**52.232-27  Prompt Payment for Construction Contracts.**

[Prompt Payment for Construction Contracts (Sept 2005)]{.smallcaps}

Notwithstanding any other payment terms in this contract, the Government
will make invoice payments under the terms and conditions specified in
this clause. The Government considers payment as being made on the day a
check is dated or the date of an electronic funds transfer. Definitions
of pertinent terms are set forth in sections 2.101, 32.001, and 32.902
of the Federal Acquisition Regulation. All days referred to in this
clause are calendar days, unless otherwise specified. (However, see
paragraph (a)(3) concerning payments due on Saturdays, Sundays, and
legal holidays.)

\(a\) Invoice payments---

\(1\) *Types of invoice payments*. For purposes of this clause, there
are several types of invoice payments that may occur under this
contract, as follows:

\(i\) **Progress payments**, if provided for elsewhere in this contract,
based on Contracting Officer approval of the estimated amount and value
of work or services performed, including payments for reaching
milestones in any project.

\(A\) The due date for making such payments is **[14 days after the
designated billing office receives a proper payment
request*.*]{.underline}** If the designated billing office fails to
annotate the payment request with the actual date of receipt at the time
of receipt, the payment due date is the 14th day after the date of the
Contractor's payment request, provided the designated billing office
receives a proper payment request and there is no disagreement over
quantity, quality, or Contractor compliance with contract requirements.

\(B\) The due date for payment of any amounts retained by the
Contracting Officer in accordance with the clause at 52.232-5, Payments
Under Fixed-Price Construction Contracts, is as specified in the
contract or, if not specified, 30 days after approval by the Contracting
Officer for release to the Contractor.

\(ii\) **[Final payments]{.underline}** based on completion and
acceptance of all work and presentation of release of all claims against
the Government arising by virtue of the contract, and payments for
partial deliveries that have been accepted by the Government
(*e.g., *each separate building, public work, or other division of the
contract for which the price is stated separately in the contract).

\(A\) The due date for making such payments is the later of the
following two events:

\(1\) **[The 30th day after the designated billing office receives a
proper invoice from the Contractor.]{.underline}**

\(2\) **[The 30th day after Government acceptance of the work or
services completed by the Contractor.]{.underline}** For a final invoice
when the payment amount is subject to contract settlement actions
(*e.g., *release of claims), acceptance is deemed to occur on the
effective date of the contract settlement.

\(B\) If the designated billing office fails to annotate the invoice
with the date of actual receipt at the time of receipt, the invoice
payment due date is the 30th day after the date of the Contractor's
invoice, provided the designated billing office receives a proper
invoice and there is no disagreement over quantity, quality, or
Contractor compliance with contract requirements.

\(2\) *Contractor\'s invoice*. The Contractor shall prepare and submit
invoices to the designated billing office specified in the contract. A
proper invoice must include the items listed in paragraphs (a)(2)(i)
through (a)(2)(xi) of this clause. [If the invoice does not comply with
these requirements, the designated billing office must return it within
7 days after receipt]{.underline}, with the reasons why it is not a
proper invoice. When computing any interest penalty owed the Contractor,
the Government will take into account if the Government notifies the
Contractor of an improper invoice in an untimely manner.

\(i\) Name and address of the Contractor.

\(ii\) Invoice date and invoice number. (The Contractor should date
invoices as close as possible to the date of mailing or transmission.)

\(iii\) Contract number or other authorization for work or services
performed (including order number and contract line item number).

\(iv\) Description of work or services performed.

\(v\) Delivery and payment terms (*e.g., *discount for prompt payment
terms).

\(vi\) Name and address of Contractor official to whom payment is to be
sent (must be the same as that in the contract or in a proper notice of
assignment).

\(vii\) Name (where practicable), title, phone number, and mailing
address of person to notify in the event of a defective invoice.

\(viii\) For payments described in paragraph (a)(1)(i) of this clause,
substantiation of the amounts requested and certification in accordance
with the requirements of the clause at 52.232-5, Payments Under
Fixed-Price Construction Contracts.

\(ix\) Taxpayer Identification Number (TIN). The Contractor shall
include its TIN on the invoice only if required elsewhere in this
contract.

\(x\) Electronic funds transfer (EFT) banking information.

\(A\) The Contractor shall include EFT banking information on the
invoice only if required elsewhere in this contract.

