Subpart 32.9 - Prompt Payment

Parent topic: Part 32 - Contract Financing

32.900 Scope of subpart.

This subpart prescribes policies, procedures, and clauses for implementing Office of Management

and Budget (OMB) prompt payment regulations at 5 CFR Part 1315.

32.901 Applicability.

(a) This subpart applies to invoice payments on all contracts, except contracts with payment terms

and late payment penalties established by other governmental authority (e.g., tariffs).

(b) This subpart does not apply to contract financing payments (see definition at 32.001).

32.902 Definitions.

As used in this subpartDiscount for prompt payment means an invoice payment reduction offered by the contractor for

payment prior to the due date.

Mixed invoice means an invoice that contains items with different payment due dates.

Payment date means the date on which a check for payment is dated or, for an electronic funds

transfer (EFT), the settlement date.

Settlement date, as it applies to electronic funds transfer, means the date on which an electronic

funds transfer payment is credited to the contractor’s financial institution.

32.903 Responsibilities.

(a) Agency heads-

(1) Must establish the policies and procedures necessary to implement this subpart;

(2) May prescribe additional standards for establishing invoice payment due dates (see 32.904)

necessary to support agency programs and foster prompt payment to contractors;

(3) May adopt different payment procedures in order to accommodate unique circumstances,

provided that such procedures are consistent with the policies in this subpart;

(4) Must inform contractors of points of contact within their cognizant payment offices to enable

contractors to obtain status of invoices; and
(5) May authorize the use of the accelerated payment methods specified at 5 CFR 1315.5, but see

32.009-1(a).

(b) When drafting solicitations and contracts, contracting officers must identify for each line item

number, subline item number, or exhibit line item number-

(1) The applicable Prompt Payment clauses that apply to each item when the solicitation or contract

contains items that will be subject to different payment terms; and

(2) The applicable Prompt Payment food category (e.g., which item numbers are meat or meat food

products, which are perishable agricultural commodities), when the solicitation or contract contains

multiple payment terms for various classes of foods and edible products.

32.904 Determining payment due dates.

(a) General. Agency procedures must ensure that, when specifying due dates, contracting officers

give full consideration to the time reasonably required by Government officials to fulfill their

administrative responsibilities under the contract.

(b) Payment due dates. Except as prescribed in paragraphs (c) through (f) of this section, or as

authorized in 32.908(a)(2) or (c)(2), the due date for making an invoice payment is as follows:

(1) The later of the following two events:

(i) The 30 thday after the designated billing office receives a proper invoice from the contractor

(except as provided in paragraph (b)(3) of this section).

(ii) The 30 thday after Government acceptance of supplies delivered or services performed.

(A) For a final invoice, when the payment amount is subject to contract settlement actions,

acceptance is deemed to occur on the effective date of the contract settlement.

(B) For the sole purpose of computing an interest penalty that might be due the contractor-

(1) Government acceptance is deemed to occur constructively on the 7 thday after the contractor

delivers supplies or performs services in accordance with the terms and conditions of the contract,

unless there is a disagreement over quantity, quality, or contractor compliance with a contract

requirement;

(2) If actual acceptance occurs within the constructive acceptance period, the Government must

base the determination of an interest penalty on the actual date of acceptance;

(3) The constructive acceptance requirement does not compel Government officials to accept

supplies or services, perform contract administration functions, or make payment prior to fulfilling

their responsibilities; and

(4) Except for a contract for the purchase of a commercial product or commercial service, including

a brand-name commercial product for authorized resale (e.g.,commissary items), the contracting

officer may specify a longer period for constructive acceptance in the solicitation and resulting

contract, if required to afford the Government a reasonable opportunity to inspect and test the

supplies furnished or to evaluate the services performed. The contracting officer must document in
the contract file the justification for extending the constructive acceptance period beyond 7 days.

Extended acceptance periods must not be a routine agency practice and must be used only when

necessary to permit proper Government inspection and testing of the supplies delivered or services

performed.

(2) If the contract does not require submission of an invoice for payment (e.g.,periodic lease

payments), the contracting officer must specify the due date in the contract.

(3) If the designated billing office fails to annotate the invoice with the actual date of receipt at the

time of receipt, the invoice payment due date is the 30 thday 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.

(c) Architect-engineer contracts.

(1) The due date for making payments on contracts that contain the clause at 52.232-10, Payments

Under Fixed-Price Architect-Engineer Contracts, is as follows:

(i) The due date for work or services completed by the contractor is the later of the following two

events:

(A) The 30 thday after the designated billing office receives a proper invoice from the contractor.

