32.205
Procedures for offeror-proposed commercial contract financing
Offerors may propose their own commercial contract financing terms, but the government will evaluate these proposals by calculating the total cost—including the time value of money—using a specified interest rate from OMB Circular A-94.
Overview
FAR 32.205 outlines the procedures for offerors to propose their own commercial contract financing terms and details how contracting officers must evaluate these proposals. The regulation ensures that the government fairly assesses the total cost of each offer, including the financial impact of early payments, to determine the best value for the United States.
Key Rules
- Offeror-Proposed Financing
- Offerors may propose their own contract financing terms, which the contracting officer must evaluate for the government's best interest.
- Solicitation Requirements
- Solicitations must include FAR provision 52.232-31 and specify both the delivery payment dates and the interest rate for evaluation.
- Evaluation of Financing Proposals
- Contracting officers must adjust proposed prices to reflect the cost of financing, using a specified interest rate to calculate the imputed cost of early payments.
- The imputed cost is calculated by multiplying the payment amount by the annual interest rate and the time between financing and delivery payment dates.
- The interest rate used must be from Appendix C of OMB Circular A-94, matching the period of financing as closely as possible.
Responsibilities
- Contracting Officers: Must include required provisions in solicitations, specify evaluation parameters, and accurately calculate the total evaluated price using the prescribed interest rate.
- Contractors/Offerors: May propose financing terms and must understand how their proposals will be evaluated for total cost.
- Agencies: Must ensure compliance with OMB Circular A-94 and maintain up-to-date evaluation practices.
Practical Implications
- This section allows flexibility for offerors but ensures the government accounts for the true cost of early payments.
- Contractors should carefully structure financing proposals, as the imputed cost can affect competitiveness.
- Common pitfalls include failing to use the correct interest rate or not specifying required solicitation details.