52.232-7 Payments under Time-andMaterials and Labor-Hour Contracts.

As prescribed in 32.111(a)(7), insert the following clause:

Payments under Time-and-Materials and Labor-Hour Contracts (Nov 2021)

The Government will pay the Contractor as follows upon the submission of vouchers approved by the

Contracting Officer or the authorized representative:

(a) Hourly rate.

(1) Hourly rate means the rate(s) prescribed in the contract for payment for labor that meets the

labor category qualifications of a labor category specified in the contract that are-

(i) Performed by the Contractor;

(ii) Performed by the subcontractors; or

(iii) Transferred between divisions, subsidiaries, or affiliates of the Contractor under a common

control.

(2) The amounts shall be computed by multiplying the appropriate hourly rates prescribed in the

Schedule by the number of direct labor hours performed.

(3) The hourly rates shall be paid for all labor performed on the contract that meets the labor

qualifications specified in the contract. Labor hours incurred to perform tasks for which labor

qualifications were specified in the contract will not be paid to the extent the work is performed by

employees that do not meet the qualifications specified in the contract, unless specifically authorized

by the Contracting Officer.

(4) The hourly rates shall include wages, indirect costs, general and administrative expense, and

profit. Fractional parts of an hour shall be payable on a prorated basis.

(5) Vouchers may be submitted not more than once every two weeks, to the Contracting Officer or

authorized representative. A small business concern may receive more frequent payments than

every two weeks. The Contractor shall substantiate vouchers (including any subcontractor hours

reimbursed at the hourly rate in the schedule) by evidence of actual payment and by-

(i) Individual daily job timekeeping records;

(ii) Records that verify the employees meet the qualifications for the labor categories specified in the

contract; or

(iii) Other substantiation approved by the Contracting Officer.

(6) Promptly after receipt of each substantiated voucher, the Government shall, except as otherwise

provided in this contract, and subject to the terms of paragraph (e) of this clause, pay the voucher as

approved by the Contracting Officer or authorized representative.
(7) Unless otherwise prescribed in the Schedule, the Contracting Officer may unilaterally issue a

contract modification requiring the Contractor to withhold amounts from its billings until a reserve

is set aside in an amount that the Contracting Officer considers necessary to protect the

Government's interests. The Contracting Officer may require a withhold of 5 percent of the amounts

due under paragraph (a) of this clause, but the total amount withheld for the contract shall not

exceed $50,000. The amounts withheld shall be retained until the Contractor executes and delivers

the release required by paragraph (g) of this clause.

(8) Unless the Schedule prescribes otherwise, the hourly rates in the Schedule shall not be varied by

virtue of the Contractor having performed work on an overtime basis. If no overtime rates are

provided in the Schedule and overtime work is approved in advance by the Contracting Officer,

overtime rates shall be negotiated. Failure to agree upon these overtime rates shall be treated as a

dispute under the Disputes clause of this contract. If the Schedule provides rates for overtime, the

premium portion of those rates will be reimbursable only to the extent the overtime is approved by

the Contracting Officer.

(b) Materials.

(1) For the purposes of this clause-

(i) Direct materials means those materials that enter directly into the end product, or that are used

or consumed directly in connection with the furnishing of the end product or service.

(ii) Materials means-

(A) Direct materials, including supplies transferred between divisions, subsidiaries, or affiliates of

the Contractor under a common control;

(B) Subcontracts for supplies and incidental services for which there is not a labor category

specified in the contract;

(C) Other direct costs (e.g., incidental services for which there is not a labor category specified in

the contract, travel, computer usage charges, etc.); and

(D) Applicable indirect costs.

(2) If the Contractor furnishes its own materials that meet the definition of a commercial product or

commercial service in Federal Acquisition Regulation (FAR) 2.101, the price to be paid for such

materials shall not exceed the Contractor's established catalog or market price, adjusted to reflect

the-

(i) Quantities being acquired; and

(ii) Actual cost of any modifications necessary because of contract requirements.

(3) Except as provided for in paragraph (b)(2) of this clause, the Government will reimburse the

Contractor for allowable cost of materials provided the Contractor-

(i) Has made payments for materials in accordance with the terms and conditions of the agreement

or invoice; or

(ii) Ordinarily makes these payments within 30 days of the submission of the Contractor's payment
request to the Government and such payment is in accordance with the terms and conditions of the

agreement or invoice.

(4) Payment for materials is subject to the Allowable Cost and Payment clause of this contract. The

Contracting Officer will determine allowable costs of materials in accordance with FAR subpart 31.2

in effect on the date of this contract.

(5) The Contractor may include allocable indirect costs and other direct costs to the extent they are-

(i) Comprised only of costs that are clearly excluded from the hourly rate;

(ii) Allocated in accordance with the Contractor's written or established accounting practices; and

(iii) Indirect costs are not applied to subcontracts that are paid at the hourly rates.

(6) To the extent able, the Contractor shall-

(i) Obtain materials at the most advantageous prices available with due regard to securing prompt

delivery of satisfactory materials; and

(ii) Take all cash and trade discounts, rebates, allowances, credits, salvage, commissions, and other

benefits. When unable to take advantage of the benefits, the Contractor shall promptly notify the

Contracting Officer and give the reasons. The Contractor shall give credit to the Government for

cash and trade discounts, rebates, scrap, commissions, and other amounts that have accrued to the

benefit of the Contractor, or would have accrued except for the fault or neglect of the Contractor.

