PROGRESS PAYMENTS (52.232‑16) (DEC 2002)

The Government will make progress payments to the Contractor when
requested as work progresses, but not more frequently than monthly, in
amounts of \$2,500 or more approved by the Contracting Officer, under
the following conditions:

\(a\) Computation of amounts. (1) Unless the Contractor requests a
smaller amount, the Government will compute each progress payment as 80
percent of the Contractor\'s total costs incurred under this contract
whether or not actually paid, plus financing payments to subcontractors
(see paragraph (j) of this clause), less the sum of all previous
progress payments made by the Government under this contract. The
Contracting Officer will consider cost of money that would be allowable
under FAR 31.205‑10 of the Federal Acquisition Regulation as an incurred
cost for progress payment purposes.

\(2\) The amount of financing and other payments for supplies and
services purchased directly for the contract are limited to the amounts
that have been paid by cash, check, or other forms of payment, or that
are determined due and will be paid to subcontractors\--

\(i\) In accordance with the terms and conditions of a subcontract or
invoice; and

\(ii\) Ordinarily within 30 days of the submission of the Contractor\'s
payment request to the Government.

\(3\) The Government will exclude accrued costs of Contractor
contributions under employee pension plans until actually paid unless---

\(i\) The Contractor\'s practice is to make contributions to the
retirement fund quarterly or more frequently; and

\(ii\) The contribution does not remain unpaid 30 days after the end of
the applicable quarter or shorter payment period (any contribution
remaining unpaid shall be excluded from the Contractor\'s total costs
for progress payments until paid).

\(4\) The Contractor shall not include the following in total costs for
progress payment purposes in paragraph (a)(1) of this clause:

\(i\) Costs that are not reasonable, allocable to this contract, and
consistent with sound and generally accepted accounting principles and
practices.

\(ii\) Costs incurred by subcontractors or suppliers.

\(iii\) Costs ordinarily capitalized and subject to depreciation or
amortization except for the properly depreciated or amortized portion of
such costs.

\(iv\) Payments made or amounts payable to subcontractors or suppliers,
except for---

\(A\) Completed work, including partial deliveries, to which the
Contractor has acquired title; and

\(B\) Work under cost-reimbursement or time-and- material subcontracts
to which the Contractor has acquired title.

\(5\) The amount of unliquidated progress payments may exceed neither
(i) the progress payments made against incomplete work (including
allowable unliquidated progress payments to subcontractors) nor (ii) the
value, for progress payment purposes, of the incomplete work. Incomplete
work shall be considered to be the supplies and services required by
this contract, for which delivery and invoicing by the Contractor and
acceptance by the Government are incomplete.

\(6\) The total amount of progress payments shall not exceed 80 percent
of the total contract price.

\(7\) If a progress payment or the unliquidated progress payments exceed
the amounts permitted by subparagraphs (a)(4) or (a)(5) above, the
Contractor shall repay the amount of such excess to the Government on
demand.

\(8\) Notwithstanding any other terms of the contract, the Contractor
agrees not to request progress payments in dollar amounts of less than
\$2,500. The Contracting Officer may make exceptions.

\(b\) Liquidation. Except as provided in the Termination for Convenience
of the Government clause, all progress payments shall be liquidated by
deducting from any payment under this contract, other than advance or
progress payments, the unliquidated progress payments, or 80 percent of
the amount invoiced, whichever is less. The Contractor shall repay to
the Government any amounts required by a retroactive price reduction,
after computing liquidations and payments on past invoices at the
reduced prices and adjusting the unliquidated progress payments
accordingly. The Government reserves the right to unilaterally change
from the ordinary liquidation rate to an alternate rate when deemed
appropriate for proper contract financing.

\(c\) Reduction or suspension. The Contracting Officer may reduce or
suspend progress payments, increase the rate of liquidation, or take a
combination of these actions, after finding on substantial evidence any
of the following conditions:

\(1\) The Contractor failed to comply with any material requirement of
this contract (which includes paragraphs (f) and (g) below).

\(2\) Performance of this contract is endangered by the Contractor\'s
(i) failure to make progress or (ii) unsatisfactory financial condition.

\(3\) Inventory allocated to this contract substantially exceeds
reasonable requirements.

\(4\) The Contractor is delinquent in payment of the costs of performing
this contract in the ordinary course of business.

\(5\) The unliquidated progress payments exceed the fair value of the
work accomplished on the undelivered portion of this contract.

\(6\) The Contractor is realizing less profit than that reflected in the
establishment of any alternate liquidation rate in paragraph (b) above,
and that rate is less than the progress payment rate stated in
subparagraph (a)(1) above.

