32.113
Customary contract financing
Solicitations must specify which customary contract financing methods are permitted, and contractors may only propose those options in accordance with FAR and agency regulations.
Overview
FAR 32.113 outlines the types of customary contract financing that may be offered to contractors, provided they comply with the relevant FAR parts and agency regulations. The section requires solicitations to specify which forms of financing are available, ensuring transparency and consistency in government contracting. It details acceptable financing methods for various contract types, including shipbuilding, construction, sealed bidding, competitive negotiation, sole-source acquisitions, and others. The section also clarifies that only one type of progress or performance-based payment may be used per contract, and allows for combinations with advance payments or guaranteed loans, as long as they adhere to the applicable subparts.
Key Rules
- Solicitation Requirements
- Solicitations must clearly state the customary contract financing options available to offerors.
- Customary Financing Types
- Shipbuilding and related contracts may use progress payments based on completion stages.
- Construction and architect-engineer contracts may use financing under Part 36.
- Sealed bid contracts may use progress payments based on costs (Subpart 32.5).
- Competitive negotiation and sole-source contracts may use either progress payments (Subpart 32.5) or performance-based payments (Subpart 32.10), but not both.
- Advance payments (Subpart 32.4) and guaranteed loans (Subpart 32.3) are also permitted.
- Combinations of these methods are allowed, with restrictions on mixing progress and performance-based payments.
Responsibilities
- Contracting Officers: Must specify allowable financing in solicitations and ensure compliance with relevant FAR subparts.
- Contractors: Must propose and use only the financing methods specified in the solicitation and permitted by regulation.
- Agencies: Must follow agency-specific regulations and ensure oversight of financing arrangements.
Practical Implications
- This section standardizes contract financing practices, reducing ambiguity for both agencies and contractors.
- Contractors must carefully review solicitations to understand which financing options are available and structure their proposals accordingly.
- Common pitfalls include proposing unapproved financing methods or attempting to combine incompatible payment types.