14.408-3
Prompt payment discounts
Prompt payment discounts do not influence bid evaluation but become part of the contract and may be utilized if payment is made within the specified period.
Overview
FAR 14.408-3 addresses how prompt payment discounts are handled in sealed bidding. While such discounts cannot be considered when evaluating bids for award purposes, any discount offered by a bidder becomes part of the contract and may be utilized if the government pays within the specified discount period. Bidders may also choose to offer discounts on individual invoices rather than as part of their bid. The section also references FAR 32.111(b)(1) and the contract clause at 52.232-8, which further govern prompt payment discounts.
Key Rules
- Exclusion from Bid Evaluation
- Prompt payment discounts are not factored into the evaluation of bids for award decisions.
- Discounts Become Part of Award
- Any prompt payment discount offered is incorporated into the contract and may be taken if payment is made within the discount period.
- Alternative Discount Offering
- Bidders may choose to offer discounts on individual invoices instead of in their bid.
- Reference to Additional Clauses
- Contracting officers should refer to FAR 32.111(b)(1) and include clause 52.232-8 as applicable.
Responsibilities
- Contracting Officers: Must not consider prompt payment discounts in bid evaluation, but must ensure discounts offered are included in the contract and referenced in payment processing. They must also include the appropriate contract clause when required.
- Contractors: Should understand that discounts offered will not affect award decisions but will be honored if payment is made within the discount period. They may choose to offer discounts on invoices instead.
- Agencies: Must ensure payment centers are aware of and apply prompt payment discounts when eligible.
Practical Implications
- This rule ensures fairness in bid evaluation by excluding prompt payment discounts from consideration, preventing manipulation of award decisions. Contractors should be aware that while discounts can benefit the government, they do not improve their chances of winning a contract. Common pitfalls include misunderstanding how discounts affect bid evaluation and failing to properly communicate or document discount terms.