32.206 Solicitation provisions and contract

clauses.

(a) The contract shall contain the paragraph entitled "Payment" of the clause at 52.212-4, Contract

Terms and Conditions-Commercial Products and Commercial Services. If the contract will provide

for contract financing, the contracting officer shall construct a solicitation provision and contract

clause. This solicitation provision shall be constructed in accordance with 32.204 or 32.205. If the

procedure at 32.205 is used, the solicitation provision at 52.232-31, invitation to Propose Financing

Terms, shall be included. The contract clause shall be constructed in accordance with the

requirements of this subpart and any agency regulations.

(b) Each contract financing clause shall include:

(1) A description of the-

(i) Computation of the financing payment amounts (see paragraph (c) of this section);

(ii) Specific conditions of contractor entitlement to those financing payments (see paragraph (c) of

this section);

(iii) Liquidation of those financing payments by delivery payments (see paragraph (e) of this section);

(iv) Security the contractor will provide for financing payments and any terms or conditions

specifically applicable thereto (see 32.202-4); and

(v) Frequency, form, and any additional content of the contractor’s request for financing payment (in

addition to the requirements of the clause at 52.232-29, Terms for Financing of Purchases of

Commercial Products and Commercial Services; and

(2) Unless agency regulations authorize alterations, the unaltered text of the clause at 52.232-29,

Terms for Financing of Purchases of Commercial Products and Commercial Services.

(c) Computation of amounts, and contractor entitlement provisions.

(1) Contracts shall provide that delivery payments shall be made only for completed supplies and

services accepted by the Government in accordance with the terms of the contract. Contracts may

provide for commercial advance and commercial interim payments based upon a wide variety of

bases, including (but not limited to) achievement or occurrence of specified events, the passage of

time, or specified times prior to the delivery date(s). The basis for payment must be objectively

determinable. The clause written by the contracting officer shall specify, to the extent access is

necessary, the information and/or facilities to which the Government shall have access for the

purpose of verifying the contractor’s entitlement to payment of contract financing.

(2) If the contract is awarded using the offeror-proposed procedure at 32.205, the clause

constructed by the contracting officer under paragraph (b)(1) of this section shall contain the

following:

(i) A statement that the offeror’s proposed listing of earliest times and greatest amounts of projected

financing payments submitted in accordance with paragraph (d)(2) of the provision at 52.232-31,
invitation to Propose Financing Terms, is incorporated into the contract, and

(ii) A statement that financing payments shall be made in the lesser amount and on the later of the

date due in accordance with the financing terms of the contract, or in the amount and on the date

projected in the listing of earliest times and greatest amounts incorporated in the contract.

(3) If the security accepted by the contracting officer is the contractor’s financial condition, the

contracting officer shall incorporate in the clause constructed under paragraph (b)(1) of this section

the following-

(i) A statement that the contractor’s financial condition has been accepted as adequate security for

commercial financing payments; and

(ii) A statement that the contracting officer may exercise the Government’s rights to require other

security under paragraph (c), Security for Government Financing, of the clause at 52.232-29, Terms

for Financing of Purchases of Commercial Products and Commercial Services, in the event the

contractor’s financial condition changes and is found not to be adequate security.

(d) Instructions for multiple appropriations. If contract financing is to be computed for the contract

as a whole, and if there is more than one appropriation account (or subaccount) funding payments

under the contract, the contracting officer shall include, in the contract, instructions for distribution

of financing payments to the respective funds accounts. Distribution instructions and contract

liquidation instructions must be mutually consistent.

(e) Liquidation. Liquidation of contract financing payments shall be on the same basis as the

computation of contract financing payments; that is, financing payments computed on a whole

contract basis shall be liquidated on a whole contract basis; and a payment computed on a line item

basis shall be liquidated against that line item. If liquidation is on a whole contract basis, the

contracting officer shall use a uniform liquidation percentage as the liquidation method, unless the

contracting officer obtains the concurrence of the cognizant payment office that the proposed

liquidation provisions can be executed by that office, or unless agency regulations provide

alternative liquidation methods.

(f) Prompt payment for commercial purchase payments. The provisions of subpart 32.9, Prompt

Payment, apply to contract financing and invoice payments for commercial purchases in the same

manner they apply to other than commercial purchases. The contracting officer is responsible for

including in the contract all the information necessary to implement prompt payment. In particular,

contracting officers must be careful to clearly differentiate in the contract between contract

financing and invoice payments and between items having different prompt payment times.

(g) Installment payment financing for commercial products and commercial services. Contracting

officers may insert the clause at 52.232-30, Installment Payments for Commercial Products and

Commercial Services, in solicitations and contracts in lieu of constructing a specific clause in

accordance with paragraphs (b) through (e) of this section, if the contract action qualifies under the

criteria at 32.202-1(b) and installment payments for the item are either customary or are authorized

in accordance with agency procedures.

(1) Description. Installment payment financing is payment by the Government to a contractor of a

fixed number of equal interim financing payments prior to delivery and acceptance of a contract

item. The installment payment arrangement is designed to reduce administrative costs. However, if

a contract will have a large number of deliveries, the administrative costs may increase to the point

where installment payments are not in the best interests of the Government.
(2) Authorized types of installment payment financing and rates. Installment payments may be made

using the clause at 52.232-30, Installment Payments for Commercial Products and Commercial

Services, either at the 70 percent financing rate cited in the clause or at a lower rate in accordance

with agency procedures.

(3) Calculating the amount of installment financing payments. The contracting officer shall identify

in the contract schedule those items for which installment payment financing is authorized. Monthly

installment payment amounts are to be calculated by the contractor pursuant to the instructions in

the contract clause only for items authorized to receive installment payment financing.

(4) Liquidating installment payments. If installment payments have been made for an item, the

amount paid to the contractor upon acceptance of the item by the Government shall be reduced by

the amount of installment payments made for the item. The contractor’s request for final payment

for each item is required to show this calculation.

Parent topic: Subpart 32.2 - Commercial Product and Commercial Service Purchase Financing