32.906 Making payments
Source: FAR 32.906 on acquisition.gov
FAR 32.906 ensures timely, accurate, and properly documented payments to contractors, with clear rules for payment timing, partial deliveries, and prompt payment discounts.
Overview
FAR 32.906 outlines the procedures and requirements for making payments to contractors under government contracts. It establishes rules for the timing of payments, handling of partial deliveries, use of contractor invoice numbers, and application of discounts for prompt payment. The regulation ensures that payments are made in accordance with contract terms, prevents premature payments, and provides guidance for handling payment timing around weekends and holidays. It also emphasizes the importance of accurate invoice processing and proper documentation for calculating due dates and interest penalties.
Key Rules
- Timing of Payments
- Payments are generally not made earlier than 7 days before the due date unless specifically authorized by the agency head.
- Payment Office Procedures
- Checks must be mailed on the date they are issued; EFT payments must settle by the due date; payments due on non-working days may be made on the next business day without penalty.
- Partial Deliveries
- Contracts should allow for payment on accepted partial deliveries or performance, unless prohibited by contract terms.
- Invoice Identification
- Payments must reference the contractor's invoice number for tracking and reconciliation.
- Discounts for Prompt Payment
- Payment offices must pay within the discount period to take advantage of prompt payment discounts, with specific rules for calculating the period and handling non-working days.
Responsibilities
- Contracting Officers: Structure contracts to allow partial payments where appropriate and ensure compliance with payment timing rules.
- Contractors: Submit proper invoices with clear invoice numbers and specify any prompt payment discounts.
- Agencies: Ensure payment offices follow timing, documentation, and discount procedures, and accurately process invoices.
Practical Implications
- This section ensures timely and accurate payments, reduces disputes over payment timing, and incentivizes prompt invoice submission and processing. Contractors benefit from clear rules on when to expect payment and how discounts are handled. Common pitfalls include failing to submit proper invoices, misunderstanding discount periods, or not structuring contracts to allow partial payments.
(a) General. The Government will not make invoice payments earlier than 7 days prior to the due dates specified in the contract unless the agency head determines-
(1) To make earlier payment on a case-by-case basis; or
(2) That the use of accelerated payment methods is necessary. See 32.903(a)(5), but see 32.009-1(a).
(b) Payment office. The designated payment office-
(1) Will mail checks on the same day they are dated;
(2) For payments made by EFT, will specify a date on or before the established due date for settlement of the payment at a Federal Reserve Bank;
(3) When the due date falls on a Saturday, Sunday, or legal holiday when Government offices are closed, may make payment on the following working day without incurring a late payment interest penalty.
(4) When it is determined that the designated billing office erroneously rejected a proper invoice and upon resubmission of the invoice, will enter in the payment system the original date the invoice was received by the designated billing office for the purpose of calculating the correct payment due date and any interest penalties that may be due.
(c) Partial deliveries.
(1) Contracting officers must, where the nature of the work permits, write contract statements of work and pricing arrangements that allow contractors to deliver and receive invoice payments for discrete portions of the work as soon as completed and found acceptable by the Government (see 32.102(d)).
(2) Unless specifically prohibited by the contract, the clause at 52.232-1, Payments, provides that the contractor is entitled to payment for accepted partial deliveries of supplies or partial performance of services that comply with all applicable contract requirements and for which prices can be calculated from the contract terms.
(d) Contractor identifier. Each payment or remittance advice will use the contractor invoice number in addition to any Government or contract information in describing any payment made.
(e) Discounts. When a discount for prompt payment is taken, the designated payment office will make payment to the contractor as close as possible to, but not later than, the end of the discount period. The discount period is specified by the contractor and is calculated from the date of the contractor’s proper invoice. If the contractor has not placed a date on the invoice, the due date is calculated from the date the designated billing office receives a proper invoice, provided the agency annotates such invoice with the date of receipt at the time of receipt. When the discount date falls on a Saturday, Sunday, or legal holiday when Government offices are closed, the designated payment office may make payment on the following working day and take a discount. Payment terms are specified in the clause at 52.232-8, Discounts for Prompt Payment.