Subpart 32.3
Loan Guarantees for Defense Production
FAR Subpart 32.3 enables contractors and subcontractors in defense production to obtain government-backed loan guarantees, ensuring access to necessary financing when commercial credit is unavailable.
Overview
FAR Subpart 32.3 establishes the policies and procedures for providing loan guarantees to contractors and subcontractors engaged in defense production. This subpart outlines the authority under which loan guarantees are issued, defines key terms, and details the processes for obtaining and administering such guarantees. It also addresses special considerations for contracts that have been terminated and for subcontracts. The primary goal is to ensure that contractors have access to necessary financing to fulfill defense production requirements, especially when commercial credit is not otherwise available on reasonable terms.
Key Rules
- Scope and Definitions
- Clarifies the applicability of loan guarantees and defines relevant terms for consistent interpretation.
- Authority and General Policy
- Specifies the statutory authority for issuing loan guarantees and the general conditions under which they may be provided.
- Procedures
- Outlines the steps contractors must follow to apply for and maintain loan guarantees, including documentation and approval processes.
- Terminated Contracts and Subcontracts
- Provides guidance on handling loan guarantees when contracts are terminated or when they involve subcontracts, ensuring continued access to financing where appropriate.
Responsibilities
- Contracting Officers: Must ensure compliance with loan guarantee procedures, verify eligibility, and oversee the administration of guarantees.
- Contractors: Must submit required documentation, maintain eligibility, and comply with all terms of the loan guarantee.
- Agencies: Oversee the program, ensure statutory compliance, and report on the use and effectiveness of loan guarantees.
Practical Implications
- This subpart exists to facilitate defense production by ensuring contractors can secure financing when commercial options are insufficient.
- It impacts daily contracting by providing a safety net for financing, particularly in high-risk or urgent defense projects.
- Common pitfalls include incomplete documentation, misunderstanding eligibility, or failing to follow required procedures, which can delay or jeopardize loan guarantees.