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Payments under Commercial Item Contracts

What types of payments are applicable to commercial item purchases?

A commercial advance payment is a payment made before any performance of work under the contract. The aggregate of these payments may not exceed 15 percent of the contract price. These payments are not subject to penalties for late payment; however, they should be paid on a timely basis. A delivery payment is a payment for accepted supplies or services, including partial deliveries. Delivery payments are subject to penalties for late payment. A commercial interim payment is any payment that is not a commercial advance payment or a delivery payment. Commercial interim payments are not subject to penalties for late payment. A commercial interim payment is made to the contractor after some work has been done, whereas a commercial advance payment is made to the contractor when no work has been done.

Accepting the Payment Document for Processing

What steps does the COR take in processing a payment?

Processing a payment to the contractor involves the following steps:

1. Determining if payment may be processed

2. Inspecting the payment document for completeness

3. Accepting the invoice or notifying the contractor of any defects found in an invoice.

1. Determining if payment can be processed

Prior to processing any payments, at least one of the following must be true:

Acceptance of the product or service must have occurred

Contract performance must have been otherwise completed.

Several documents may need to be obtained in order to determine whether payment can be processed. Necessary documentation may include:

Documentation that supports successful delivery or completion of products and services, including:

- Inspection forms

- Receiving report forms (see Question 311, Chapter 6)

- Commercial shipping documents

- Packing lists.

Documentation of the suspension of performance

Documentation of the application of remedies, such as liquidated damages or rejection of work

Documentation of adjustments to liquidation rates or reductions in progress payments

Documentation of interim or final adjustments to the contract price

Modifications to the contract

Documentation of termination settlements.

2. Inspecting the payment document for completeness

Once a contractor submits an invoice for payment, the COR may be required to:

Inspect the submitted invoices

Determine if the invoice is complete

Determine if the invoice is for a fixed price or cost-type contract.

3. Accepting the invoice or notifying the contractor of any defects found in the invoice

Once an invoice is received, the COR will evaluate the invoice and either accept it or notify the contractor of a deficiency in the invoice. Incomplete or incorrect invoices should be returned to the contractor prior to acceptance for payment. Contractors must be notified of any specific deficiencies:

In writing and

Within seven calendar days after the receipt of invoice.

If the contractor submits an incomplete invoice, the COR should keep a record of the length of the delay getting a corrected invoice from the contractor causes. Once the invoice is corrected, if the original invoice date appears on the corrected invoice, the invoice should be sent to the payment office with the following statement:

After receipt of invoice, the Contracting Office waited days for the contractor to supply necessary information for invoicing. Therefore, the invoice was not proper until, and any interest payment that may be due the contractor shall be based on this later date.

 
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