[Federal Register Volume 59, Number 87 (Friday, May 6, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10802]
[[Page Unknown]]
[Federal Register: May 6, 1994]
_______________________________________________________________________
Part II
Department of Defense
General Services Administration
National Aeronautics and Space Administration
_______________________________________________________________________
48 CFR Parts 32 and 52
Federal Acquisition Regulation; Prompt Payment Act; Proposed Rule
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 32 and 52
[FAR Case 91-91]
Federal Acquisition Regulation; Prompt Payment Act
AGENCY: Department of Defense (DOD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council are proposing changes to the Federal
Acquisition Regulation (FAR) to amend FAR policies and clauses on
Prompt Payment. This proposed rule, in combination with changes made by
Federal Acquisition Circular 84-45, dated March 31, 1989, will complete
the implementation of changes made in OMB Circular A-125 (Revised),
dated December 12, 1989, to comply with the Prompt Payment Act
Amendments of 1988 (Public Law 100-496). Changes are also proposed to
clarify, simplify, and correct inconsistencies in the existing FAR text
and clauses. This regulatory action was not subject to Office of
Management and Budget review pursuant to Executive Order No. 12866
dated September 30, 1993.
DATES: Comments should be submitted to the FAR Secretariat at the
address shown below on or before July 5, 1994 to be considered in the
formulation of a final rule.
ADDRESSES: Interested parties should submit written comments to:
General Services Administration, FAR Secretariat (VRS), 18th and F
Streets, NW, Room 4037, Attn: Ms. Beverly Fayson, Washington, DC 20405.
Please cite FAR case 91-91 in all correspondence related to this case.
FOR FURTHER INFORMATION CONTACT:
Mr. Jeremy Olson at (202) 501-3221 in reference to this FAR case. For
general information, contact the FAR Secretariat, Room 4037, GS
Building, Washington, DC 20405, (202) 501-4755. Please cite FAR case
91-91.
SUPPLEMENTARY INFORMATION:
A. Background
Federal Acquisition Circular (FAC) 84-45 published a final FAR rule
in the Federal Register at 54 FR 13332, March 31, 1989, to implement
changes required by the Prompt Payment Act Amendments of 1988 (Public
Law 100-496). The Office of Management and Budget (OMB) implemented the
statutory requirements by revising OMB Circular A-125, Prompt Payment.
The Circular was published as a final rule in the Federal Register on
December 21, 1989, and became effective 30 days after publication.
OMB's final guidance differed somewhat from earlier proposed coverage
which served as the basis for the FAR changes published in FAC 84-45.
This proposed FAR rule implements the guidance published in OMB
Circular A-125 (Revised).
Major FAR changes proposed include: (1) Clarifying policy on
partial payments for partial performance by establishing coverage at
FAR 32.102(d) and 32.903(f); (2) revising and adding definitions at FAR
32.902 to be in consonance with definitions in OMB Circular A-125 and
to make related editorial changes; (3) adding coverage at FAR 32.904 to
address an ongoing problem with contracts containing more than one set
of payment terms; (4) clarifying policy at FAR 32.905(a)(1)(ii)
concerning use of extended acceptance periods; (5) adding coverage at
FAR 32.905(c)(6) to address construction prime contractor certification
requirements under the clause at FAR 52.232-5; (6) adding coverage at
FAR 32.905(j) to address the use and payment of ``mixed'' invoices; (7)
adding coverage at FAR 32.907-1(b)(3) concerning interest penalties in
relation to electronic funds transfers; (8) adding coverage at FAR
32.907-1(g) concerning additional interest penalties and contractor
demands for such penalties; (9) adding coverage at FAR 32.910 to
address construction contractors' payment of interest on unearned
amounts under the clauses at FAR 52.232-5 and 52.232-27; and (10)
revising the clause at FAR 52.232-5 to include the specific criteria
required by A-125 for construction contractors' requests for progress
payments. FAR clauses 52.232-5, 52.232-8, and 52.232-25, 52.232-26,
52.232-27, and 52.232-28 are amended to reflect the proposed FAR text
changes. In addition, numerous changes are proposed to clarify,
simplify, and correct inconsistencies in the existing FAR text and
clauses. (Note: The requirements that no late payment penalty payments
be made to certain foreign vendors were removed from the FAR by FAC 90-
20, Item XIII, March 10, 1994, 59 FR 11368.)
B. Regulatory Flexibility Act
The proposed changes to FAR 32.102, subpart 32.9, and related part
52 clauses at 52.232-5, 52.232-8, 52.232-25, 52.232-26, 52.232-27, and
52.232-28 may have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq., because the proposed rule will
apply to all small businesses who contract with the Federal Government
and to all small businesses who enter into construction contracts with
contractors holding prime Federal construction contracts. An Initial
Regulatory Flexibility Analysis (IRFA) has been prepared and will be
provided to the Chief Counsel for Advocacy for the Small Business
Administration. A copy of the IRFA may be obtained from the FAR
Secretariat. Comments are invited. Comments from small entities
concerning the affected FAR subparts will also be considered in
accordance with 5 U.S.C. 610. Such comments must be submitted
separately and should cite 5 U.S.C. 601, et seq. (FAR case 91-91), in
correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because the proposed
changes to the FAR do not impose recordkeeping information collection
requirements, or collections of information from offerors, contractors,
or members of the public which require the approval of the Office of
Management and Budget under 44 U.S.C. 3501, et seq. Approval for the
affected FAR segments was originally provided under OMB Control Number
9000-0102.
List of Subjects in 48 CFR Parts 32 and 52
Government procurement.
Dated: April 29, 1994.
Albert A. Vicchiolla,
Director, Office of Federal Acquisition Policy.
Therefore, it is proposed that 48 CFR parts 32 and 52 be amended as
set forth below:
1. The authority citation for 48 CFR parts 32 and 52 continues to
read as follows:
Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 32--CONTRACT FINANCING
2. Section 32.102 is amended by revising paragraph (d) to read as
follows:
32.102 Description of contract financing methods.
* * * * *
(d) Partial payments for accepted supplies and services that are
only a part of the contract requirements are authorized under section
305 of the Federal Property and Administrative Services Act (41 U.S.C.
255). OMB Circular A-125, Prompt Payment, requires agencies to pay for
partial delivery of supplies or partial performance of services unless
specifically prohibited by the contract. Although partial payments are
generally treated as a method of payment and not as a method of
contract financing, using partial payments can assist contractors to
participate in Government contracts without, or with minimal, contract
financing. When appropriate, contract statements of work and pricing
arrangements shall be designed to permit acceptance and payment for
discrete portions of the work, as soon as accepted (but see
32.903(f)(2)).