\(B\) If EFT banking information is not required to be on the invoice,
in order for the invoice to be a proper invoice, the Contractor shall
have submitted correct EFT banking information in accordance with the
applicable solicitation provision (*e.g., *52.232-38, Submission of
Electronic Funds Transfer Information with Offer), contract clause
(*e.g., *52.232-33, Payment by Electronic Funds Transfer---Central
Contractor Registration, or 52.232-34, Payment by Electronic Funds
Transfer---Other Than Central Contractor Registration), or applicable
agency procedures.

\(C\) EFT banking information is not required if the Government waived
the requirement to pay by EFT.

\(xi\) Any other information or documentation required by the contract.

\(3\) ***Interest penalty*.** The designated payment office will pay an
interest penalty automatically, without request from the Contractor, if
payment is not made by the due date and the conditions listed in
paragraphs (a)(3)(i) through (a)(3)(iii) of this clause are met, if
applicable. However, when the due date falls on a Saturday, Sunday, or
legal holiday, the designated payment office may make payment on the
following working day without incurring a late payment interest penalty.

\(i\) The designated billing office received a proper invoice.

\(ii\) The Government processed a receiving report or other Government
documentation authorizing payment and there was no disagreement over
quantity, quality, Contractor compliance with any contract term or
condition, or requested progress payment amount.

\(iii\) In the case of a final invoice for any balance of funds due the
Contractor for work or services performed, the amount was not subject to
further contract settlement actions between the Government and the
Contractor.

\(4\) *Computing penalty amount*. The Government will compute the
interest penalty in accordance with the Office of Management and Budget
prompt payment regulations at 5 CFR Part 1315.

\(i\) For the sole purpose of computing an interest penalty that might
be due the Contractor for payments described in paragraph (a)(1)(ii) of
this clause, Government acceptance or **[approval is deemed to occur
constructively on the 7th day after the Contractor has completed the
work or services in accordance with the terms and conditions of the
contract.]{.underline}** If actual acceptance or approval occurs within
the constructive acceptance or approval period, the Government will base
the determination of an interest penalty on the actual date of
acceptance or approval. Constructive acceptance or constructive approval
requirements do not apply if there is a disagreement over quantity,
quality, or Contractor compliance with a contract provision. These
requirements also do not compel Government officials to accept work or
services, approve Contractor estimates, perform contract administration
functions, or make payment prior to fulfilling their responsibilities.

\(ii\) The prompt payment regulations at 5 CFR 1315.10(c) do not require
the Government to pay interest penalties if payment delays are due to
disagreement between the Government and the Contractor over the payment
amount or other issues involving contract compliance, or on amounts
temporarily withheld or retained in accordance with the terms of the
contract. The Government and the Contractor shall resolve claims
involving disputes, and any interest that may be payable in accordance
with the clause at FAR 52.233-1, Disputes.

\(5\) *Discounts for prompt payment*. The designated payment office will
pay an interest penalty automatically, without request from the
Contractor, if the Government takes a discount for prompt payment
improperly. The Government will calculate the interest penalty in
accordance with the prompt payment regulations at 5 CFR Part 1315.

\(6\) Additional interest penalty.

\(i\) The designated payment office will pay a penalty amount,
calculated in accordance with the prompt payment regulations at 5 CFR
Part 1315 in addition to the interest penalty amount only if---

\(A\) The Government owes an interest penalty of \$1 or more;

\(B\) The designated payment office does not pay the interest penalty
within 10 days after the date the invoice amount is paid; and

\(C\) The Contractor makes a written demand to the designated payment
office for additional penalty payment, in accordance with
paragraph (a)(6)(ii) of this clause, postmarked not later than 40 days
after the date the invoice amount is paid.

(ii)(A) The Contractor shall support written demands for additional
penalty payments with the following data. The Government will not
request any additional data. The Contractor shall---

\(1\) Specifically assert that late payment interest is due under a
specific invoice, and request payment of all overdue late payment
interest penalty and such additional penalty as may be required;

\(2\) Attach a copy of the invoice on which the unpaid late payment
interest was due; and

\(3\) State that payment of the principal has been received, including
the date of receipt.

\(B\) If there is no postmark or the postmark is illegible---

\(1\) The designated payment office that receives the demand will
annotate it with the date of receipt provided the demand is received on
or before the 40th day after payment was made; or

\(2\) If the designated payment office fails to make the required
annotation, the Government will determine the demand's validity based on
the date the Contractor has placed on the demand, provided such date is
no later than the 40th day after payment was made.

\(b\) *Contract financing payments*. If this contract provides for
contract financing, the Government will make contract financing payments
in accordance with the applicable contract financing clause.

