32.201
Statutory authority
FAR 32.201 allows agencies to use payment terms for commercial products and services that reflect standard commercial practices, provided they are in the government's best interest.
Overview
FAR 32.201 establishes the statutory authority for agencies to make payments for commercial products and services under terms and conditions that are appropriate or customary in the commercial marketplace, as long as they are in the best interest of the United States. This authority is derived from 10 U.S.C. 3805 and 41 U.S.C. 4505, which grant agency heads the flexibility to structure payment terms for commercial acquisitions in a manner consistent with standard industry practices. The section provides the legal foundation for the flexible payment arrangements often used in commercial item contracting, distinguishing these from the more rigid payment structures required for non-commercial acquisitions.
Key Rules
- Statutory Authority for Payment Terms
- Agency heads may authorize payment terms for commercial products and services that align with customary commercial practices and serve the government's best interests.
- Applicability to Commercial Acquisitions
- The authority applies specifically to contracts for commercial products and commercial services, not to non-commercial acquisitions.
Responsibilities
- Contracting Officers: Must ensure payment terms for commercial contracts are both customary in the marketplace and in the government's best interest.
- Contractors: Should propose payment terms that reflect standard commercial practices and are justifiable as beneficial to the government.
- Agencies: Must exercise oversight to confirm that payment arrangements comply with statutory authority and agency policy.
Practical Implications
- This section enables greater flexibility in negotiating payment terms for commercial contracts, supporting faster and more efficient procurement.
- Contractors benefit from familiar, market-based payment structures, while agencies retain discretion to protect government interests.
- Common pitfalls include proposing payment terms that are not customary or failing to document how terms serve the government's best interest.