Chapter 20 Contract Payment - The Library of Congress · PDF fileCHAPTER 20 CONTRACT PAYMENT ... Progress Payments on Construction Contracts. ... Assignment of Claims

2014 Contract Attorneys Deskbook

Chapter 20 Contract Payment

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CHAPTER 20

CONTRACT PAYMENT

I. INTRODUCTION. ........................................................................................................1

A. Objectives ...............................................................................................................1

B. Perspectives.............................................................................................................1

II. REFERENCES. .............................................................................................................1

III. POLICIES AND PROCEDURES.................................................................................2

A. FAR Part 32 ...........................................................................................................2

B. Disbursing Authority ...............................................................................................2

C. Contract Payments...................................................................................................2

D. Advances ................................................................................................................2

E. Invoice Payments vs. Financing Payments...............................................................2

F. Order of Preference .................................................................................................3

G. Payment Requirements. ...........................................................................................3

H. Invoice Payment Due Date ......................................................................................3

I. Financing Payment Due Date. .................................................................................4

IV. CONTRACT PAYMENT METHODS. ........................................................................4

A. Definitions...............................................................................................................4

B. Non-Commercial Contract Payments.. .....................................................................4

D. Progress Payments on Construction Contracts. ......................................................13

V. THE PROMPT PAYMENT ACT...............................................................................13

A. Applicability of the Prompt Payment Act (PPA). ...................................................13

B. Invoice Payment Procedures. .................................................................................15

C. Fixed-Price Construction Contracts. ......................................................................19

D. Fixed-Price Architect-Engineer Contracts..............................................................20

E. Prompt Payment Discounts....................................................................................20

F. Waiver...................................................................................................................21

VI. ELECTRONIC FUNDS TRANSFERS (EFT). FAR SUBPART 32.11. ...................21

A. Mandatory Use .....................................................................................................21

B. Specified Payment Date. .......................................................................................22

C. Assignment of Claims...........................................................................................22

D. Central Contractor Registration (CCR)..................................................................22

E. Incorrect EFT Information. ...................................................................................23

F. Payment by Government Purchase Card................................................................23

G. FAR Clauses.........................................................................................................23

H. Liability for Erroneous Transfer............................................................................23

I. Wide Area Work Flow (WAWF). .........................................................................24

VII. ASSIGNMENT OF CLAIMS. ....................................................................................24

A. General Rule .........................................................................................................24

B. Protection for the Assignee....................................................................................25

VIII. DEBT DETERMINATION AND COLLECTION PROCEDURES. ........................26

A. Debts Covered by Contract Collection Procedures. ...............................................26

B. Determination of Contractor Debt. ........................................................................27

C. Enforcing Government Claims-Collecting the Debt. .............................................28

D. Compromise Actions ............................................................................................29

E. Funds Received from the Contractor. ....................................................................30

CHAPTER 20

CONTRACT PAYMENT

I. INTRODUCTION.

A. Objectives. Following this block of instruction, students should understand these concepts:

1. The various methods used by the Government to pay contractors.

2. The methods, and order of preference, for financing Government contracts.

3. The application of The Prompt Payment Act.

4. The Governments policies and procedures for identifying and collecting contract debts.

B. Perspective. The Department [of Defense] continues to experience an unacceptable number of contract payment problems. These problems are caused by a number of factors including systems deficiencies and contract structure.1

II. REFERENCES.

A. 10 U.S.C. 2307, Contract Financing.

B. 31 U.S.C. 3901, Prompt Payment.

C. 31 U.S.C. 3701, Claims.

D. 31 U.S.C. 3727 and 41 U.S.C. 6305, Assignment of Claims Act of 1940.

E. 41 U.S.C. 4503, Advance or other payments.

F. Federal Acquisition Regulation, Part 32, Contract Financing.

G. DoD Financial Management Regulation (FMR) (DoD 7000.14-R), vol. 10, Contract Payment Policy and Procedures.

H. 5 CFR Part 1315, Prompt Payment.

1. Memorandum, The Under Secretary of Defense, Acquisition and Technology, to Assistant Secretaries of the Military Departments, subject: Reducing Contract Fund Citations (30 Apr. 1999).

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III. POLICIES AND PROCEDURES.

A. FAR Part 32. This Part prescribes policies and procedures for contract financing and other payment matters.

B. Disbursing Authority.

1. The Bureau of the Fiscal Service (formerly the Financial Management Service), a bureau of the U.S. Department of the Treasury, is the principal disbursing agent of the Federal government, accounting for approximately 85% of all Federal payments. The Bureau of the Fiscal Service website is at: http://www.fiscal.treasury.gov/.

2. The Department of Defense, the United States Marshals Office, and the Department of Homeland Security (with respect to public money available for the Coast Guards expenditure when it is not operating as a service in the Navy) have statutory authority to disburse public money. 31 U.S.C. 3321. The Defense Finance and Accounting Service (DFAS) website is at: http://www.dfas.mil/.

C. Contract Payments. All solicitations and contracts shall specify the payment procedures, payment due dates, and interest penalties for late invoice payment. FAR 32.903(b). There are two major types of government contract payments:

1. Payment of the contract price for completed work.

2. Payment in advance of work performance.

D. Advances. An advance of public money may be made only if authorized by Congress or the President. 31 U.S.C. 3324(b). Chapter 4 of Volume 10, DoD FMR covers all aspects of the various types of advance payments for DoD.

E. Invoice Payments vs. Financing Payments. FAR Subpart 32.9.

1. 1. Invoice payments are payments made upon delivery of goods or performance of services and acceptance by the government. Invoice payments include: See Ch. 7, Vol. 10 of DoD FMR.

a. Final payments of the contract price, costs, or fee in accordance with the contract or as settled by the government and the contractor.

b. Payments for partial deliveries or partial performance under fixed-price contracts.

c. Progress payments:

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http://www.fiscal.treasury.gov/http://www.dfas.mil/

(1) Construction contracts.

(2) Architect/Engineer contracts.

2. Financing payments are made to a contractor before acceptance of goods or services by the government. Such payments include: See 100401, Ch. 10, Vol. 10 of DoD FMR.

a. Advance payments.

b. Performance-Based Payments.

c. Commercial advance and interim payments.

d. Progress payments based on costs.

e. Progress payments based on a percentage or stage of completion under FAR 52.232-5 or 52.232-10.

f. Interim payments on cost-type contracts. But see FAR 32.908(c)(3) (allowing interim payments for cost-type service contracts).

3. Financing payments DO NOT include invoice payments, payments for partial deliveries or lease and rental payments.

F. Order of Preference. FAR 32.106 provides the following order of preference when a contractor requests contract financing, unless an exception would b