\(c\) *Subcontract clause requirements*. The Contractor shall include in
each subcontract for property or services (including a material
supplier) for the purpose of performing this contract the following:

\(1\) *Prompt payment for subcontractors*. A payment clause that
obligates the Contractor to pay the subcontractor for satisfactory
performance under its subcontract not later than 7 days from receipt of
payment out of such amounts as are paid to the Contractor under this
contract.

\(2\) *Interest for subcontractors*. An interest penalty clause that
obligates the Contractor to pay to the subcontractor an interest penalty
for each payment not made in accordance with the payment clause---

\(i\) For the period beginning on the day after the required payment
date and ending on the date on which payment of the amount due is made;
and

\(ii\) Computed at the rate of interest established by the Secretary of
the Treasury, and published in the *Federal Register*, for interest
payments under section 12 of the Contract Disputes Act of 1978
(41 U.S.C. 611) in effect at the time the Contractor accrues the
obligation to pay an interest penalty.

\(3\) *Subcontractor clause flowdown*. A clause requiring each
subcontractor to---

\(i\) Include a payment clause and an interest penalty clause conforming
to the standards set forth in paragraphs (c)(1) and (c)(2) of this
clause in each of its subcontracts; and

\(ii\) Require each of its subcontractors to include such clauses in
their subcontracts with each lower-tier subcontractor or supplier.

\(d\) *Subcontract clause interpretation*. The clauses required by
paragraph (c) of this clause shall not be construed to impair the right
of the Contractor or a subcontractor at any tier to negotiate, and to
include in their subcontract, provisions that---

\(1\) *Retainage permitted*. Permit the Contractor or a subcontractor to
retain (without cause) a specified percentage of each progress payment
otherwise due to a subcontractor for satisfactory performance under the
subcontract without incurring any obligation to pay a late payment
interest penalty, in accordance with terms and conditions agreed to by
the parties to the subcontract, giving such recognition as the parties
deem appropriate to the ability of a subcontractor to furnish a
performance bond and a payment bond;

\(2\) *Withholding permitted*. Permit the Contractor or subcontractor to
make a determination that part or all of the subcontractor's request for
payment may be withheld in accordance with the subcontract agreement;
and

\(3\) *Withholding requirements*. Permit such withholding without
incurring any obligation to pay a late payment penalty if---

\(i\) A notice conforming to the standards of paragraph (g) of this
clause previously has been furnished to the subcontractor; and

\(ii\) The Contractor furnishes to the Contracting Officer a copy of any
notice issued by a Contractor pursuant to paragraph (d)(3)(i) of this
clause.

\(e\) *Subcontractor withholding procedures*. If a Contractor, after
making a request for payment to the Government but before making a
payment to a subcontractor for the subcontractor's performance covered
by the payment request, discovers that all or a portion of the payment
otherwise due such subcontractor is subject to withholding from the
subcontractor in accordance with the subcontract agreement, then the
Contractor shall---

\(1\) *Subcontractor notice*. Furnish to the subcontractor a notice
conforming to the standards of paragraph (g) of this clause as soon as
practicable upon ascertaining the cause giving rise to a withholding,
but prior to the due date for subcontractor payment;

\(2\) *Contracting Officer notice*. Furnish to the Contracting Officer,
as soon as practicable, a copy of the notice furnished to the
subcontractor pursuant to paragraph (e)(1) of this clause;

\(3\) *Subcontractor progress payment reduction*. Reduce the
subcontractor's progress payment by an amount not to exceed the amount
specified in the notice of withholding furnished under paragraph (e)(1)
of this clause;

\(4\) *Subsequent subcontractor payment*. Pay the subcontractor as soon
as practicable after the correction of the identified subcontract
performance deficiency, and---

\(i\) Make such payment within---

\(A\) Seven days after correction of the identified subcontract
performance deficiency (unless the funds therefor must be recovered from
the Government because of a reduction under paragraph (e)(5)(i)) of this
clause; or

\(B\) Seven days after the Contractor recovers such funds from the
Government; or

\(ii\) Incur an obligation to pay a late payment interest penalty
computed at the rate of interest established by the Secretary of the
Treasury, and published in the *Federal Register*, for interest payments
under section 12 of the Contracts Disputes Act of 1978 (41 U.S.C. 611)
in effect at the time the Contractor accrues the obligation to pay an
interest penalty;

\(5\) *Notice to Contracting Officer*. Notify the Contracting Officer
upon---

\(i\) Reduction of the amount of any subsequent certified application
for payment; or