* * * * *
3. Section 32.902 is amended by revising the definitions ``Day'',
``Designated billing office'', ``Discount for prompt payment'', and
``Payment date''; and adding, in alphabetical order, the definitions
``Invoice'' and ``Specified payment date'' to read as follows:
32.902 Definitions.
* * * * *
Day, as used in this subpart, means calendar day, including
weekends and holidays, unless otherwise indicated. (However, see
32.903(e)(3) concerning payments due on Saturdays, Sundays, and legal
holidays.)
Designated billing office, as used in this subpart, means the
office or person (governmental or nongovernmental) designated in the
contract where the contractor first submits invoices and contract
financing requests. This might be the Government disbursing office,
contract administration office, office accepting the supplies delivered
or services performed by the contractor, contract audit office, or a
nongovernmental agent. In some cases, different offices might be
designated to receive invoices and contract financing requests.
* * * * *
Discount for prompt payment means an invoice payment reduction
voluntarily offered by the contractor, in conjunction with the clause
at 52.232-8, Discounts for Prompt Payment, if payment is made by the
Government prior to the due date. The due date is calculated from the
date of the contractor's 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 Federal Government offices are closed and Government
business is not expected to be conducted, payment may be made on the
following business day and a discount may be taken.
* * * * *
Invoice means a contractor's bill or written request for payment
under the contract for supplies delivered or services performed.
* * * * *
Payment date means the date on which a check for payment is dated
or the date an electronic funds transfer is specified for settlement at
a Federal Reserve Bank (see 32.903(e)(2)).
* * * * *
Specified payment date means, for an electronic funds transfer
(EFT) payment, the date which the Government has placed in the EFT
payment transaction instruction given to the transfer network, as the
date on which funds are to be transferred to the contractor's financial
institution.
4. Section 32.903 is revised to read as follows:
32.903 Policy.
(a) All solicitations and contracts subject to this subpart shall
specify payment procedures, payment due dates, and interest penalties
for late invoice payment.
(b) The Government shall not make invoice and contract financing
payments earlier than 7 days prior to the due dates specified in the
contract unless the agency head, or designee, determines to make
earlier payment on a case-by-case basis (see 32.908 for required
clauses).
(c) Payment will be based on receipt of a proper invoice or
contract financing request and satisfactory contract performance.
(d) Agency procedures shall ensure that, when specifying due dates,
full consideration is given to the time reasonably required by
Government officials to fulfill their administrative responsibilities
under the contract.
(e)(1) Checks shall be mailed on the same day they are dated.
(2) Payments made by electronic funds transfer shall be specified
by the Government (see 32.902 definition of specified payment date) for
settlement at a Federal Reserve Bank on or before the established due
date.
(3) When the due date falls on a Saturday, Sunday, or legal holiday
when Federal Government offices are closed and Government business is
not expected to be conducted, payment may be made on the following
business day without incurring a late payment interest penalty.
(f)(1) Contracting officers shall, 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 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.
(3) Under some types of contracts, such as many cost-reimbursement
contracts, partial payments cannot be made because the invoice price
cannot be determined until after settlement of total contract costs and
other contract-wide final arrangements. However, interim payments or
contract financing payments may be made in accordance with the terms of
the contract.
(g) Discounts for prompt payment offered by the contractor shall be
taken only when payments are made within the discount period specific
by the contractor.
(h) Agencies shall pay an interest penalty, without request from
the contractor, for late invoice payments or improperly taken discounts
for prompt payment. The interest penalty shall be absorbed within funds
available for administration or operation of the program for which the
penalty was incurred. The temporary unavailability of funds to make a
timely payment does not relieve an agency from the obligation to pay
interest penalties or the additional interest penalties discussed in
32.903(i) and 32.907-1(g).
(i) For contracts awarded after October 1, 1989, if the interest
penalty is not paid within 10 days after it is due and the contractor
makes a written demand for payment within 40 days after payment of the
principal amount due, agencies shall pay an additional penalty amount,
which shall be calculated in accordance with 32.907-1(g).
(j) If the contractor has assigned a contractor identifier (such as
an invoice number) to an invoice or financing request, each payment
shall use the contractor identifier (in addition to any Government or
contract information) in describing any payment made.
5. Section 32.904 is revised to read as follows:
32.904 Responsibilities.
(a) Agency heads--
(1) Shall establish policies and procedures to implement this
subpart;
(2) May prescribe additional standards for establishing due dates
on voice payments (32.905) and contract financing payments (32.906)
necessary to support agency programs and foster prompt payment to
contractors;
(3) May adopt different payment procedures to accommodate unique
circumstances, provided such procedures are consistent with the
policies in this subpart; and
(4) Shall inform contractors of points of contact within their
cognizant payment offices to enable contractors to obtain status of
invoices.
(b) Contracting officers, in drafting solicitations and contracts,
shall identify for each contract line item number, subline item number,
or exhibit line item number--
(1) Which of the applicable Prompt Payment clauses applies to each
item when the solicitation or contract contains items which will be
subject to different payment terms; and
(2) The applicable Prompt Payment food category (i.e., which item
numbers are meat or meat food products, which are perishable
agricultural commodities, etc.), when using the clause at 52.232-25
which contains multiple payment terms for various classes of foods and
edible products.
6. Section 32.905 is revised to read as follows:
32.905 Invoice payments.
(a) Except as prescribed in paragraphs (b), (c), and (d) of this
section, the due date for making an invoice payment by the designated
payment office shall be as follows:
(1) The 30th day after the designated billing office has received a
proper invoice from the contractor (except as provided in paragraph
(a)(2) of this section); or the 30th day after Government acceptance of
supplies delivered or services performed by the contractor, whichever
is later.
(i) On a final invoice where the payment amount is subject to
contract settlement actions, acceptance shall be deemed to have
occurred on the effective date of the contract settlement.
(ii) For the sole purpose of computing an interest penalty that
might be due the contractor, Government acceptance shall be deemed to
have occurred constructively on the 7th day after the contractor has
delivered supplies or performed services in accordance with the terms
and conditions of the contract, unless there is a disagreement over
quantity, quality, or contractor compliance with a contract
requirement. In the event that actual acceptance occurs within the
constructive acceptance period, the determination of an interest
penalty shall be based on the actual date of acceptance. The
constructive acceptance requirement does not, however, compel
Government officials to accept supplies or services, perform contract
administration functions, or make payment prior to fulfilling their
responsibilities. Except in the case of a contract for the purchase of
a commercial item or service as defined in 15.804-3(c)(3), including a
brand name commercial item for authorized resale (e.g., commissary
items), the contracting officer may specify a longer period for
constructive acceptance in the solicitation and resulting contract, if
required to afford the Government a reasonable opportunity to inspect
and test the supplies furnished or to evaluate the services performed.
The contract file shall indicate the justification for extending the
constructive acceptance period beyond 7 days. Extended acceptance
periods shall not be a routine agency practice but shall be used only
when necessary to permit proper Government inspection and testing of
the supplies delivered or services rendered.
