32.501-2
Unusual progress payments
Unusual progress payments require thorough justification, documentation, and high-level approval to ensure they are only used when absolutely necessary.
Overview
FAR 32.501-2 addresses the conditions under which contracting officers may authorize unusual progress payments, which are payments that deviate from the standard progress payment terms. This section is designed to ensure that such payments are only granted when absolutely necessary and under strict oversight, primarily to support contractors facing significant upfront costs that exceed their available working capital and credit. The regulation requires thorough documentation and high-level approval before unusual progress payments can be authorized.
Key Rules
- Eligibility for Unusual Progress Payments
- Unusual progress payments may only be provided if the contract requires large predelivery expenditures relative to the contract price and the contractor’s financial resources.
- Documentation and Approval
- Contractors must fully document the need for such payments, demonstrating that private financing options have been exhausted. Approval must be obtained from the head of the contracting activity or their designee.
- Limiting Excess Payment Rates
- Any excess over the customary progress payment rate should be minimized to the lowest amount necessary.
- Letter Contracts Not Automatically Unusual
- Progress payments on letter contracts or their definitive replacements are not considered unusual solely due to their contract type.
Responsibilities
- Contracting Officers: Must ensure all criteria are met, review documentation, and obtain required approvals before authorizing unusual progress payments.
- Contractors: Must provide comprehensive documentation of financial need and demonstrate that private financing is insufficient.
- Agencies: The head of the contracting activity or designee must review and approve requests for unusual progress payments.
Practical Implications
- This section exists to prevent misuse of government funds by ensuring unusual progress payments are only used in exceptional circumstances.
- Contractors must be prepared to provide detailed financial information and justification.
- Failure to comply with documentation or approval requirements can result in denial of payment requests or contract delays.