(B) The 30 thday after Government acceptance of the work or services completed by the contractor.

(1) 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 settlement.

(2) For the sole purpose of computing an interest penalty that might be due the contractor,

Government acceptance is deemed to occur constructively on the 7 thday after the contractor

completes the work or services in accordance with the terms and conditions of the contract (see also

paragraph (c)(2) of this section). If actual acceptance occurs within the constructive acceptance

period, the Government must base the determination of an interest penalty on the actual date of

acceptance.

(ii) The due date for progress payments is the 30 thday after Government approval of contractor

estimates of work or services accomplished. For the sole purpose of computing an interest penalty

that might be due the contractor-

(A) Government approval is deemed to occur constructively on the 7 thday after the designated

billing office receives the contractor estimates (see also paragraph (c)(2) of this section).

(B) If actual approval occurs within the constructive approval period, the Government must base the

determination of an interest penalty on the actual date of approval.

(iii) If the designated billing office fails to annotate the invoice or payment request with the actual

date of receipt at the time of receipt, the payment due date is the 30 thday after the date of the

contractor’s invoice or payment request, provided the designated billing office receives a proper

invoice or payment request and there is no disagreement over quantity, quality, or contractor

compliance with contract requirements.

(2) The constructive acceptance and constructive approval requirements described in paragraphs
(c)(1)(i) and (ii) of this section are conditioned upon receipt of a proper payment request and no

disagreement over quantity, quality, contractor compliance with contract requirements, or the

requested progress payment amount. These requirements 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. The contracting officer may specify a longer

period for constructive acceptance or constructive approval, if required to afford the Government a

reasonable opportunity to inspect and test the supplies furnished or to evaluate the services

performed. The contracting officer must document in the contract file the justification for extending

the constructive acceptance or approval period beyond 7 days.

(d) Construction contracts.

(1) The due date for making payments on construction contracts is as follows:

(i) The due date for making progress payments based on contracting officer approval of the

estimated amount and value of work or services performed, including payments for reaching

milestones in any project, is 14 days after the designated billing office receives a proper payment

request.

(A) 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 14 thday 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 contracting officer may specify a longer period in the solicitation and resulting contract if

required to afford the Government a reasonable opportunity to adequately inspect the work and to

determine the adequacy of the contractor’s performance under the contract. The contracting officer

must document in the contract file the justification for extending the due date beyond 14 days.

(C) The contracting officer must not approve progress payment requests unless the certification and

substantiation of amounts requested are provided as required by the clause at 52.232-5, Payments

Under Fixed-Price Construction Contracts.

(ii) 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, will be as specified in

the contract or, if not specified, 30 days after approval by the contracting officer for release to the

contractor. The contracting officer must base the release of retained amounts on the contracting

officer’s determination that satisfactory progress has been made.

(iii) The due date for final payments based on completion and acceptance of all work (including any

retained amounts), 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) is as follows:

(A) The later of the following two events:

(1) The 30 thday after the designated billing office receives a proper invoice from the contractor.

(2) The 30 thday after Government acceptance of the work or services completed by the contractor.

For a final invoice, when the payment amount is subject to contract settlement actions (e.g., release

of contractor 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 actual date of receipt at the

time of receipt, the invoice payment due date is the 30 thday 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) For the sole purpose of computing an interest penalty that might be due the contractor for

payments described in paragraph (d)(1)(iii) of this section-

(i) Government acceptance or approval is deemed to occur constructively on the 7 thday after the

contractor completes the work or services in accordance with the terms and conditions of the

contract, unless there is a disagreement over quantity, quality, contractor compliance with a

contract requirement, or the requested amount;

(ii) If actual acceptance occurs within the constructive acceptance period, the Government must

base the determination of an interest penalty on the actual date of acceptance;

(iii) The constructive acceptance requirement does not compel Government officials to accept work

or services, approve contractor estimates, perform contract administration functions, or make

payment prior to fulfilling their responsibilities; and

(iv) The contracting officer may specify a longer period for constructive acceptance or constructive

approval in the solicitation and resulting contract, if required to afford the Government a reasonable

opportunity to adequately inspect the work and to determine the adequacy of the contractor’s

performance under the contract. The contracting officer must document in the contract file the

justification for extending the constructive acceptance or approval beyond 7 days.

(3) Construction contracts contain special provisions concerning contractor payments to

subcontractors, along with special contractor certification requirements. The Office of Management

and Budget has determined that these certifications must not be construed as final acceptance of the

subcontractor’s performance. The certification in 52.232-5(c) implements this determination;

however, certificates are still acceptable if the contractor deletes paragraph (c)(4) of 52.232-5 from

the certificate.

