Administration of progress payments
Contracting officers must conduct periodic postpayment reviews or audits to ensure progress payments are justified, within limits, and supported by reliable contractor accounting systems.
Overview
FAR 32.503-5 outlines the requirements for administering progress payments to contractors, focusing on the oversight and review responsibilities of the Administrative Contracting Officer (ACO). The regulation allows the ACO to rely on the contractor’s accounting system and certification for approving progress payment requests, but mandates periodic postpayment reviews or audits to ensure the validity of payments. These reviews must assess whether progress payments are justified by work accomplished, whether payment limits have been exceeded, if the remaining contract balance is sufficient for completion, and the adequacy of the contractor’s accounting system. For indefinite-delivery contracts, progress payments should be managed on an order-by-order basis unless agency procedures specify otherwise, and coordination is required when contract administration is transferred between agencies.
Key Rules
- Reliance on Contractor Systems
- ACOs may approve progress payments based on contractor certifications, but must conduct postpayment reviews or audits as needed.
- Mandatory Postpayment Reviews
- Reviews must verify that payments are supported by work performed, limits are not exceeded, contract balances are sufficient, and accounting systems are reliable.
- Indefinite-Delivery Contracts
- Progress payments should be administered per individual order unless otherwise specified, with inter-agency coordination required for alternative arrangements.
Responsibilities
- Contracting Officers: Must conduct or arrange for periodic postpayment reviews or audits and coordinate administration for indefinite-delivery contracts.
- Contractors: Must maintain reliable accounting systems and provide accurate certifications supporting progress payment requests.
- Agencies: Oversee compliance and coordinate administration when contracts are managed by different agencies.
Practical Implications
- Ensures government funds are protected by verifying progress payments are justified and within contractual limits.
- Requires contractors to maintain robust accounting systems and accurate reporting.
- Common issues include inadequate documentation, exceeding payment limits, or unreliable accounting systems, which can delay payments or trigger audits.