(iii) If the contract does not require submission of an invoice for
payment (e.g., periodic lease payments), the due date will be as
specified in the contract.
(2) If the designated billing office fails to annotate the invoice
with the actual date of receipt at the time of receipt, the invoice
payment due date shall be the 30th day after the date of the
contractor's invoice, provided a proper invoice is received and there
is no disagreement over quantity, quality, or contractor compliance
with contract requirements.
(b) The due date for making payments on contracts that contain the
clause at 52.232-10, Payments under Fixed-Price Architect-Engineer
Contracts, shall be as follows:
(1) The due date for work or services completed by the contractor
shall be the later of the following two events:
(i) The 30th day after the designated billing office has received a
proper invoice from the contractor.
(ii) The 30th day after Government acceptance of the work or
services completed by the contractor. On a final invoice where the
payment amount is subject to contract settlement actions (e.g., release
of claims), acceptance shall be deemed to have occurred on the
effective date of the settlement. For the sole purpose of computing an
interest penalty that might be due the contractor, Government
acceptance shall be deemed to have occurred constructively on the 7th
day after the contractor has completed the work or services in
accordance with the terms and conditions of the contract (see also
paragraph (b)(4) of this section). In the event that actual acceptance
occurs within the constructive acceptance period, the determination of
an interest penalty shall be based on the actual date of acceptance.
(2) The due date for progress payments shall be the 30th day after
Government approval of contractor estimates of work or services
accomplished. For the sole purpose of computing an interest penalty
that might be due the contractor, Government approval shall be deemed
to have occurred constructively on the 7th day after contractor
estimates have been received by the designated billing office (see also
paragraph (b)(4) of this section). In the event that actual approval
occurs within the constructive approval period, the determination of an
interest penalty shall be based on the actual date of approval.
(3) If the designated billing office fails to annotate the invoice
or payment request with the actual date of receipt at the time of
receipt, the payment due date shall be the 30th day after the date of
the contractor's invoice or payment request, provided a proper invoice
or payment request is received and there is no disagreement over
quantity, quality, or contractor compliance with contract requirements.
(4) The constructive acceptance and constructive approval
requirements described in paragraphs (b)(1) and (b)(2) of this section
are conditioned upon receipt of a proper payment request and no
disagreement over quantity, quality, contractor compliance with
contract requirements, or the requested progress payment amount. These
requirements do not compel Government officials to accept work or
services, approve contractor estimates, perform contract administration
functions, or make payment prior to fulfilling their responsibilities.
The contracting officer may specify a longer period for constructive
acceptance or constructive approval, if required to afford the
Government a reasonable opportunity to inspect and test the supplies
furnished or to evaluate the services performed.
(c) The due date for making payments on construction contracts
shall be as follows:
(1) The due date for making progress payments based on contracting
officer approval of the estimated amount and value of work or services
performed, including payments for reaching milestones in any project,
shall be 14 days after receipt of a proper payment request by the
designated billing office. If the designated billing office fails to
annotate the payment request with the actual date of receipt at the
time of receipt, the payment due date shall be the 14th day after the
date of the contractor's payment request, provided a proper payment
request is received and there is no disagreement over quantity,
quality, or contractor compliance with contract requirements. The
contracting officer may specify a longer period in the solicitation and
resulting contract if required to afford the Government a reasonable
opportunity to adequately inspect the work and to determine the
adequacy of the contractor's performance under the contract. The
contract file shall indicate the justification for extending the due
date beyond 14 days. The contracting officer or his representative
shall not approve progress payment requests unless the certification
and substantiation of amounts requested are provided as required by the
clause at 52.232-5, Payments under Fixed-Price Construction Contracts.
(2) The due date for payment of any amounts retained by the
contracting officer in accordance with the clause at 52.232-5, Payments
under Fixed-Price Construction Contracts, shall be as specified in the
contract or, if not specified, 30 days after approval by the
contracting officer for release to the contractor. This release of
retained amounts shall be based on the contracting officer's
determination that satisfactory progress has been made.
(3) The due date for final payments based on completion and
acceptance of all work (including any retained amounts), and payments
for partial deliveries that have been accepted by the Government (e.g.,
each separate building, public work, or other division of the contract
for which the price is stated separately in the contract) shall be as
follows:
(i) Either the 30th day after receipt by the designated billing
office of a proper invoice from the contractor, or the 30th day after
Government acceptance of the work or services completed by the
contractor, whichever is later. If the designated billing office fails
to annotate the invoice with the actual date of receipt at the time of
receipt, the invoice payment due date shall be the 30th day after the
date of the contractor's invoice, provided a proper invoice is received
and there is no disagreement over quantity, quality, or contractor
compliance with contract requirements.
(ii) On a final invoice where the payment amount is subject to
contract settlement action (e.g., release of contractor claims),
acceptance shall be deemed to have occurred on the effective date of
the contract settlement.
(4) For the sole purpose of computing an interest penalty that
might be due the contractor for payments described in paragraph
(c)(3)(i) of this section, Government acceptance or approval shall be
deemed to have occurred constructively on the 7th day after the
contractor has completed the work or services in accordance with the
terms and conditions of the contract (see also paragraph (c)(5) of this
section). In the event that actual acceptance occurs within the
constructive acceptance period, the determination of an interest
penalty shall be based on the actual date of acceptance.
(5) The constructive acceptance and constructive approval
requirements described in paragraph (c)(4) of this section are
conditioned upon receipt of a proper payment request and no
disagreement over quantity, quality, contractor compliance with
contract requirements, or the requested amount. These requirements do
not compel Government officials to accept work or services, approve
contractor estimates, perform contract administration functions, or
make payment prior to fulfilling their responsibilities. The
contracting officer may specify a longer period for constructive
acceptance or constructive approval in the solicitation and resulting
contract, if required to afford the Government a reasonable opportunity
to adequately inspect the work and to determine the adequacy of the
contractor's performance under the contract.
(6) Construction prime contracts contain special provisions
concerning prime contractor payments to subcontractors, along with
special prime contractor certification requirements. The Office of
Management and Budget has determined that these certifications are not
to be construed as final acceptance of the subcontractor's performance.
The certification in 52.232-5(c) implements this determination;
however, certificates are still acceptance if the contractor deletes
paragraph (c)(4) of 52.232-5.
(d) Due dates for payments of contractor invoices for meat, meat
food products, or fish; perishable agricultural commodities; and dairy
products, edible fats or oils, and food products prepared from edible
fats or oils are as follows:
(1) For meat or meat food products, as defined in section 2(a)(3)
of the Packers and Stockyard Act of 1921 (7 U.S.C. 182(3)), as further
defined in Public Law 98-181, including any edible fresh or frozen
poultry meat, any perishable poultry meat food product, fresh eggs, and
any perishable egg product, as close as possible to, but not later
than, the 7th day after product delivery.