\(ii\) Payment to the subcontractor of any withheld amounts of a
progress payment, specifying---

\(A\) The amounts withheld under paragraph (e)(1) of this clause; and

\(B\) The dates that such withholding began and ended; and

\(6\) *Interest to Government*. Be obligated to pay to the Government an
amount equal to interest on the withheld payments (computed in the
manner provided in 31 U.S.C. 3903(c)(1)), from the 8th day after receipt
of the withheld amounts from the Government until---

\(i\) The day the identified subcontractor performance deficiency is
corrected; or

\(ii\) The date that any subsequent payment is reduced under
paragraph (e)(5)(i) of this clause.

\(f\) Third-party deficiency reports---

\(1\) *Withholding from subcontractor*. If a Contractor, after making
payment to a first-tier subcontractor, receives from a supplier or
subcontractor of the first-tier subcontractor (hereafter referred to as
a \"second-tier subcontractor\") a written notice in accordance with the
Miller Act (40 U.S.C. 3133), asserting a deficiency in such first-tier
subcontractor's performance under the contract for which the Contractor
may be ultimately liable, and the Contractor determines that all or a
portion of future payments otherwise due such first-tier subcontractor
is subject to withholding in accordance with the subcontract agreement,
the Contractor may, without incurring an obligation to pay an interest
penalty under paragraph (e)(6) of this clause---

\(i\) Furnish to the first-tier subcontractor a notice conforming to the
standards of paragraph (g) of this clause as soon as practicable upon
making such determination; and

\(ii\) Withhold from the first-tier subcontractor's next available
progress payment or payments an amount not to exceed the amount
specified in the notice of withholding furnished under
paragraph (f)(1)(i) of this clause.

\(2\) *Subsequent payment or interest charge*. As soon as practicable,
but not later than 7 days after receipt of satisfactory written
notification that the identified subcontract performance deficiency has
been corrected, the Contractor shall---

\(i\) Pay the amount withheld under paragraph (f)(1)(ii) of this clause
to such first-tier subcontractor; or

\(ii\) Incur an obligation to pay a late payment interest penalty to
such first-tier subcontractor computed at the rate of interest
established by the Secretary of the Treasury, and published in the
*Federal Register*, for interest payments under section 12 of the
Contracts Disputes Act of 1978 (41 U.S.C. 611) in effect at the time the
Contractor accrues the obligation to pay an interest penalty.

\(g\) *Written notice of subcontractor withholding*. The Contractor
shall issue a written notice of any withholding to a subcontractor (with
a copy furnished to the Contracting Officer), specifying---

\(1\) The amount to be withheld;

\(2\) The specific causes for the withholding under the terms of the
subcontract; and

\(3\) The remedial actions to be taken by the subcontractor in order to
receive payment of the amounts withheld.

\(h\) *Subcontractor payment entitlement*. The Contractor may not
request payment from the Government of any amount withheld or retained
in accordance with paragraph (d) of this clause until such time as the
Contractor has determined and certified to the Contracting Officer that
the subcontractor is entitled to the payment of such amount.

\(i\) *Prime-subcontractor disputes*. A dispute between the Contractor
and subcontractor relating to the amount or entitlement of a
subcontractor to a payment or a late payment interest penalty under a
clause included in the subcontract pursuant to paragraph (c) of this
clause does not constitute a dispute to which the Government is a party.
The Government may not be interpleaded in any judicial or administrative
proceeding involving such a dispute.

\(j\) *Preservation of prime-subcontractor rights*. Except as provided
in paragraph (i) of this clause, this clause shall not limit or impair
any contractual, administrative, or judicial remedies otherwise
available to the Contractor or a subcontractor in the event of a dispute
involving late payment or nonpayment by the Contractor or deficient
subcontract performance or nonperformance by a subcontractor.

\(k\) *Non-recourse for prime contractor interest penalty*. The
Contractor's obligation to pay an interest penalty to a subcontractor
pursuant to the clauses included in a subcontract under paragraph (c) of
this clause shall not be construed to be an obligation of the Government
for such interest penalty. A cost-reimbursement claim may not include
any amount for reimbursement of such interest penalty.

\(l\) *Overpayments*. If the Contractor becomes aware of a duplicate
contract financing or invoice payment or that the Government has
otherwise overpaid on a contract financing or invoice payment, the
Contractor shall immediately notify the Contracting Officer and request
instructions for disposition of the overpayment.

(End of clause)