32.502-2 Contract finance office clearance
Source: FAR 32.502-2 on acquisition.gov
Contracting officers must obtain finance office approval before making exceptions to standard progress payment practices or paying contractors with financial risks.
Overview
FAR 32.502-2 requires contracting officers to obtain clearance from the contract finance office or other designated agency offices before taking certain actions related to progress payments. This includes providing a progress payment rate above the customary rate, deviating from standard progress payment terms, or authorizing progress payments to contractors with questionable financial standing or those listed as indebted to the U.S. government. The regulation ensures that financial risks are properly reviewed and mitigated before proceeding with non-standard or higher-risk payment arrangements.
Key Rules
- Approval for Higher Progress Payment Rates
- Contracting officers must secure finance office approval before offering progress payment rates above the customary rate.
- Approval for Deviations from Standard Terms
- Any deviation from prescribed progress payment terms requires finance office clearance.
- Approval for At-Risk Contractors
- Progress payments to contractors with financial doubts, recent denials of advance payments or loan guarantees, or those on the "Hold-up List" require finance office approval.
Responsibilities
- Contracting Officers: Must obtain required finance office clearance before taking any of the specified actions.
- Contractors: Should be aware that their financial status may impact eligibility for progress payments.
- Agencies: Must designate appropriate offices for finance clearance and maintain oversight of high-risk payment actions.
Practical Implications
- This section exists to protect government funds by ensuring additional scrutiny for non-standard or higher-risk progress payments.
- It impacts daily contracting by requiring an extra layer of review for exceptions to standard payment practices.
- Common pitfalls include failing to obtain required approvals, which can result in unauthorized payments and compliance violations.
The contracting officer shall obtain the approval of the contract finance office or other offices designated under agency procedures before taking any of the following actions:
(a) Providing a progress payment rate higher than the customary rate (see 32.501-1).
(b) Deviating from the progress payments terms prescribed in this part.
(c) Providing progress payments to a contractor-
(1) Whose financial condition is in doubt;
(2) Who has had an advance payment request or loan guarantee denied for financial reasons (or approved but withdrawn or lapsed) within the previous 12 months; or
(3) Who is named in the consolidated list of contractors indebted to the United States (known commonly as the "Hold-up List").