52.232-25
Prompt Payment
FAR 52.232-25 ensures contractors are paid promptly by the government and provides automatic interest penalties for late payments, making timely and accurate invoicing essential for compliance and cash flow.
Overview
FAR 52.232-25, Prompt Payment, establishes the requirements and procedures for timely government payments to contractors. It sets specific due dates for invoice payments, outlines what constitutes a proper invoice, and details the process for interest penalties if payments are late. The clause also addresses special payment timelines for certain food products, contract financing payments, fast payment procedures, and contractor obligations in the event of overpayments. Alternate I modifies requirements for interim payments under cost-reimbursement service contracts.
Key Rules
- Invoice Payment Due Dates
- Standard payment is due the later of 30 days after receipt of a proper invoice or government acceptance of goods/services. Special, shorter timelines apply for certain food and agricultural products.
- Proper Invoice Requirements
- Invoices must include specific information (e.g., contract number, item descriptions, EFT info) to be considered proper. Improper invoices must be returned within set timeframes.
- Interest Penalties
- Automatic interest penalties apply if the government pays late, with additional penalties possible if interest is not paid promptly after principal payment.
- Overpayments
- Contractors must promptly report and return any overpayments, providing detailed documentation to both the payment office and Contracting Officer.
- Alternate I for Interim Payments
- For cost-reimbursement service contracts, certain standard provisions do not apply, and invoices must follow FAR 52.216-7.
Responsibilities
- Contracting Officers: Ensure contract includes the clause, verify invoice compliance, and oversee prompt payment and penalty processes.
- Contractors: Submit proper invoices, monitor payment timelines, report and return overpayments, and follow special procedures for food/agricultural products and interim payments.
- Agencies: Process payments and penalties in accordance with the clause, return improper invoices timely, and maintain compliance with OMB prompt payment regulations.
Practical Implications
- This clause ensures contractors are paid promptly and fairly, reducing cash flow issues and disputes. Failure to submit proper invoices or to monitor payment timelines can delay payments or forfeit interest penalties. Contractors must be diligent in invoice preparation, tracking, and communication with the government to ensure compliance and timely payment.