32.503-14 Protection of Government title
Source: FAR 32.503-14 on acquisition.gov
Contractors must ensure and certify that all property covered by progress payments remains free of encumbrances, or risk payment suspension and potential legal action.
Overview
FAR 32.503-14 outlines the requirements for protecting the Government’s title to property acquired or produced under contracts with progress payments. When progress payments are made, the Government obtains title to materials, work-in-process, finished goods, and other property as specified in the Progress Payments clause. The Administrative Contracting Officer (ACO) must ensure that this title is not compromised by liens or other encumbrances. The ACO can generally rely on the contractor’s certification in the progress payment request unless there is reason to suspect otherwise. If the ACO discovers any arrangement that could impair the Government’s title, they must require additional protective measures. Any encumbrance is a contract violation and may result in suspension or reduction of progress payments. Failure to disclose such encumbrances may also trigger legal consequences under the False Claims Act.
Key Rules
- Government Title Protection
- The Government holds title to property covered by progress payments, and this title must not be compromised by other claims or liens.
- ACO Reliance and Action
- The ACO may rely on contractor certifications unless there is evidence to the contrary, but must act if any risk to Government title is identified.
- Contractor Obligations and Violations
- Contractors must not allow encumbrances on Government-titled property and must disclose any such issues; violations can lead to payment suspension and legal action.
Responsibilities
- Contracting Officers: Monitor for encumbrances, require protective provisions if needed, and consult legal counsel for possible False Claims Act violations.
- Contractors: Certify that property is free of encumbrances and disclose any existing issues in progress payment requests.
- Agencies: Oversee compliance and enforce remedies for violations.
Practical Implications
- This section ensures the Government’s financial interests are protected when making progress payments.
- Contractors must maintain clear title to property and be diligent in disclosures.
- Failure to comply can result in payment delays, contract remedies, or legal penalties.
(a) Since the Progress Payments clause gives the Government title to all of the materials, work-in-process, finished goods, and other items of property described in paragraph (d) of the Progress Payments clause, under the contract under which progress payments have been made, the ACO must ensure that the Government title to these inventories is not compromised by other encumbrances. Ordinarily, the ACO, in the absence of reason to believe otherwise, may rely upon the contractor’s certification contained in the progress payment request.
(b) If the ACO becomes aware of any arrangement or condition that would impair the Government’s title to the property affected by progress payment, the ACO shall require additional protective provisions (see 32.501-5) to establish and protect the Government’s title.
(c) The existence of any such encumbrance is a violation of the contractor’s obligations under the contract, and the ACO may, if necessary, suspend or reduce progress payments under the terms of the Progress Payments clause covering failure to comply with any material requirement of the contract. In addition, if the contractor fails to disclose an existing encumbrance in the progress payments certification, the ACO should consult with legal counsel concerning possible violation of http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title31-section3729&num=0&edition=prelim" target="_blank">31 U.S.C.3729, the False Claims Act.