(2) For fresh or frozen fish, as defined in section 204(3) of the
Fish and Seafood Promotion Act of 1986 (16 U.S.C. 4003(3)), will be as
close as possible to, but not later than, the 7th day after product
delivery.
(3) For perishable agricultural commodities, as defined in section
1(4) of the Perishable Agricultural Commodities Act of 1930 (7 U.S.C.
499a(4)), as close as possible to, but not later than, the 10th day
after product delivery, unless another date is specified in the
contract.
(4) For dairy products, as defined in section 111(e) of the Dairy
Production Stabilization Act of 1983 (7 U.S.C. 4502(e)), edible fats or
oils, and food products prepared from edible fats or oils, as close as
possible to, but not later than, the 10th day after the date on which a
proper invoice has been received. Liquid milk, cheese, certain
processed cheese products, butter, yogurt, ice cream, mayonnaise, salad
dressings, and other similar products, fall within this classification.
Nothing in the Act limits this classification to refrigerated products.
When questions arise about the proper classification of a specific
product, prevailing industry practices should be followed in specifying
a contract payment due date. The burden of proof that a classification
of a specific product is, in fact, prevailing industry practice is upon
the bidder making the representation.
(e) A proper invoice must include the items listed in paragraphs
(e)(1) through (e)(8) of this section. If the invoice does not comply
with these requirements, the contractor must be notified of the defect
within 7 days after receipt of the invoice at the designated billing
office (3 days on contracts for meat, meat food products, or fish; 5
days on contracts for perishable agricultural commodities, dairy
products, edible fats or oils, and food products prepared from edible
fats or oils). The reason that the invoice is not a proper invoice must
be specified. If such notice is not timely, then an adjusted due date
for the purpose of determining an interest penalty, if any, will be
established in accordance with 32.907-1(b).
(1) Name and address of the contractor.
(2) Invoice date. (Contractors are encouraged to date invoices as
close as possible to the date of mailing or transmission.)
(3) Contract number or other authorization for supplies delivered
or services performed (including order number and contract line item
number).
(4) Description, quantity, unit of measure, unit price, and
extended price of supplies delivered or services performed.
(5) Shipping and payment terms (e.g., shipment number and date of
shipment, Prompt Payment discount terms). Bill of lading number and
weight of shipment will be shown for shipments on Government bills of
lading.
(6) Name and address of contractor official to whom payment is to
be sent (must be the same as that in the contract or in a proper notice
of assignment).
(7) Name (where practicable), title, phone number, and mailing
address of person to be notified in event of a defective invoice.
(8) Any other information or documentation required by the contract
(such as evidence of shipment).
(9) While not required, contractors are strongly encouraged to
assign an identification number to each invoice.
(f) All invoice payments shall be supported by a receiving report
or any other Government documentation authorizing payment. The agency
receiving official should forward the receiving report or other
Government documentation to the designated payment office by the 5th
working day after Government acceptance or approval, unless other
arrangements have been made. This period of time does not extend the
due dates prescribed in 32.905. Acceptance should be completed as
expeditiously as possible. The receiving report or other Government
documentation authorizing payment shall, as a minimum, include the
following:
(1) Contract number or other authorization for supplies delivered
or services performed.
(2) Description of supplies delivered or services performed.
(3) Quantities of supplies received and accepted, if applicable.
(4) Date supplies delivered or services performed.
(5) Date supplies or services were accepted by the designated
Government official (or progress payment request was approved if being
made under the clause at 52.232-5, Payments under Fixed-Price
Construction Contracts, or the clause at 52.232-10, Payments under
Fixed-Price Architect-Engineer Contracts).
(6) Signature, or when permitted by agency regulations, electronic
equivalent, printed name, title, mailing address, and telephone number
of the designated Government official responsible for acceptance or
approval functions.
(7) If the contract provides for the use of Government certified
invoices in lieu of a separate receiving report, the Government
certified invoice must also contain the information described in
paragraphs (f)(1) through (f)(6) of this section.
(g) When a discount for prompt payment is to be taken, payment will
be made as close as possible to, but not later than, the end of the
discount period. Payment terms are specified in the clause at 52.232-8,
Discounts for Prompt Payment.
(h) The designated billing office shall immediately annotate each
invoice with the actual date it receives the invoice.
(i) The designated payment office shall annotate each invoice and
receiving report with the date a proper invoice or receiving report was
received by the designated payment office.
(j) Contractors may be encouraged, but cannot be required to submit
separate invoices for products with different payment due dates under
the same contract or order. When an invoice is received which contains
items with different payment periods (a mixed invoice), the payment
office shall comply with all contractual and statutory payment
provisions. In dealing with mixed invoices the payment office may,
subject to agency policy--
(1) Pay all items at the later of the due dates, provided
applicable interest penalties are also paid;
(2) Pay all items at the earlier of the due dates; or
(3) Split invoice payments, making payment by the due date
applicable to each payment class.
32.906 [Amended]
7. Section 32.906 is amended in the first sentence of paragraph (a)
by inserting the words ``or designee,'' after the word ``head,''.
8. Section 32.907-1 is amended in paragraphs (a)(1) and (a)(2) by
removing the words ``has been'' and inserting ``was'' in their place;
and by revising paragraphs (b), (d), and (g) to read as follows:
32.907-1 Late invoice payment.
* * * * *
(b) The interest penalty computation shall not include--
(1) The time taken by the Government to notify the contractor of a
defective invoice, unless it exceeds the periods prescribed in
32.905(e);
(2) The time taken by the contractor to correct the invoice. If the
designated billing office failed to notify the contractor of a
defective invoice within the periods prescribed in 32.905(e), the due
date on the corrected invoice will be adjusted by subtracting from such
date the number of days taken beyond the prescribed notification of
defects period. Any interest penalty owed the contractor will be based
on this adjusted due date; and
(3) The period between the date of an attempted electronic funds
transfer and the date the contractor furnishes correct electronic funds
transfer data; provided, the Government notifies the contractor of the
defective data within 7 days after the Government receives notice that
the transfer could not be completed because of defective data.
* * * * *
(d) The interest penalty shall be at the rate established by the
Secretary of the Treasury under section 12 of the Contract Disputes Act
of 1978 (41 U.S.C. 611) that is in effect on the day after the due
date, except where the interest penalty is prescribed by other
governmental authority (e.g., tariffs). The rate in effect on the day
after the due date shall remain fixed during the period for which an
interest penalty is calculated. This rate is referred to as the
``Renegotiation Board Interest Rate,'' and it is published in the
Federal Register semiannually on or about January 1 and July 1.