The Contractor shall not deduct from gross costs the benefits lost without fault or neglect on the

part of the Contractor, or lost through fault of the Government.

(7) Except as provided for in 31.205-26(e) and (f), the Government will not pay profit or fee to the

prime Contractor on materials.

(c) If the Contractor enters into any subcontract that requires consent under the clause at 52.244-2,

Subcontracts, without obtaining such consent, the Government is not required to reimburse the

Contractor for any costs incurred under the subcontract prior to the date the Contractor obtains the

required consent. Any reimbursement of subcontract costs incurred prior to the date the consent

was obtained shall be at the sole discretion of the Government.

(d) Total cost. It is estimated that the total cost to the Government for the performance of this

contract shall not exceed the ceiling price set forth in the Schedule, and the Contractor agrees to

use its best efforts to perform the work specified in the Schedule and all obligations under this

contract within such ceiling price. If at any time the Contractor has reason to believe that the hourly

rate payments and material costs that will accrue in performing this contract in the next succeeding

30 days, if added to all other payments and costs previously accrued, will exceed 85 percent of the

ceiling price in the Schedule, the Contractor shall notify the Contracting Officer giving a revised

estimate of the total price to the Government for performing this contract with supporting reasons

and documentation. If at any time during performing this contract, the Contractor has reason to

believe that the total price to the Government for performing this contract will be substantially

greater or less than the then stated ceiling price, the Contractor shall so notify the Contracting

Officer, giving a revised estimate of the total price for performing this contract, with supporting

reasons and documentation. If at any time during performing this contract, the Government has

reason to believe that the work to be required in performing this contract will be substantially

greater or less than the stated ceiling price, the Contracting Officer will so advise the Contractor,

giving the then revised estimate of the total amount of effort to be required under the contract.
(e) Ceiling price. The Government will not be obligated to pay the Contractor any amount in excess

of the ceiling price in the Schedule, and the Contractor shall not be obligated to continue

performance if to do so would exceed the ceiling price set forth in the Schedule, unless and until the

Contracting Officer notifies the Contractor in writing that the ceiling price has been increased and

specifies in the notice a revised ceiling that shall constitute the ceiling price for performance under

this contract. When and to the extent that the ceiling price set forth in the Schedule has been

increased, any hours expended and material costs incurred by the Contractor in excess of the ceiling

price before the increase shall be allowable to the same extent as if the hours expended and material

costs had been incurred after the increase in the ceiling price.

(f) Audit. At any time before final payment under this contract, the Contracting Officer may request

audit of the vouchers and supporting documentation. Each payment previously made shall be subject

to reduction to the extent of amounts, on preceding vouchers, that are found by the Contracting

Officer or authorized representative not to have been properly payable and shall also be subject to

reduction for overpayments or to increase for underpayments. Upon receipt and approval of the

voucher designated by the Contractor as the "completion voucher" and supporting documentation,

and upon compliance by the Contractor with all terms of this contract (including, without limitation,

terms relating to patents and the terms of paragraph (g) of this clause), the Government shall

promptly pay any balance due the Contractor. The completion voucher, and supporting

documentation, shall be submitted by the Contractor as promptly as practicable following

completion of the work under this contract, but in no event later than 120 days (or such longer

period as the Contracting Officer may approve in writing) from the date of completion.

(g) Assignment and Release of Claims. The Contractor, and each assignee under an assignment

entered into under this contract and in effect at the time of final payment under this contract, shall

execute and deliver, at the time of and as a condition precedent to final payment under this contract,

a release discharging the Government, its officers, agents, and employees of and from all liabilities,

obligations, and claims arising out of or under this contract, subject only to the following exceptions:

(1) Specified claims in stated amounts, or in estimated amounts if the amounts are not susceptible of

exact statement by the Contractor.

(2) Claims, together with reasonable incidental expenses, based upon the liabilities of the Contractor

to third parties arising out of performing this contract, that are not known to the Contractor on the

date of the execution of the release, and of which the Contractor gives notice in writing to the

Contracting Officer not more than 6 years after the date of the release or the date of any notice to

the Contractor that the Government is prepared to make final payment, whichever is earlier.

(3) Claims for reimbursement of costs (other than expenses of the Contractor by reason of its

indemnification of the Government against patent liability), including reasonable incidental

expenses, incurred by the Contractor under the terms of this contract relating to patents.

(h) Interim payments on contracts for other than services.

(1) Interim payments made prior to the final payment under the contract are contract financing

payments. Contract financing payments are not subject to the interest penalty provisions of the

Prompt Payment Act.

(2) The designated payment office will make interim payments for contract financing on the _________

[Contracting Officer insert day as prescribed by agency head; if not prescribed, insert "30th ] day

after the designated billing office receives a proper payment request. In the event that the
Government requires an audit or other review of a specific 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 due date.

(i) Interim payments on contracts for services. For interim payments made prior to the final payment

under this contract, the Government will make payment in accordance with the Prompt Payment Act

(31 U.S.C. 3903) and prompt payment regulations at 5 CFR part 1315.

(End of clause)

Parent topic: 52.232 [Reserved]