\(d\) Title. (1) Title to the property described in this paragraph (d)
shall vest in the Government. Vestiture shall be immediately upon the
date of this contract, for property acquired or produced before that
date. Otherwise, vestiture shall occur when the property is or should
have been allocable or properly chargeable to this contract.

\(2\) \"Property,\" as used in this clause, includes all of the
below‑described items acquired or produced by the Contractor that are or
should be allocable or properly chargeable to this contract under sound
and generally accepted accounting principles and practices.

\(i\) Parts, materials, inventories, and work in process;

\(ii\) Special tooling and special test equipment to which the
Government is to acquire title under any other clause of this contract;

\(iii\) Nondurable (i.e., noncapital) tools, jigs, dies, fixtures,
molds, patterns, taps, gauges, test equipment, and other similar
manufacturing aids, title to which would not be obtained as special
tooling under subparagraph (ii) above; and

\(iv\) Drawings and technical data, to the extent the Contractor or
subcontractors are required to deliver them to the Government by other
clauses of this contract.

\(3\) Although title to property is in the Government under this clause,
other applicable clauses of this contract, e.g., the termination or
special tooling clauses, shall determine the handling and disposition of
the property.

\(4\) The Contractor may sell any scrap resulting from production under
this contract without requesting the Contracting Officer\'s approval,
but the proceeds shall be credited against the costs of performance.

\(5\) To acquire for its own use or dispose of property to which title
is vested in the Government under this clause, the Contractor must
obtain the Contracting Officer\'s advance approval of the action and the
terms. The Contractor shall (i) exclude the allocable costs of the
property from the costs of contract performance, and (ii) repay to the
Government any amount of unliquidated progress payments allocable to the
property. Repayment may be by cash or credit memorandum.

\(6\) When the Contractor completes all of the obligations under this
contract, including liquidation of all progress payments, title shall
vest in the Contractor for all property (or the proceeds thereof) not‑‑

\(i\) Delivered to, and accepted by, the Government under this contract;
or

\(ii\) Incorporated in supplies delivered to, and accepted by, the
Government under this contract and to which title is vested in the
Government under this clause.

\(7\) The terms of this contract concerning liability for
Government‑furnished property shall not apply to property to which the
Government acquired title solely under this clause.

\(e\) Risk of loss. Before delivery to and acceptance by the Government,
the Contractor shall bear the risk of loss for property, the title to
which vests in the Government under this clause, except to the extent
the Government expressly assumes the risk. The Contractor shall repay
the Government an amount equal to the unliquidated progress payments
that are based on costs allocable to property that is damaged, lost,
stolen, or destroyed.

\(f\) Control of costs and property. The Contractor shall maintain an
accounting system and controls adequate for the proper administration of
this clause.

\(g\) Reports and access to records. The Contractor shall promptly
furnish reports, certificates, financial statements, and other pertinent
information reasonably requested by the Contracting Officer for the
administration of this clause. Also, the Contractor shall give the
Government reasonable opportunity to examine and verify the
Contractor\'s book, records, and accounts.

\(h\) Special terms regarding default. If this contract is terminated
under the Default clause, (i) the Contractor shall, on demand, repay to
the Government the amount of unliquidated progress payments and (ii)
title shall vest in the Contractor, on full liquidation of progress
payments, for all property for which the Government elects not to
require delivery under the Default clause. The Government shall be
liable for no payment except as provided by the Default clause.

\(i\) Reservations of rights. (1) No payment or vesting of title under
this clause shall (i) excuse the Contractor from performance of
obligations under this contract or (ii) constitute a waiver of any of
the rights or remedies of the parties under the contract.

\(2\) The Government\'s rights and remedies under this clause (i) shall
not be exclusive but rather shall be in addition to any other rights and
remedies provided by law or this contract and (ii) shall not be affected
by delayed, partial, or omitted exercise of any right, remedy, power, or
privilege, nor shall such exercise or any single exercise preclude or
impair any further exercise under this clause or the exercise of any
other right, power, or privilege of the Government.

\(j\) Financing payments to subcontractors. The financing payments to
subcontractors mentioned in paragraphs (a)(1) and (a)(2) of this clause
shall be all financing payments to subcontractors or divisions, if the
following conditions are met:

\(1\) The amounts included are limited to\--

\(i\) The unliquidated remainder of financing payments made; plus

\(ii\) Any unpaid subcontractor requests for financing payments.

\(2\) The subcontract or interdivisional order is expected to involve a
minimum of approximately 6 months between the beginning of work and the
first delivery; or, if the subcontractor is a small business concern, 4
months.