Information concerning this interest rate can be obtained from the
Department of the Treasury, Finance Management Branch, Washington, DC
20227, telephone (202) 208-1515. Interest calculations shall be based
upon a 360-day year. The interest penalty will accrue daily on the
invoice payment amount approved by the Government and be compounded in
30-day increments inclusive from the first day after the due date
through the payment date. That is, interest accrued at the end of any
30-day period will be added to the approved invoice payment amount and
be subject to interest penalties if not paid in the succeeding 30-day
period. The interest penalty amount, interest rate and the period for
which the interest penalty was computed, will be separately stated by
the designated payment office on the check, in accompanying remittance
advice, or for Electronic Funds Transfer (EFT) by an appropriate
electronic or other remittance advice. Adjustments will be made by the
designated payment office for errors in calculating interest penalties.
* * * * *
(g)(1) For contracts awarded on or after October 1, 1989, a penalty
amount (calculated in accordance with paragraph (g)(3) of this section)
shall be paid, in addition to the interest penalty amount, only if the
contractor--
(i) Is owed an interest penalty;
(ii) Is not paid the interest penalty within 10 days after the date
the invoice amount is paid; and
(iii) Makes a written demand to the designated payment office for
additional penalty payment in accordance with paragraph (g)(2) of this
section, postmarked not later than 40 days after the date the invoice
amount is paid.
(2)(i) Contractors shall support written demands for additional
penalty payments with the following data. No additional data shall be
required. Contractors shall--
(A) Specifically assert that late payment interest is due under a
specific invoice and request payment of all overdue late payment
interest penalty and such additional penalty as may be required;
(B) Attach a copy of the invoice on which the unpaid late payment
interest was due; and
(C) State that payment of the principal has been received,
including the date of receipt.
(ii) Demands must be postmarked on or before the 40th day after
payment was made, except that--
(A) If the postmark is illegible or nonexistent, the demand must
have been received and annotated with the date of receipt by the
designated payment office on or before the 40th day after payment was
made, or
(B) If the postmark is illegible or nonexistent and the designated
payment office fails to make the required annotation, the demand's
validity will be determined by the date the contractor has placed on
the demand; provided, such date is no later than the 40th day after
payment was made.
(3)(i) The additional penalty shall be equal to 100 percent of any
original late payment interest penalty that is due on or after January
22, 1990, except--
(A) For additional penalties due on or before January 22, 1992,
such penalties shall not exceed $2,500;
(B) After January 22, 1992, the additional penalty shall not exceed
$5,000;
(C) The additional penalty shall never be less than $25.
(ii) If the interest penalty ceases to accrue in accordance with
the limits stated in paragraphs (e) (1) and (2) of this section, the
amount of the additional penalty shall be calculated on the amount of
interest penalty that would have accrued in the absence of these
limits, but shall not exceed the limits specified in paragraph
(g)(3)(i) of this section.
(iii) For determining the maximum and minimum additional penalties,
the test shall be the interest penalty due on each separate payment
made for each separate contract. The maximum and minimum additional
penalty shall not be based upon individual invoices unless the invoices
are paid separately. Where payments are consolidated for disbursing
purposes, the maximum and minimum additional penalty determination
shall be made separately for each contract therein.
(iv) The additional penalty does not apply to payments regulated by
other Government regulations (for example, payments under utility
contracts subject to tariffs and regulation).
9. Section 32.910 is added to read as follows:
Sec. 32.910 Additional Construction Policies.
(a) The Payments under Fixed-Price Construction clause (52.232-5),
paragraph (d), and Prompt Payment for Construction Contracts clause
(52.232-27), subparagraph (e)(6), provide for the contractor to pay
interest on unearned amounts in certain circumstances. This interest
shall be recovered from subsequent payments to the contractor.
Therefore, no demand for payment shall normally be made. Contracting
officers shall--
(1) Compute the amount in accordance with the clause;
(2) Provide the contractor with a final decision; and
(3) Notify the payment office of the amount to be withheld.
(b) The payment office shall be responsible for making the
deduction of interest. Amounts collected in accordance with these
provisions shall revert to the Treasury of the United States.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
10. Section 52.232-5 is amended by revising paragraphs (b), (c),
and (d)(2); adding paragraph (j); and adding paragraph headings to
paragraphs (a), and (d) through (i) to read as follows:
52.232-5 Payments Under Fixed-Price Construction Contracts.
* * * * *
Payments Under Fixed-Price Construction Contracts (Date)
(a) Payment of price. * * *
(b) Progress payments. The Government shall make progress
payments monthly as the work proceeds, or at more frequent intervals
as determined by the Contracting Officer, on estimates of work
accomplished which meets the standards of quality established under
the contract, as approved by the Contracting Officer.
(1) The Contractor's request for progress payment shall include
the following substantiation:
(i) An itemization of the amounts requested related to the
various elements of work required by the contract covered by the
payment request.
(ii) A listing of the amount included for work performed by each
subcontractor under the contract.
(iii) A listing of the total amount of each subcontract under
the contract.
(iv) A listing of the amounts previously paid to each such
subcontractor under the contract.
(v) Additional supporting data in a form and detail required by
the Contracting Officer.
(2) In the preparation of estimates, the Contracting Officer may
authorize material delivered on the site and preparatory work done
to be taken into consideration. Material delivered to the Contractor
at locations other than the site may also be taken into
consideration if--
(i) Consideration is specifically authorized by this contract;
and
(ii) The Contractor furnishes satisfactory evidence that it has
acquired title to such material and that the material will be used
to perform this contract.
(c) Contractor certification. Along with each request for
progress payments, the Contractor shall furnish the following
certification, or payment shall not be made:
I hereby certify, to the best of my knowledge and belief, that--
(1) The amounts requested are only for performance in accordance
with the specifications, terms, and conditions of the contract;
(2) Payments to subcontractors and suppliers have been made from
previous payments received under the contract, and timely payments
will be made from the proceeds of the payment covered by this
certification, in accordance with subcontract agreements and the
requirements of chapter 39 of title 31, United States Code;
(3) This request for progress payments does not include any
amounts which the prime contractor intends to withhold or retain
from a subcontractor or supplier in accordance with the terms and
conditions of the subcontract; and
(4) This certification is not to be construed as final
acceptance of a subcontractor's performance.
----------------------------------------------------------------------
Name
----------------------------------------------------------------------
Title
----------------------------------------------------------------------
Date
(d) Refund of unearned amounts. * * *
* * * * *
(2) Be obligated to pay the Government an amount (computed by
the Contracting Officer in the manner provided in paragraph (j) of
this clause) equal to interest on the unearned amount from the 8th
day after the date of receipt of the unearned amount until--
* * * * *
(e) Retainage. * * *
(f) Title, liability, and reservation of rights. * * *
(g) Reimbursement for bond premiums. * * *
(h) Final payment. * * *
(i) Limitation because of undefinitized work. * * *
(j) Interest computation on unearned amounts. In accordance with
31 U.S.C. 3903(c)(1), the amount payable under paragraph (d)(2) of
this clause shall be--
(1) Computed at the rate of average bond equivalent rates of 91-
day Treasury bills auctioned at the most recent auction of such
bills prior to the date the Contractor receives the unearned amount;
and
(2) Deducted from the next available payment to the Contractor.
