Applying Pub.L.85-804 to advance payments under sealed bid contracts
Agencies may provide advance payments under sealed bid contracts to support national defense, but bids requiring advance payments as a condition for acceptance must be rejected.
Overview
FAR 32.405 outlines how agencies may apply Public Law 85-804 to provide advance payments under sealed bid contracts, particularly in support of national defense. The regulation clarifies that advance payments can be made at or after contract award, regardless of whether the contract was awarded through sealed bidding or negotiation. Bidders may request advance payments even if the solicitation does not mention them, but bids that require advance payments as a condition for acceptance must be rejected. The contracting officer has discretion to provide, withhold, or deny advance payments based on the contractor's actual need and the agency's approval process. If a request for advance payments is denied and the contractor lacks sufficient funds, the agency may deny the contract award. This section ensures that advance payments are managed in a way that supports national defense needs while maintaining proper oversight and compliance with FAR Part 32 procedures.
Key Rules
- Advance Payments for National Defense
- Agencies may make advance payments under sealed bid or negotiated contracts to facilitate national defense, even if other laws would normally restrict such payments.
- Bidder Requests for Advance Payments
- Bidders can request advance payments before or after award, but bids that make advance payments a condition for acceptance must be rejected.
- Agency Options When Advance Payments Are Requested
- Agencies may: (1) award the contract and provide advance payments per FAR Part 32; (2) award without advance payments if not needed; or (3) deny award if the request is disapproved and the contractor lacks funds.
Responsibilities
- Contracting Officers: Must evaluate requests for advance payments, reject conditional bids, and follow FAR Part 32 procedures for approval or denial.
- Contractors: May request advance payments but cannot make them a condition for bid acceptance; must demonstrate need if requesting advance payments.
- Agencies: Must ensure compliance with FAR and Pub.L.85-804, and document decisions regarding advance payments.
Practical Implications
- This section provides flexibility for agencies to support urgent national defense needs with advance payments, but enforces strict controls to prevent misuse.
- Contractors should not condition their bids on receiving advance payments, and must be prepared to justify their need if requesting them.
- Common pitfalls include submitting non-compliant bids or failing to follow the proper approval process for advance payments.