(4)

(i) Paragraph (d) of the clause at 52.232-5, Payments under Fixed-Price Construction Contracts, and

paragraph (e)(6) of the clause at 52.232-27, Prompt Payment for Construction Contracts, provide for

the contractor to pay interest on unearned amounts in certain circumstances. The Government must

recover this interest from subsequent payments to the contractor. Therefore, contracting officers

normally must make no demand for payment. Contracting officers must-

(A) Compute the amount in accordance with the clause;

(B) Provide the contractor with a final decision; and

(C) Notify the payment office of the amount to be withheld.

(ii) The payment office is responsible for making the deduction of interest. Amounts collected in

accordance with these provisions revert to the United States Treasury.

(e) Cost-reimbursement contracts for services. For purposes of computing late payment interest

penalties that may apply, the due date for making interim payments on cost-reimbursement
contracts for services is 30 days after the date of receipt of a proper invoice.

(f) Food and specified items.

If the items delivered are:

Payment must be

made as close as

possible to, but not

later than:

(1) Meat or meat food products. As defined in section 2(a)(3) of the

Packers and Stockyard Act of 1921 (7 U.S.C.182(3)), and as further

defined in Public Law98-181, including any edible fresh or frozen

poultry meat, any perishable poultry meat food product, fresh eggs,

and any perishable egg product.

7th day after

product delivery.

(2) Fresh or frozen fish. As defined in section 204(3) of the Fish and

Seafood Promotion Act of 1986 (16 U.S.C.4003(3)).

7th day after

product delivery.

(3) Perishable agricultural commodities. As defined in section 1(4) of

the Perishable Agricultural Commodities Act of 1930 (7

U.S.C.499a(4)).

10th day after

product delivery,

unless another date

is specified in the

contract.

(4) Dairy products. As defined in section 111(e) of the Dairy

Production Stabilization Act of 1983 (7 U.S.C.4502(e)), edible fats or

oils, and food products prepared from edible fats or oils. Liquid milk,

cheese, certain processed cheese products, butter, yogurt, ice cream,

mayonnaise, salad dressings, and other similar products fall within

this classification. Nothing in the Act limits this classification to

refrigerated products. If questions arise regarding the proper

classification of a specific product, the contracting officer must follow

prevailing industry practices in specifying a contract payment due

date. The burden of proof that a classification of a specific product is,

in fact, prevailing industry practice is upon the contractor making the

representation.

10th day after a

proper invoice has

been received.

(g) Multiple payment due dates. Contracting officers may encourage, but not require, contractors to

submit separate invoices for products with different payment due dates under the same contract or

order. When an invoice contains items with different payment due dates (i.e.,a mixed invoice), the

payment office will, subject to agency policy-

(1) Pay the entire invoice on the earliest due date; or

(2) Split invoice payments, making payments by the applicable due dates.

32.905 Payment documentation and process.
(a) General. Payment will be based on receipt of a proper invoice and satisfactory contract

performance.

(b) Content of invoices.

(1) A proper invoice must include the following items (except for interim payments on cost

reimbursement contracts for services):

(i) Name and address of the contractor.

(ii) Invoice date and invoice number. (Contractors should date invoices as close as possible to the

date of mailing or transmission.)

(iii) Contract number or other authorization for supplies delivered or services performed (including

order number and line item number).

(iv) Description, quantity, unit of measure, unit price, and extended price of supplies delivered or

services performed.

(v) Shipping and payment terms (e.g., shipment number and date of shipment, discount for prompt

payment terms). Bill of lading number and weight of shipment will be shown for shipments on

Government bills of lading.

(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) Taxpayer Identification Number (TIN). The contractor must include its TIN on the invoice only

if required by agency procedures. (See 4.9 TIN requirements.)

(ix) Electronic funds transfer (EFT) banking information.

(A) The contractor must include EFT banking information on the invoice only if required by agency

procedures.

(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 must 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 TransferSystem for Award Management, or 52.232-34, Payment by Electronic Funds Transfer-Other Than

System for Award Management), or applicable agency procedures.

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

EFT.

(x) Any other information or documentation required by the contract (e.g., evidence of shipment).

(2) An interim payment request under a cost-reimbursement contract for services constitutes a

proper invoice for purposes of this subsection if it includes all of the information required by the

contract.
(3) If the invoice does not comply with these requirements, the designated billing office must return

it within 7 days after receipt (3 days on contracts for meat, meat food products, or fish; 5 days on

contracts for perishable agricultural commodities, dairy products, edible fats or oils, and food

products prepared from edible fats or oils), with the reasons why it is not a proper invoice. If such

notice is not timely, then the designated billing office must adjust the due date for the purpose of

determining an interest penalty, if any.

