H. R. 1107—115 
§ 4502. Payment 
(a) BASIS FOR PAYMENT.—When practicable, payments under sec-
tion 4501 of this title shall be made on any of the following bases: 
(1) Performance measured by objective, quantifiable methods 
such as delivery of acceptable items, work measurement, or 
statistical process controls. 
(2) Accomplishment of events defined in the program manage-
ment plan. 
(3) Other quantifiable measures of results. 
(b) PAYMENT AMOUNT.—Payments made under section 4501 of 
this title may not exceed the unpaid contract price. 
§ 4503. Security for advance payments 
Advance payments under section 4501 of this title may be made 
only on adequate security and a determination by the agency head 
that to do so would be in the public interest. The security may 
be in the form of a lien in favor of the Federal Government on 
the property contracted for, on the balance in an account in which 
the payments are deposited, and on such of the property acquired 
for performance of the contract as the parties may agree. This 
lien shall be paramount to all other liens and is effective imme-
diately upon the first advancement of funds without filing, notice, 
or any other action by the Federal Government. 
§ 4504. Conditions for progress payments 
(a) PAYMENT COMMENSURATE WITH WORK.—The executive agency 
shall ensure that a payment for work in progress (including mate-
rials, labor, and other items) under a contract of an executive 
agency that provides for those payments is commensurate with 
the work accomplished that meets standards established under 
the contract. The contractor shall provide information and evidence 
the executive agency determines is necessary to permit the executive 
agency to carry out this subsection. 
(b) LIMITATION.—The executive agency shall ensure that progress 
payments referred to in subsection (a) are not made for more 
than 80 percent of the work accomplished under the contract as 
long as the executive agency has not made the contractual terms, 
specifications, and price definite. 
(c) APPLICATION.—This section applies to a contract in an amount 
greater than $25,000. 
§ 4505. Payments for commercial items 
(a) TERMS
AND CONDITIONS
FOR PAYMENTS.—Payments under 
section 4501 of this title for commercial items may be made under 
terms and conditions that the head of the executive agency deter-
mines are appropriate or customary in the commercial marketplace 
and are in the best interests of the Federal Government. 
(b) SECURITY FOR PAYMENTS.—The head of the executive agency 
shall obtain adequate security for the payments. If the security 
is in the form of a lien in favor of the Federal Government, the 
lien is paramount to all other liens and is effective immediately 
on the first payment, without filing, notice, or other action by 
the Federal Government. 
(c) LIMITATION ON ADVANCE PAYMENTS.—Advance payments made 
under section 4501 of this title for commercial items may include 
payments, in a total amount not more than 15 percent of the 
contract price, in advance of any performance of work under the 
contract.
H. R. 1107—116 
(d) NONAPPLICATION
OF CERTAIN CONDITIONS.—The conditions 
of sections 4503 and 4504 of this title need not be applied if 
they would be inconsistent, as determined by the head of the 
executive agency, with commercial terms and conditions pursuant 
to this section. 
§ 4506. Action in case of fraud 
(a) DEFINITION.—In this section, the term ‘‘remedy coordination 
official’’, with respect to an executive agency, means the individual 
or entity in that executive agency who coordinates within that 
executive agency the administration of criminal, civil, administra-
tive, and contractual remedies resulting from investigations of fraud 
or corruption related to procurement activities. 
(b) RECOMMENDATION TO REDUCE OR SUSPEND PAYMENTS.—In 
any case in which the remedy coordination official of an executive 
agency finds that there is substantial evidence that the request 
of a contractor for advance, partial, or progress payment under 
a contract awarded by that executive agency is based on fraud, 
the remedy coordination official shall recommend that the executive 
agency reduce or suspend further payments to that contractor. 
(c) REDUCTION OR SUSPENSION OF PAYMENTS.—The head of an 
executive agency receiving a recommendation under subsection (b) 
in the case of a contractor’s request for payment under a contract 
shall determine whether there is substantial evidence that the 
request is based on fraud. On making an affirmative determination, 
the head of the executive agency may reduce or suspend further 
payments to the contractor under the contract. 
(d) EXTENT OF REDUCTION OR SUSPENSION.—The extent of any 
reduction or suspension of payments by an executive agency under 
subsection (c) on the basis of fraud shall be reasonably commensu-
rate with the anticipated loss to the Federal Government resulting 
from the fraud. 
(e) WRITTEN JUSTIFICATION.—A written justification for each deci-
sion of the head of an executive agency whether to reduce or 
suspend payments under subsection (c), and for each recommenda-
tion received by the executive agency in connection with the deci-
sion, shall be prepared and be retained in the files of the executive 
agency. 
(f) NOTICE.—The head of each executive agency shall prescribe 
procedures to ensure that, before the head of the executive agency 
decides to reduce or suspend payments in the case of a contractor 
under subsection (c), the contractor is afforded notice of the proposed 
reduction or suspension and an opportunity to submit matters 
to the executive agency in response to the proposed reduction or 
suspension. 
(g) REVIEW.—Not later than 180 days after the date on which 
the head of an executive agency reduces or suspends payments 
to a contractor under subsection (c), the remedy coordination official 
of the executive agency shall— 
(1) review the determination of fraud on which the reduction 
or suspension is based; and 
(2) transmit a recommendation to the head of the executive 
agency whether the suspension or reduction should continue. 
(h) REPORT.—The head of each executive agency who receives 
recommendations made by the remedy coordination official of the 
executive agency to reduce or suspend payments under subsection 
(c) during a fiscal year shall prepare for that year a report that