28.106-8
Payment to subcontractors or suppliers
Payments to subcontractors or suppliers from an ILC or similar security require clear evidence of entitlement, such as a court decision, notarized contractor statement, or signed agreement.
Overview
FAR 28.106-8 outlines the conditions under which a contracting officer may authorize payment to subcontractors or suppliers from an Irrevocable Letter of Credit (ILC) or other cash equivalent security. The regulation ensures that such payments are only made when there is clear evidence of entitlement, either through a court decision, a notarized statement from the contractor, or a signed agreement between the involved parties. This protects both the government and contractors by preventing unauthorized or disputed payments from security instruments held for contract performance or payment bonds.
Key Rules
- Judicial Determination
- Payment can be authorized if a court has determined the rights of the parties regarding the amount due.
- Notarized Contractor Statement
- Payment may be made if the contractor provides a signed, notarized statement confirming the payment is due and owed to the subcontractor or supplier.
- Signed Agreement
- Payment can also be authorized if both parties sign an agreement specifying the amount due and owed.
Responsibilities
- Contracting Officers: Must ensure one of the three specified conditions is met before authorizing payment from an ILC or similar security.
- Contractors: Must provide a notarized statement or enter into a signed agreement if seeking payment to a subcontractor or supplier from the security.
- Subcontractors/Suppliers: May need to participate in agreements or legal proceedings to establish entitlement to payment.
Practical Implications
- This rule prevents premature or improper disbursement of funds held as security.
- Contractors and subcontractors should maintain clear documentation and communication regarding payment disputes.
- Failure to meet these requirements can delay payment and potentially lead to legal disputes.