment is made to a bank, trust company, or other financing institution; the contractual document does not prohibit the assignment; and the assignee sends a written notice of the assignment to the contracting officer or the agency head.

Question 54

H. PROMPT PAYMENT (FAR 32.9)

Solicitations and contracts must specify payment procedures, payment due dates, and interest penalties for late invoice payment. Payments are generally made

Answer 54

on the 30th day after the designated billing office receives a proper invoice from the contractor or the 30th day after government acceptance of supplies delivered or services performed by the contractor, whichever is later.
Payment will be based on receipt of a proper invoice and satisfactory contract performance.

Discounts for prompt payment may be taken only when payments are made within the dis-count period specified by the contractor. Agencies must pay interest for late invoice payments or improperly taken discounts for prompt payment.

Question 55

I. PERFORMANCE-BASED PAYMENTS (FAR
32.10)

Performance-based payments are the preferred financing method

Answer 55

when the contracting officer finds them practical and the contractor agrees to their use.
Performance-based payments are contract financing payments that are not payment for accepted items.
Performance-based payments are fully recoverable, in the same manner as progress payments, in the event of default.

Question 56

CONDITIONS FOR USE

The contracting officer may use performance-based payments only if the following conditions are met:

Answer 56

• The contracting officer and offeror are able to agree on the performance-based payment terms;
• The contract is a fixed-price type contract;
• For indefinite-delivery contracts, the individual order does not provide for progress payments; and
• For other than indefinite-delivery contracts, the contract does not provide for progress payments.

Question 57

The basis for performance-based payments may be

Answer 57

either specifically described events (e.g., milestones) or some measurable criterion of performance. Note, however, that the signing of contracts or modifications, the exercise of options, or other such actions may not form the basis for such payments.

Question 58

J. ELECTRONIC FUNDS TRANSFER (FAR
32.11)

Electronic funds transfer (EFT) means

Answer 58

any transfer of funds, other than a transaction originated by cash,check, or similar paper instrument, that is initiated through an electronic terminal, telephone, computer, or magnetic tape, for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit an account.

The government shall provide all contract payments through EFT, except the provisions found at FAR 32.1103