Description of contract financing methods
FAR 32.102 defines and distinguishes the main contract financing methods, requiring agencies and contractors to use and administer each method according to specific rules and statutory limits.
Overview
FAR 32.102 outlines the primary methods of contract financing available to government contractors, detailing the distinctions and requirements for each. The section covers advance payments, progress payments (based on costs or percentage/stage of completion), loan guarantees, payments for partial deliveries, and performance-based payments. Each method has specific criteria, limitations, and intended uses, with the goal of supporting contractor cash flow while ensuring government interests are protected. The regulation emphasizes that payments for partial deliveries are generally considered a payment method rather than contract financing, but can still aid contractor participation. Agencies must ensure that progress and performance-based payments are tied to measurable work accomplishments and quality standards, with statutory limits on certain payment types (e.g., progress payments on undefinitized contract actions capped at 80% of eligible costs).