32.503-5 Administration of progress payments
Source: FAR 32.503-5 on acquisition.gov
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.
(a) While the ACO may, in approving progress payment requests under 32.503-3 of this section, rely on the contractor’s accounting system and certification without prepayment review, postpayment reviews (including audits when considered necessary) shall be made periodically, or when considered desirable by the ACO to determine the validity of progress payments already made and expected to be made.
(b) These postpayment reviews or audits shall, as a minimum, include a determination of whether or not-
(1) The unliquidated progress payments are fairly supported by the value of the work accomplished on the undelivered portion of the contract;
(2) The applicable limitation on progress payments in the Progress Payments clause has been exceeded;
(3)
(i) The unpaid balance of the contract price will be adequate to cover the anticipated cost of completion; or
(ii) The contractor has adequate resources to complete the contract; and
(4) There is reason to doubt the adequacy and reliability of the contractor’s accounting system and controls and certification.
(c) Under indefinite-delivery contracts, the contracting officer should administer progress payments made under each individual order as if the order constituted a separate contract, unless agency procedures provide otherwise. When the contract will be administered by an agency other than the awarding agency, the contracting officer shall coordinate with the contract administration office if the awarding agency wants the administration of progress payments to be on a basis other than order-by-order.