32.001 Definitions
Source: FAR 32.001 on acquisition.gov
Correctly classifying a payment under FAR 32.001 is essential because it determines billing procedures, Prompt Payment treatment, liquidation of financing, and whether higher-level approval is needed for unusual financing.
Overview
- FAR 32.001 provides the core definitions used throughout FAR Part 32, Contract Financing. Its purpose is to distinguish among payment types, financing mechanisms, and administrative offices so contracting professionals can apply the correct financing, billing, and prompt payment rules.
- These definitions matter because whether a payment is treated as an invoice payment, delivery payment, or contract financing payment affects liquidation, approval requirements, and whether Prompt Payment Act interest penalties apply.
Key Rules
- Payment Type Definitions
- The section defines commercial interim payments, commercial advance payments, delivery payments, and invoice payments, clarifying when payment occurs relative to contractor performance and Government acceptance.
- Contract Financing Payment
- Contract financing payments are Government disbursements made before acceptance of supplies or services. They include advance payments, performance-based payments, commercial advance/interim payments, certain progress payments, and some interim cost-reimbursement payments.
- Included vs. Excluded Payments
- Contract financing payments do not include invoice payments, payments for accepted partial deliveries, or lease/rental payments. Invoice payments cover accepted supplies or services and certain construction, architect-engineer, and service cost-reimbursement payments for Prompt Payment purposes.
- Administrative Roles and Liquidation
- The section defines the designated billing office, designated payment office, due date, and liquidate, which are central to routing invoices and recouping prior financing from later accepted-delivery payments.
Responsibilities
- Contracting Officers: classify payment methods correctly, identify designated billing/payment offices in the contract, and determine whether financing is customary or unusual.
- Contractors: submit invoices and financing requests to the correct office and understand whether requested payments are financing or invoice payments.
- Agencies: establish what financing is customary and require higher-level approval for unusual financing.
Practical Implications
- This section exists to create consistent payment terminology across Part 32.
- It affects how contractors request payment, when the Government pays, and whether financing is later liquidated from delivery payments.
- Common pitfalls include misclassifying accepted partial deliveries, confusing commercial interim payments with advance payments, and sending requests to the wrong billing office.
As used in this part—
Commercial interim payment means any payment that is not a commercial advance payment or a delivery payment. These payments are contract financing payments for prompt payment purposes (i.e., not subject to the interest penalty provisions of the Prompt Payment Act in accordance with subpart 32.9). A commercial interim payment is given to the contractor after some work has been done, whereas a commercial advance payment is given to the contractor when no work has been done.
Contract action means an action resulting in a contract, as defined in subpart 2.1, including actions for additional supplies or services outside the existing contract scope, but not including actions that are within the scope and under the terms of the existing contract, such as contract modifications issued pursuant to the Changes clause, or funding and other administrative changes.
Contract financing payment means an authorized Government disbursement of monies to a contractor prior to acceptance of supplies or services by the Government.
(1) Contract financing payments include-
(i) Advance payments;
(ii) Performance-based payments;
(iii) Commercial advance and interim payments;
(iv) Progress payments based on cost under the clause at 52.232-16, Progress Payments;
(v) Progress payments based on a percentage or stage of completion (see 32.102(e)), except those made under the clause at 52.232-5, Payments Under Fixed-Price Construction Contracts, or the clause at 52.232-10, Payments Under Fixed-Price Architect-Engineer Contracts; and
(vi) Interim payments under a cost reimbursement contract, except for a cost reimbursement contract for services when Alternate I of the clause at 52.232-25, Prompt Payment, is used.
(2) Contract financing payments do not include-
(i) Invoice payments;
(ii) Payments for partial deliveries; or
(iii) Lease and rental payments.
Customary contract financing means that financing deemed by an agency to be available for routine use by contracting officers. Most customary contract financing arrangements should be usable by contracting officers without specific reviews or approvals by higher management.
Delivery payment means a payment for accepted supplies or services, including payments for accepted partial deliveries. Commercial financing payments are liquidated by deduction from these payments. Delivery payments are invoice payments for prompt payment purposes.
Designated billing office means the office or person (governmental or nongovernmental) designated in the contract where the contractor first submits invoices and contract financing requests. The contract might designate different offices to receive invoices and contract financing requests. The designated billing office might be-
(1) The Government disbursing office;
(2) The contract administration office;
(3) The office accepting the supplies delivered or services performed by the contractor;
(4) The contract audit office; or
(5) A nongovernmental agent.
Designated payment office means the office designated in the contract to make invoice payments or contract financing payments. Normally, this will be the Government disbursing office.
Due date means the date on which payment should be made.
Invoice payment means a Government disbursement of monies to a contractor under a contract or other authorization for supplies or services accepted by the Government.
(1) Invoice payments include-
(i) Payments for partial deliveries that have been accepted by the Government;
(ii) Final cost or fee payments where amounts owed have been settled between the Government and the contractor;
(iii) For purposes of subpart 32.9 only, all payments made under the clause at 52.232-5, Payments Under Fixed-Price Construction Contracts, and the clause at 52.232-10, Payments Under Fixed-Price Architect-Engineer Contracts; and
(iv) Interim payments under a cost-reimbursement contract for services when Alternate I of the clause at 52.232-25, Prompt Payment, is used
(2) Invoice payments do not include contract financing payments.
Liquidate means to decrease a payment for an accepted supply item or service under a contract for the purpose of recouping financing payments previously paid to the contractor.
Unusual contract financing means any financing not deemed customary contract financing by the agency. Unusual contract financing is financing that is legal and proper under applicable laws, but that the agency has not authorized contracting officers to use without specific reviews or approvals by higher management.