(c) Authorization to pay. All invoice payments, with the exception of interim payments on costreimbursement contracts for services, must be supported by a receiving report or other Government

documentation authorizing payment (e.g., Government certified voucher). The agency receiving

official should forward the receiving report or other Government documentation to the designated

payment office by the 5th working day after Government acceptance or approval, unless other

arrangements have been made. This period of time does not extend the due dates prescribed in this

section. Acceptance should be completed as expeditiously as possible. The receiving report or other

Government documentation authorizing payment must, as a minimum, include the following:

(1) Contract number or other authorization for supplies delivered or services performed.

(2) Description of supplies delivered or services performed.

(3) Quantities of supplies received and accepted or services performed, if applicable.

(4) Date supplies delivered or services performed.

(5) Date that the designated Government official-

(i) Accepted the supplies or services; or

(ii) Approved the progress payment request, if the request is being made under the clause at

52.232-5, Payments Under Fixed-Price Construction Contracts, or the clause at 52.232-10, Payments

Under Fixed-Price Architect-Engineer Contracts.

(6) Signature, printed name, title, mailing address, and telephone number of the designated

Government official responsible for acceptance or approval functions.

(d) Billing office. The designated billing office must immediately annotate each invoice with the

actual date it receives the invoice.

(e) Payment office. The designated payment office will annotate each invoice and receiving report

with the actual date it receives the invoice.

32.906 Making payments.

(a) General. The Government will not make invoice payments earlier than 7 days prior to the due

dates specified in the contract unless the agency head determines-

(1) To make earlier payment on a case-by-case basis; or

(2) That the use of accelerated payment methods is necessary. See 32.903(a)(5), but see 32.009-1(a).

(b) Payment office. The designated payment office-
(1) Will mail checks on the same day they are dated;

(2) For payments made by EFT, will specify a date on or before the established due date for

settlement of the payment at a Federal Reserve Bank;

(3) When the due date falls on a Saturday, Sunday, or legal holiday when Government offices are

closed, may make payment on the following working day without incurring a late payment interest

penalty.

(4) When it is determined that the designated billing office erroneously rejected a proper invoice and

upon resubmission of the invoice, will enter in the payment system the original date the invoice was

received by the designated billing office for the purpose of calculating the correct payment due date

and any interest penalties that may be due.

(c) Partial deliveries.

(1) Contracting officers must, where the nature of the work permits, write contract statements of

work and pricing arrangements that allow contractors to deliver and receive invoice payments for

discrete portions of the work as soon as completed and found acceptable by the Government (see

32.102(d)).

(2) Unless specifically prohibited by the contract, the clause at 52.232-1, Payments, provides that

the contractor is entitled to payment for accepted partial deliveries of supplies or partial

performance of services that comply with all applicable contract requirements and for which prices

can be calculated from the contract terms.

(d) Contractor identifier. Each payment or remittance advice will use the contractor invoice number

in addition to any Government or contract information in describing any payment made.

(e) Discounts. When a discount for prompt payment is taken, the designated payment office will

make payment to the contractor as close as possible to, but not later than, the end of the discount

period. The discount period is specified by the contractor and is calculated from the date of the

contractor’s proper invoice. If the contractor has not placed a date on the invoice, the due date is

calculated from the date the designated billing office receives a proper invoice, provided the agency

annotates such invoice with the date of receipt at the time of receipt. When the discount date falls on

a Saturday, Sunday, or legal holiday when Government offices are closed, the designated payment

office may make payment on the following working day and take a discount. Payment terms are

specified in the clause at 52.232-8, Discounts for Prompt Payment.

32.907 Interest penalties.

(a) Late payment. The designated payment office will pay an interest penalty automatically, without

request from the contractor, when all of the following conditions, if applicable, have been met:

(1) The designated billing office received a proper invoice.

(2) The Government processed a receiving report or other Government documentation authorizing

payment, and there was no disagreement over quantity, quality, or contractor compliance with any

contract requirement.
(3) In the case of a final invoice, the payment amount is not subject to further contract settlement

actions between the Government and the contractor.

(4) The designated payment office paid the contractor after the due date.

(5) In the case of interim payments on cost-reimbursement contracts for services, when payment is

made more than 30 days after the designated billing office receives a proper invoice.

(b) Improperly taken discount. 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 interest penalty is calculated on the amount of discount taken for the

period beginning with the firstday after the end of the discount period through the date when the

contractor is paid.

(c) Failure to pay interest.

