[Code of Federal Regulations]
[Title 48, Volume 1]
[Revised as of October 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR32.102]

[Page 627-628]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
PART 32--CONTRACT FINANCING--Table of Contents
 
          Subpart 32.1--Non-Commercial Item Purchase Financing
 
Sec. 32.102  Description of contract financing methods.

    (a) Advance payments are advances of money by the Government to a 
prime contractor before, in anticipation of, and for the purpose of 
complete performance under one or more contracts. They are expected to 
be liquidated from payments due to the contractor incident to 
performance of the contracts. Since they are not measured by 
performance, they differ from partial, progress, or other payments based 
on the performance or partial performance of a contract. Advance 
payments may be made to prime contractors for the purpose of making 
advances to subcontractors.
    (b) Progress payments based on costs are made on the basis of costs 
incurred by the contractor as work progresses under the contract. This 
form of contract financing does not include--
    (1) Payments based on the percentage or stage of completion 
accomplished;
    (2) Payments for partial deliveries accepted by the Government;
    (3) Partial payments for a contract termination proposal; or
    (4) Performance-based payments.
    (c) Loan guarantees are made by Federal Reserve banks, on behalf of 
designated guaranteeing agencies, to enable contractors to obtain 
financing from private sources under contracts for the acquisition of 
supplies or services for the national defense.
    (d) Payments for accepted supplies and services that are only a part 
of the contract requirements (i.e., partial deliveries) are authorized 
under 41 U.S.C. 255 and 10 U.S.C. 2307. In accordance with 5 CFR 
1315.4(k), agencies must pay for partial delivery of supplies or partial 
performance of services unless specifically prohibited by the contract. 
Although payments for partial deliveries generally are treated as a 
method of payment and not as a method of contract financing, using 
partial delivery payments can assist contractors to participate in 
contracts without, or with minimal, contract financing. When 
appropriate, contract statements of work and pricing arrangements must 
permit acceptance and payment for discrete portions of the work, as soon 
as accepted (see 32.906(c)).
    (e)(1) Progress payments based on a percentage or stage of 
completion are authorized by the statutes cited in 32.101.
    (2) This type of progress payment may be used as a payment method 
under agency procedures. Agency procedures must ensure that payments are 
commensurate with work accomplished, which meets the quality standards 
established under the contract. Furthermore, progress payments may not 
exceed 80 percent of the eligible costs of work accomplished on 
undefinitized contract actions.

[[Page 628]]

    (f) Performance-based payments are contract financing payments made 
on the basis of--
    (1) Performance measured by objective, quantifiable methods;
    (2) Accomplishment of defined events; or
    (3) Other quantifiable measures of results.

[48 FR 42328, Sept. 19, 1987, as amended at 52 FR 30077, Aug. 12, 1987; 
60 FR 49711, Sept. 26, 1995; 62 FR 12706, Mar. 17, 1997; 66 FR 65355, 
Dec. 18, 2001]