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PAYMENT

FAR Subpart 32.9 states that the contractor is entitled to payment under the contract. This payment should conform to agency policies and to the policy outlined in the Prompt Payment Act. The COR should not authorize payment of money in excess of, or less than, the amount to which the contractor is entitled under the terms and conditions of the contract. However, the government has payment alternatives with regard to paying a contractor for services or supplies received or accepted. These are:

Payment in full

Payment after certain deductions and withholdings (after written notice to the contractor)

Rejection of the contractor's invoice (the reason for rejection must be specified) and return of the invoice to the contractor for correction and resubmission.

What is a payment?

A payment is the monetary amount the contractor is entitled to receive under the contract for services or supplies ordered by the government. The form used to pay the contractor is known as a payment document.

What is the COR's role in payment authorization?

The COR is often the individual responsible for assisting the CO with the authorization of payment. This duty is completed successfully when the COR recommends to the CO whether to authorize payment for any invoice in full, in part, or not at all.

What tasks will the COR need to perform to successfully authorize payments?

The COR must:

1. Accept the payment document for processing

2. Calculate the payment amount

3. Notify the contractor of the final amount calculated to be paid, and submit the correct invoice to the paying office.

The following sections deal with payments to be made in accordance with various types of government contracts with and without government financing. For a discussion regarding the methods of government financing, refer to the Government Financing section in Chapter 4.

What is partial payment?

Partial payment is a method of payment based on acceptance of a particular part of contract performance.

What is prompt payment?

Prompt payment occurs when the government pays the contractor prior to the invoice payment date. The prompt payment discount is an invoice payment reduction voluntarily offered to the government by the contractor for prompt payment that is made prior to the due date stated on the invoice.

Payments under Noncommercial Item contracts

What is a contract financing payment?

A contract financing payment is a disbursement of monies to a contractor under a contract clause or other authorization prior to acceptance of supplies or services by the government. Contract financing payments include the following payment types:

Performance-based payments

Advance payments

Progress payments based on costs incurred

Progress payments based on a percentage or stage of completion

Interim payments under a cost-reimbursement contract.

Contract financing payments should be made on a timely basis. Contract financing payments do not include:

Invoice payments

Payments for partial deliveries

Lease and rental payments.

What is government policy regarding performance-based payments?

Performance-based payments are the preferred government financing method when the CO finds them practical and the contractor agrees to their use. Performance-based payments are contract financing payments that are not payments for accepted items; they are fully recoverable, in the same manner as progress payments, in the event of default. Performance-based payments may not be used :

For payments under cost-reimbursement line items

When the contract provides for progress payments based on a percentage or stage of completion

For contracts awarded through sealed-bid procedures.

Performance-based payments may be made on either a whole contract or a deliverable item basis, unless otherwise prescribed by agency regulations. Financing payments made on a whole contract basis are applicable to the entire contract, not to specific deliverable items. Financing payments made on a deliverable item basis are applicable to a specific individual deliverable item, i.e., an item with a distinct unit price. Thus, a contract line item for 10 airplanes, with a unit price of $1,000,000 each, has 10 deliverable items the separate planes. A contract line item for one lot of 10 airplanes, with a lot price of $10,000,000, has only one deliverable itemthe lot.

 
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