Subpart 32.5
Progress Payments Based on Costs
FAR Subpart 32.5 provides the framework for contractors to receive progress payments based on incurred costs, ensuring cash flow while maintaining strict compliance and oversight requirements.
Overview
FAR Subpart 32.5 establishes the policies and procedures for providing progress payments to contractors based on costs incurred during contract performance. This subpart outlines the requirements for both preaward and postaward activities related to progress payments, including eligibility, calculation methods, and oversight responsibilities. It also addresses the treatment of subcontracts under prime contracts that provide for progress payments. The purpose is to ensure that contractors receive timely financing to support contract performance while protecting the government's interests through proper controls and documentation.
Key Rules
- Scope and Applicability
- Defines when and how progress payments based on costs may be used in government contracts.
- General Requirements
- Sets forth the general principles, including eligibility criteria and the standard progress payment rate.
- Preaward Considerations
- Details the factors contracting officers must evaluate before authorizing progress payments, such as contractor financial capability and risk assessment.
- Postaward Administration
- Outlines procedures for monitoring, reviewing, and adjusting progress payments after contract award.
- Subcontractor Progress Payments
- Provides guidance on handling progress payments for subcontracts under prime contracts that include such provisions.
Responsibilities
- Contracting Officers: Must determine eligibility, negotiate terms, monitor compliance, and ensure proper documentation for progress payments.
- Contractors: Must submit accurate cost data, maintain adequate records, and comply with progress payment terms and reporting requirements.
- Agencies: Oversee implementation, ensure regulatory compliance, and safeguard government interests.
Practical Implications
- This subpart exists to facilitate contractor cash flow during performance, reducing financial barriers and supporting timely completion of government contracts.
- It impacts daily contract administration, especially for contracts with significant upfront costs.
- Common pitfalls include inadequate documentation, failure to meet eligibility criteria, and improper calculation or oversight of progress payments.