(End of clause)
11. Section 52.232-8 is amended by revising paragraph (b) of the
clause to read as follows:
52.232-8 Discounts for Prompt Payment.
* * * * *
Discounts for Prompt Payment (Date)
* * * * *
(b) In connection with any discount offered for prompt payment,
time shall be computed from the date of the invoice. If the
Contractor has not placed a date on the invoice, the due date shall
be 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. For the purpose of computing
the discount earned, payment shall be considered to have been made
on the date which appears on the payment check or the date on which
an electronic funds transfer is specified for settlement at a
Federal Reserve Bank. When the discount date falls on a Saturday,
Sunday, or legal holiday when Federal Government offices are closed
and Government business is not expected to be conducted, payment may
be made on the following business day.
(End of clause)
12. Section 52.232-25 is revised to read as follows:
52.232-25 Prompt Payment.
As prescribed in 32.908(c), insert the following clause:
(a) As authorized in 32.905(a)(1)(ii), the Contracting Officer
may modify the date in subdivision (a)(5)(i) of this clause to
specify a period longer than 7 days for constructive acceptance, if
required to afford the Government a reasonable opportunity to
inspect and test the supplies furnished or evaluate the services
performed, except in the case of a contract for the purchase of a
commercial item or service as defined in FAR 15.804-3(c)(3),
including a brand-name commercial item for authorized resale (e.g.,
commissary items).
(b) As prescribed in 32.906(a), and only as allowed under agency
policies and procedures, the Contracting Officer may insert in
paragraph (b) of the clause a period shorter than 30 days (but not
less than 7 days) for making contract financing payments.
Prompt Payment (Date)
Notwithstanding any other payment clause in this contract, the
Government will make invoice payments and contract financing
payments under the terms and conditions specified in this clause.
Payment shall be considered as being made on the day a check is
dated or the date of an electronic funds transfer. Definitions of
pertinent terms are set forth in Federal Acquisition Regulation
32.902. All days referred to in this clause are calendar days,
unless otherwise specified. (However, see paragraph (a)(4) of this
clause concerning payments due on Saturdays, Sundays, and legal
holidays.)
(a) Invoice payments--(1) Due date. (i) Except as indicated in
subparagraph (a)(2) and paragraph (c) of this clause, the due date
for making invoice payments by the designated payment office shall
be the later of the following two events:
(A) The 30th day after the designated billing office has
received a proper invoice from the Contractor (except as provided in
paragraph (a)(1)(ii) of this clause).
(B) The 30th day after Government acceptance of supplies
delivered or services performed by the Contractor. On a final
invoice where the payment amount is subject to contract settlement
actions, acceptance shall be deemed to have occurred on the
effective date of the contract settlement.
(ii) If the designated billing office fails to annotate the
invoice with the actual date of receipt, at the time of receipt, the
invoice payment due date shall be the 30th day after the date of the
Contractor's invoice; provided a proper invoice is received and
there is no disagreement over quantity, quality, or Contractor
compliance with contract requirements.
(2) Certain food products and other payments. (i) Due dates on
Contractor invoices for meat, meat food products, or fish;
perishable agricultural commodities; and dairy products, edible fats
or oils, and food products prepared from edible fats or oils, are--
(A) For meat or meat food products, as defined in section
2(a)(3) of the Packers and Stockyard Act of 1921 (7 U.S.C. 182(3)),
as further defined in Public Law 98-181, including any edible fresh
or frozen poultry meat, any perishable poultry meat food product,
fresh eggs, and any perishable egg product, as close as possible to,
but not later than, the 7th day after product delivery.
(B) For fresh or frozen fish, as defined in section 204(3) of
the Fish and Seafood Promotion Act of 1986 (16 U.S.C. 4003(3)), as
close as possible to, but not later than, the 7th day after product
delivery.
(C) For perishable agricultural commodities, as defined in
section 1(4) of the Perishable Agricultural Commodities Act of 1930
(7 U.S.C. 499a(44)), as close as possible to, but not later than,
the 10th day after product delivery, unless another date is
specified in the contract.
(D) For dairy products, as defined in section 111(e) of the
Dairy Production Stabilization Act of 1983 (7 U.S.C. 4502(e)),
edible fats or oils, and food products prepared from edible fats or
oils, as close as possible to, but not later than, the 10th day
after the date on which a proper invoice has been received. Liquid
milk, cheese, certain processed cheese products, butter, yogurt, ice
cream, mayonnaise, salad dressings, and other similar products, fall
within this classification. Nothing in the Act limits this
classification to refrigerated products. When questions arise about
the proper classification of a specific product, prevailing industry
practices will be followed in specifying a contract payment due
date. The burden of proof that a classification of a specific
product is, in fact, prevailing industry practice is upon the bidder
making the representation.
(ii) If the contract does not require submission of an invoice
for payment (e.g., periodic lease payments), the due date will be as
specified in the contract.
(3) Contractor's invoice. The Contractor shall prepare and
submit invoices to the designated billing office specified in the
contract. A proper invoice must include the items listed in
subdivisions (a)(3)(i) through (a)(3)(viii) of this clause. If the
invoice does not comply with these requirements, the Contractor will
be notified of the defect within 7 days after receipt of the invoice
at the designated billing office (3 days for meat, meat food
products, or fish; 5 days for perishable agricultural commodities,
edible fats or oils, and food products prepared from edible fats or
oils). Untimely notification will be taken into account in computing
any interest penalty owed the Contractor in the manner described in
subparagraph (a)(5) of the clause.
(i) Name and address of the Contractor.
(ii) Invoice date. (Contractors are encouraged to date invoices
as close as possible to the date of the mailing or transmission.)
(iii) Contract number of other authorization for supplies
delivered or services performed (including order number and contract
line item number).
(iv) Description, quantity, unit of measure, unit price, and
extended price of supplies delivered or services performed.
(v) Shipping and payment terms (e.g., shipment number and date
of shipment, prompt payment discount terms). Bill of lading number
and weight of shipment will be shown for shipments on Government
bills of lading.
(vi) Name and address of Contractor official to whom payment is
to be sent (must be the same as that in the contract or in a proper
notice of assignment).
(vii) Name (where practicable), title, phone number, and mailing
address of person to be notified in event of a defective invoice.
(viii) Any other information or documentation required by the
contract (such as evidence of shipment).