\(3\) If the financing payments are in the form of progress payments,
the terms of the subcontract or interdivisional order concerning
progress payments----

\(i\) Are substantially similar to the terms of this clause for any
subcontractor that is a large business concern, or this clause with its
Alternate I for any subcontractor that is a small business concern;

\(ii\) Are at least as favorable to the Government as the terms of this
clause;

\(iii\) Are not more favorable to the subcontractor or division than the
terms of this clause are to the Contractor;

\(iv\) Are in conformance with the requirements of FAR 32.504(e); and

\(v\) Subordinate all subcontractor rights concerning property to which
the Government has title under the subcontract to the Government\'s
right to require delivery of the property to the Government if\--

\(A\) The Contractor defaults; or

\(B\) The subcontractor becomes bankrupt or insolvent.

\(4\) If the financing payments are in the form of performance-based
payments, the terms of the subcontract or interdivisional order
concerning payments----

\(i\) Are substantially similar to the Performance-Based Payments clause
at FAR 52.232-32 and meet the criteria for, and definition of,
performance-based payments in FAR Part 32;

\(ii\) Are in conformance with the requirements of FAR 32.504(f); and

\(iii\) Subordinate all subcontractor rights concerning property to
which the Government has title under the subcontract to the
Government\'s right to require delivery of the property to the
Government if\--

> \(A\) The Contractor defaults; or

\(B\) The subcontractor becomes bankrupt or insolvent.

\(5\) If the financing payments are in the form of commercial item
financing payments, the terms of the subcontract or interdivisional
order concerning payments----

\(i\) Are constructed in accordance with FAR 32.206(c) and included in a
subcontract for a commercial item purchase that meets the definition and
standards for acquisition of commercial items in FAR Parts 2 and 12;

\(ii\) Are in conformance with the requirements of FAR 32.504(g); and

\(iii\) Subordinate all subcontractor rights concerning property to
which the Government has title under the subcontract to the
Government\'s right to require delivery of the property to the
Government if\--

(A) The Contractor defaults; or

(B) The subcontractor becomes bankrupt or insolvent.

\(6\) If financing is in the form of progress payments, the progress
payment rate in the subcontract is the customary rate used by the
contracting agency, depending on whether the subcontractor is or is not
a small business concern.

\(7\) Concerning any proceeds received by the Government for property to
which title has vested in the Government under the subcontract terms,
the parties agree that the proceeds shall be applied to reducing any
unliquidated financing payments by the Government to the Contractor
under this contract.

\(8\) If no unliquidated financing payments to the Contractor remain,
but there are unliquidated financing payments that the Contractor has
made to any subcontractor, the Contractor shall be subrogated to all the
rights the Government obtained through the terms required by this clause
to be in any subcontract, as if all such rights had been assigned and
transferred to the Contractor.

\(9\) To facilitate small business participation in subcontracting under
this contract, the Contractor shall provide financing payments to small
business concerns, in conformity with the standards for customary
contract financing payments stated in FAR 32.113. The Contractor shall
not consider the need for such financing payments as a handicap or
adverse factor in the award of subcontracts.

\(k\) Limitations on undefinitized contract actions. Notwithstanding any
other progress payment provisions in this contract, progress payments
may not exceed 80 percent of costs incurred on work accomplished under
undefinitized contract actions. A \"contract action\" is any action
resulting in a contract, as defined in Subpart 2.1, including contract
modifications for additional supplies or services, but not including
contract modifications that are within the scope and under the terms of
the contract, such as contract modifications issued pursuant to the
Changes clause, or funding and other administrative changes. This
limitation shall apply to the costs incurred, as computed in accordance
with paragraph (a) of this clause and shall remain in effect until the
contract action is definitized. Costs incurred which are subject to this
limitation shall be segregated on Contractor progress payment requests
and invoices from those costs eligible for higher progress payment
rates. For purposes of progress payment liquidation, as described in
paragraph (b) of this clause, progress payments for undefinitized
contract actions shall be liquidated at 80 percent of the amount
invoiced for work performed under the undefinitized contract action as
long as the contract action remains undefinitized. The amount of
unliquidated progress payments for undefinitized contract actions shall
not exceed 80 percent of the maximum liability of the Government under
the undefinitized contract action or such lower limit specified
elsewhere in the contract. Separate limits may be specified for separate
actions.

\(l\) Due date. The designated payment office will make progress
payments on the 30^th^ day after the designated billing office receives
a proper progress payment request. In the event that the Government
requires an audit or other review of a specific progress payment request
to ensure compliance with the terms and conditions of the contract, the
designated payment office is not compelled to make payment by the
specified date due date. Progress payments are considered contract
financing and are not subject to the interest penalty provisions of the
Prompt Payment Act.

(End of clause)