(1) The designated payment office will pay a penalty amount, in addition to the interest penalty

amount, only if-

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

(ii) The designated payment office does not pay the interest penalty within 10 days after the date the

invoice amount is paid; and

(iii) The contractor makes a written demand to the designated payment office for additional penalty

payment in accordance with paragraph (c)(2) of this section, postmarked not later than 40 days after

the date the invoice amount is paid.

(2)

(i) Contractors must support written demands for additional penalty payments with the following

data. The Government must not request additional data. Contractors must-

(A) 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;

(B) Attach a copy of the invoice on which the unpaid late payment interest is due; and

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

(3) If there is no postmark or the postmark is illegible-

(i) 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 40 thday after payment was made; or

(ii) 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 40 thday after payment was made.

(d) Disagreements.
(1) The payment office will not pay interest penalties if payment delays are due to disagreement

between the Government and contractor concerning-

(i) The payment amount;

(ii) Contract compliance; or

(iii) Amounts temporarily withheld or retained in accordance with the terms of the contract.

(2) The Government and the contractor must resolve claims involving disputes, and any interest that

may be payable in accordance with the Disputes clause.

(e) Computation of interest penalties. The Government will compute interest penalties in accordance

with OMB prompt payment regulations at 5 CFR Part 1315. These regulations are available via the

Internet at http://www.fms.treas.gov/prompt/.

(f) Unavailability of funds. The temporary unavailability of funds to make a timely payment does not

relieve an agency from the obligation to pay interest penalties.

32.908 Contract clauses.

(a) Insert the clause at 52.232-26, Prompt Payment for Fixed-Price Architect-Engineer Contracts, in

solicitations and contracts that contain the clause at 52.232-10, Payments Under Fixed-Price

Architect-Engineer Contracts.

(1) As authorized in 32.904(c)(2), the contracting officer may modify the date in paragraph (a)(4)(i)

of the clause to specify a period longer than 7 days for constructive acceptance or constructive

approval, if required to afford the Government a practicable opportunity to inspect and test the

supplies furnished or evaluate the services performed.

(2) As provided in 32.903, agency policies and procedures may authorize amendment of paragraphs

(a)(1)(i) and (ii) of the clause to insert a period shorter than 30 days (but not less than 7 days) for

making contract invoice payments.

(b) Insert the clause at 52.232-27, Prompt Payment for Construction Contracts, in all solicitations

and contracts for construction (see part 36).

(1) As authorized in 32.904(d)(1)(i)(B), the contracting officer may modify the date in paragraph

(a)(1)(i)(A) of the clause to specify a period longer than 14 days if required to afford the Government

a reasonable opportunity to adequately inspect the work and to determine the adequacy of the

Contractor’s performance under the contract.

(2) As authorized in 32.904(d)(2)(iv), the contracting officer may modify the date in paragraph

(a)(4)(i) of the clause to specify a period longer than 7 days for constructive acceptance or

constructive approval if required to afford the Government a reasonable opportunity to inspect and

test the supplies furnished or evaluate the services performed.

(c) Insert the clause at 52.232-25, Prompt Payment, in all other solicitations and contracts, except

when the clause at 52.212-4, Contract Terms and Conditions-Commercial Products and Commercial

Services, applies, or when payment terms and late payment penalties are established by other

governmental authority (e.g., tariffs).
(1) As authorized in 32.904(b)(1)(ii)(B)(4), the contracting officer may modify the date in paragraph

(a)(5)(i) of the clause to specify a period longer than 7 days for constructive acceptance, if required

to afford the Government a reasonable opportunity to inspect and test the supplies furnished or to

evaluate the services performed, except in the case of a contract for the purchase of a commercial

product or commercial service, including a brand-name commercial product for authorized resale

(e.g., commissary items).

(2) As provided in 32.903, agency policies and procedures may authorize amendment of paragraphs

(a)(1)(i) and (ii) of the clause to insert a period shorter than 30 days (but not less than 7 days) for

making contract invoice payments.

(3) If the contract is a cost-reimbursement contract for services, use the clause with its Alternate I.

32.909 Contractor inquiries.

(a) Direct questions involving-

(1) Delinquent payments to the designated billing office or designated payment office; and

(2) Disagreements in payment amount or timing to the contracting officer for resolution. The

contracting officer must coordinate within appropriate contracting channels and seek the advice of

other offices as necessary to resolve dis-agreements.

(b) Small business concerns may contact the agency’s local small business specialist or

representative from the Office of Small and Disadvantaged Business Utilization to obtain additional

assistance related to payment issues, late payment interest penalties, and information on the Prompt

Payment Act.