Discounts for Prompt Payment
Prompt payment discounts are not evaluated in offers but become enforceable if accepted, with strict rules on timing and documentation for both contractors and agencies.
Overview
FAR 52.232-8, "Discounts for Prompt Payment," establishes the rules for how discounts offered by contractors for early payment are handled in federal contracts. The clause clarifies that while such discounts are not considered during the evaluation of offers, they become part of the contract if accepted and will be taken if payment is made within the specified discount period. Contractors may also offer prompt payment discounts on individual invoices after contract award. The clause details how the discount period is calculated, starting from the invoice date or, if undated, from the date the billing office receives a proper invoice. It also specifies how payment dates are determined for discount purposes, including provisions for weekends and federal holidays.
Key Rules
- Discounts Not Considered in Offer Evaluation
- Prompt payment discounts are not factored into the evaluation of offers but are included in the contract if accepted.
- Discount Period Calculation
- The discount period starts from the invoice date or, if undated, from the date the billing office receives the invoice (with receipt date annotation required).
- Payment Date Determination
- Payment is considered made on the date of the payment check or the specified date for electronic funds transfer.
- Weekend and Holiday Adjustments
- If the discount date falls on a non-business day, payment may be made on the next business day without losing the discount.
Responsibilities
- Contracting Officers: Must ensure the clause is included in applicable contracts and that payment timing is tracked accurately.
- Contractors: Must clearly state any prompt payment discounts and ensure invoices are properly dated; may offer discounts on invoices post-award.
- Agencies: Must annotate receipt dates on undated invoices and process payments in accordance with the clause.
Practical Implications
- This clause incentivizes early payment by the government and can improve contractor cash flow.
- Contractors should ensure invoice accuracy and clarity regarding discount terms.
- Failure to properly date invoices or annotate receipt can affect discount eligibility and payment timing.