(ix) While not required, Contractors are strongly encouraged to
assign an identification number to each invoice.
(4) Interest penalty. An interest penalty shall be paid
automatically by the designated payment office, without request from
the Contractor, if payment is not made by the due date and the
conditions listed in subdivisions (a)(4)(i) through (a)(4)(iii) of
this clause are met, if applicable. However, when the due date falls
on a Saturday, Sunday, or legal holiday when Federal Government
offices are closed and Government business is not expected to be
conducted, payment may be made on the following business day without
incurring a late payment interest penalty.
(i) A proper invoice was received by the designated billing
office.
(ii) A receiving report or other Government documentation
authorizing payment was processed and there was no disagreement over
quantity, quality, or contractor compliance with any contract term
or condition.
(iii) In the case of a final invoice for any balance of funds
due the Contractor for supplies delivered or services performed, the
amount was not subject to further contract settlement actions
between the Government and the Contractor.
(5) Computing penalty amount. The interest penalty shall be at
the rate established by the Secretary of the Treasury under section
12 of the Contract Disputes Act of 1978 (41 U.S.C. 611) that is in
effect on the day after the due date, except where the interest
penalty is prescribed by other governmental authority (e.g.,
tariffs). This rate is referred to as the ``Renegotiation Board
Interest Rate,'' and it is published in the Federal Register
semiannually on or about January 1 and July 1. The interest penalty
shall accrue daily on the invoice payment amount approved by the
Government and be compounded in 30-day increments inclusive from the
first day after the due date through the payment date. That is,
interest accrued at the end of any 30-day period will be added to
the approved invoice payment amount and be subject to interest
penalties if not paid in the succeeding 30-day period. If the
designated billing office failed to notify the Contractor of a
defective invoice within the periods prescribed in subparagraph
(a)(3) of this clause, the due date on the corrected invoice will be
adjusted by subtracting from such date the number of days taken
beyond the prescribed notification of defects period. Any interest
penalty owed the Contractor will be based on this adjusted due date.
Adjustments will be made by the designated payment office for errors
in calculating interest penalties.
(i) For the sole purpose of computing an interest penalty that
might be due the Contractor, Government acceptance shall be deemed
to have occurred constructively on the 7th day (unless otherwise
specified in this contract) after the Contractor delivered the
supplies or performed the services in accordance with the terms and
conditions of the contract, unless there is a disagreement over
quantity, quality, or contractor compliance with a contract
provision. In the event that actual acceptance occurs within the
constructive acceptance period, the determination of an interest
penalty shall be based on the actual date of acceptance. The
constructive acceptance requirement does not, however, compel
Government officials to accept supplies or services, perform
contract administration functions, or make payment prior to
fulfilling their responsibilities.
(ii) The following periods of time will not be included in the
determination of an interest penalty:
(A) The period taken to notify the Contractor of defects in
invoices submitted to the Government, but this may not exceed 7 days
(3 days for meat, meat food products, or fish; 5 days for perishable
agricultural commodities, dairy products, edible fats or oils, and
food products prepared from edible fats or oils).
(B) The period between the defects notice and resubmission of
the corrected invoice by the Contractor.
(C) The period between the date of an attempted electronic funds
transfer and the date the Contractor furnishes correct electronic
funds transfer data; provided, the Government notifies the
Contractor of the defective data within 7 days after the Government
receives notice that the transfer could not be completed because of
defective data.
(iii) Interest penalties will not continue to accrue after the
filing of a claim for such penalties under the clause at 52.233-1,
Disputes, or for more than 1 year. Interest penalties of less than
$1 need not be paid.
(iv) Interest penalties are not required on payment delays due
to disagreement between the Government and Contractor over the
payment amount or other issues involving contract compliance or on
amounts temporarily withheld or retained in accordance with the
terms of the contract. Claims involving disputes, and any interest
that may be payable, will be resolved in accordance with the clause
at 52.233-1, Disputes.
(6) Prompt payment discounts. An interest penalty shall also be
paid automatically by the designated payment office, without request
from the Contractor, if a discount for prompt payment is taken
improperly. The interest penalty will be calculated as described in
subparagraph (a)(5) of this clause on the amount of discount taken
for the period beginning with the first day after the end of the
discount period through the date when the Contractor is paid.
(7) Additional interest penalty. (i) If this contract was
awarded on or after October 1, 1989, a penalty amount, calculated in
accordance with (a)(7)(iii) of this clause shall be paid in addition
to the interest penalty amount if the Contractor--
(A) Is owed an interest penalty;
(B) Is not paid the interest penalty within 10 days after the
date the invoice amount is paid; and
(C) Makes a written demand to the designated payment office for
additional penalty payment, in accordance with (a)(7)(ii) of this
clause, postmarked not later than 40 days after the invoice amount
is paid.
(ii)(A) Contractors shall support written demands for additional
penalty payments with the following data. No additional data shall
be required. Contractors shall--
(1) Specifically assert that late payment interest is due under
a specific invoice and request payment of all overdue late payment
interest penalty and such additional penalty as may be required;
(2) Attach a copy of the invoice on which the unpaid late
payment interest was due; and
(3) State that payment of the principal has been received,
including the date of receipt.
(B) Demands must be postmarked on or before the 40th day after
payment was made, except that--
(1) If the postmark is illegible or nonexistent, the demand must
have been received and annotated with the date of receipt by the
designated payment office on or before the 40th day after payment
was made, or
(2) If the postmark is illegible or nonexistent and the
designated payment office fails to make the required annotation, the
demand's validity will be determined by the date the Contractor has
placed on the demand; provided, such date is no later than the 40th
day after payment was made.
(iii)(A) The additional penalty shall be equal to 100 percent of
any original late payment interest penalty that is due on or after
January 22, 1990, except--
(1) For additional penalties due on or before January 22, 1992,
such penalties shall not exceed $2,500;
(2) After January 22, 1992, the additional penalty shall not
exceed $5,000;
(3) The additional penalty shall never be less than $25.
(B) If the interest penalty ceases to accrue in accordance with
the limits stated in subdivision (a)(5)(iii) of this clause, the
amount of the additional penalty shall be calculated on the amount
of interest penalty that would have accrued in the absence of these
limits, subject to the overall limits on the additional penalty
specified above.
(C) For determining the maximum and minimum additional
penalties, the test shall be the interest penalty due on each
separate payment made for each separate contract. The maximum and
minimum additional penalty shall not be based upon individual
invoices unless the invoices are paid separately. Where payments are
consolidated for disbursing purposes, the maximum and minimum
additional penalty determination shall be made separately for each
contract therein.
(D) The additional penalty does not apply to payments regulated
by other Government regulations (for example, payments under utility
contracts subject to tariffs and regulation).
