32.503-8
Liquidation rates-ordinary method
The ordinary method requires the liquidation rate for recouping progress payments to match the progress payment rate, ensuring consistent and predictable deductions from contractor payments.
Overview
FAR 32.503-8 outlines the standard procedure for recouping progress payments made to contractors by the Government. Under the ordinary method, the Government deducts liquidations from payments due for completed and accepted contract items, using a liquidation rate that matches the progress payment rate. This ensures that the Government recovers the amounts advanced as progress payments as the contractor delivers and completes contract items. The contracting officer is required to use this ordinary method at the start of the contract, providing a clear and consistent approach to managing progress payments and liquidations.
Key Rules
- Liquidation of Progress Payments
- The Government deducts liquidations from payments for completed contract items to recoup progress payments.
- Liquidation Rate Determination
- The liquidation rate applied is the same as the progress payment rate.
- Mandatory Use at Contract Start
- The contracting officer must use the ordinary method at the beginning of the contract.
Responsibilities
- Contracting Officers: Must apply the ordinary liquidation method and ensure the liquidation rate equals the progress payment rate at contract initiation.
- Contractors: Should understand how liquidations will be calculated and deducted from payments for delivered items.
- Agencies: Must oversee proper application of the ordinary liquidation method and ensure compliance with FAR requirements.
Practical Implications
- This section standardizes how progress payments are recouped, reducing confusion and ensuring fairness.
- Contractors should anticipate deductions from payments for delivered items based on the progress payment rate.
- Common pitfalls include misunderstanding the deduction process or failing to account for liquidations in cash flow planning.