32.206
Solicitation provisions and contract clauses
FAR 32.206 mandates specific clauses and detailed requirements for contract financing in commercial contracts, ensuring clear payment terms, proper security, and compliance with prompt payment rules.
Overview
FAR 32.206 outlines the requirements for including solicitation provisions and contract clauses related to contract financing in contracts for commercial products and commercial services. It specifies the mandatory use of certain clauses, the construction of custom clauses when contract financing is provided, and the content that must be included in such clauses. The section also addresses computation and liquidation of financing payments, instructions for contracts funded by multiple appropriations, prompt payment requirements, and the use of installment payment financing.
Key Rules
- Mandatory Clauses
- Contracts must include the "Payment" paragraph from 52.212-4. If contract financing is provided, additional clauses must be constructed per 32.204 or 32.205, and specific solicitation provisions (e.g., 52.232-31) may be required.
- Content of Financing Clauses
- Financing clauses must describe payment computation, entitlement conditions, liquidation methods, security requirements, and the process for requesting payments. The unaltered clause at 52.232-29 must be included unless agency regulations allow changes.
- Computation and Entitlement
- Delivery payments are only for accepted supplies/services. Advance/interim payments must be based on objectively determinable criteria. The contract must specify information/facilities for verifying entitlement.
- Multiple Appropriations
- Contracts with multiple funding sources must include instructions for distributing financing payments and ensure consistency with liquidation instructions.
- Liquidation
- Financing payments must be liquidated on the same basis as computed (whole contract or line item). Uniform liquidation percentages are standard unless otherwise approved.
- Prompt Payment
- Prompt payment rules apply to both financing and invoice payments. Contracts must clearly differentiate between payment types and timelines.
- Installment Payments
- The clause at 52.232-30 may be used for installment payments if customary or authorized. Installment payments are fixed, equal interim payments, and must be properly calculated and liquidated upon item acceptance.
Responsibilities
- Contracting Officers: Must ensure inclusion of required clauses, construct custom clauses as needed, specify payment and liquidation methods, and provide clear instructions for multiple appropriations and prompt payment.
- Contractors: Must comply with clause requirements, submit accurate payment requests, provide necessary security, and ensure proper calculation and documentation of installment payments.
- Agencies: May authorize clause alterations, set installment payment rates, and provide procedures for alternative liquidation methods.
Practical Implications
- This section ensures clarity and consistency in contract financing for commercial acquisitions, reducing risk and administrative burden. Contractors must pay close attention to the specific clauses and requirements included in their contracts, as failure to comply can delay payments or result in noncompliance. Common pitfalls include misunderstanding the basis for payments, improper documentation, or failing to differentiate between financing and invoice payments.