(b) Contract financing payments--(1) Due dates for progress
payments. For contracts that provide for contract financing,
requests for payment shall be submitted to the designated billing
office as specified in this contract or as directed by the
Contracting Officer. Contract financing payments shall be made on
the (insert day as prescribed by agency head; if not prescribed,
insert 30th day) day after receipt of a proper contract financing
request by the designated billing office. In the event that an audit
or other review of a specific financing request is required to
ensure compliance with the terms and conditions of the contract, the
designated payment office is not compelled to make payment by the
due date specified.
(2) Due dates for other contract financing. For advance
payments, loans, or other arrangements that do not involve recurrent
submissions of contract financing requests, payment shall be made in
accordance with the corresponding contract terms or as directed by
the Contracting Officer.
(3) Interest penalty not applicable. Contract financing payments
shall not be assessed an interest penalty for payment delays.
(c) Fast payment procedure due dates. If this contract contains
the clause at 52.213-1, Fast Payment Procedure, payments will be
made within 15 days after the date of receipt of the invoice.
(End of clause)
13. Section 52.232-26 is revised to read as follows:
52.232-26 Prompt Payment for Fixed-Price Architect-Engineer Contracts.
As prescribed in 32.908(a), insert the following clause:
(a) As authorized in 32.905(b)(4), the Contracting Officer may
modify the date in subdivision (a)(4)(i) of this clause to specify a
period longer than 7 days for constructive acceptance or
constructive approval, if required, to afford the Government a
practicable opportunity to inspect and test the supplies furnished
or evaluate the services performed.
(b) If applicable, as authorized in 32.906(a) and only as
allowed under agency policies and procedures, the Contracting
Officer may insert in paragraph (b) of this clause a period shorter
than 30 days (but not less than 7 days) for making contract
financing payments.
Prompt Payment for Fixed-Price Architect-Engineer Contracts (Date)
Notwithstanding any other payment terms in this contract, the
Government will make invoice payments and contract financing
payments under the terms and conditions specified in this clause.
Payment shall be considered as being made on the day a check is
dated or the date of an electronic funds transfer. Definitions of
pertinent terms are set forth in Federal Acquisition Regulation
32.902. All days referred to in this clause are calendar days,
unless otherwise specified. (However, see paragraph (a)(3) of this
clause concerning payments due on Saturdays, Sundays, and legal
holidays.)
(a) Invoice payments--(1) Due date. The due date for making
invoice payments shall be--
(i) For work or services completed by the Contractor, the later
of the following two events:
(A) The 30th day after the designated billing office has
received a proper invoice from the Contractor (except as provided in
subdivision (a)(1)(iii) of this clause).
(B) The 30th day after Government acceptance of the work or
services completed by the Contractor. On a final invoice where the
payment amount is subject to contract settlement actions (e.g.,
release of claims), acceptance shall be deemed to have occurred on
the effective date of the contract settlement.
(ii) The due date for progress payments shall be the 30th day
after Government approval of Contractor estimates of work or
services accomplished.
(iii) If the designated billing office fails to annotate the
invoice or payment request with the actual date of receipt, at the
time of receipt, the payment due date shall be the 30th day after
the date of the Contractor's invoice or payment request, provided a
proper invoice or payment request is received and there is no
disagreement over quantity, quality, or Contractor compliance with
contract requirements.
(2) Contractor's invoice. The Contractor shall prepare and
submit invoices to the designated billing office specified in the
contract. A proper invoice must include the items listed in
subdivisions (a)(2)(i) through (a)(2)(viii) of this clause. If the
invoice does not comply with these requirements, the Contractor will
be notified of the defect within 7 days after receipt of the invoice
at the designated billing office. Untimely notification will be
taken into account in computing any interest penalty owed the
Contractor in the manner described in subparagraph (a)(4) of this
clause.
(i) Name and address of the Contractor.
(ii) Invoice date. (Contractors are encouraged to date invoices
as close as possible to the date of mailing or transmission.)
(iii) Contract number or other authorization for work or
services performed (including order number and contract line item
number).
(iv) Description of work or services performed.
(v) Delivery and payment terms (e.g., prompt payment discount
terms).
(vi) Name and address of Contractor official to whom payment is
to be sent (must be the same as that in the contract or in a proper
notice of assignment).
(vii) Name (where practicable), title, phone number, and mailing
address of person to be notified in event of a defective invoice.
(viii) Any other information or documentation required by the
contract.
(ix) While not required, Contractors are strongly encouraged to
assign an identification number to each invoice.
(3) Interest penalty. An interest penalty shall be paid
automatically by the designated payment office, without request from
the Contractor, if payment is not made by the due date and the
conditions listed in subdivisions (a)(3)(i) through (a)(3)(iii) of
this clause are met, if applicable. However, when the due date falls
on a Saturday, Sunday, or legal holiday when Federal Government
offices are closed and Government business is not expected to be
conducted, payment may be made on the following business day without
incurring a late payment interest penalty.
(i) A proper invoice was received by the designated billing
office.
(ii) A receiving report or other Government documentation
authorizing payment was processed and there was no disagreement over
quantity, quality, Contractor compliance with any contract term or
condition, or requested progress payment amount.
(iii) In the case of a final invoice for any balance of funds
due the Contractor for work or services performed, the amount was
not subject to further contract settlement actions between the
Government and the Contractor.
(4) Computing penalty amount. The interest penalty shall be at
the rate established by the Secretary of the Treasury under section
12 of the Contract Disputes Act of 1978 (41 U.S.C. 611) that is in
effect on the day after the due date, except where the interest
penalty is prescribed by other governmental authority (e.g.,
tariffs). This rate is referred to as the ``Renegotiation Board
Interest Rate,'' and it is published in the Federal Register
semiannually on or about January 1 and July 1. The interest penalty
shall accrue daily on the invoice payment amount approved by the
Government and be compounded in 30-day increments inclusive from the
first day after the due date through the payment date. That is,
interest accrued at the end of any 30-day period will be added to
the approved invoice payment amount and be subject to interest
penalties if not paid in the succeeding 30-day period. If the
designated billing office failed to notify the Contractor of a
defective invoice within the periods prescribed in subparagraph
(a)(2) of this clause, the due date on the corrected invoice will be
adjusted by subtracting from such date the number of days taken
beyond the prescribed notification of defects period. Any interest
penalty owed the Contractor will be based on this adjusted due date.
Adjustments will be made by the designated payment office for errors
in calculating interest penalties.
(i) For the sole purpose of computing an interest penalty that
might be due the Contractor, Government acceptance or approval shall
be deemed to have occurred constructively as shown in subdivisions
(a)(4)(i) (A) and (B) of this clause. In the event that actual
acceptance or approval occurs within the constructive acceptance or
approval period, the determination of an interest penalty shall be
based on the actual date of acceptance or approval. Constructive
acceptance or constructive approval requirements do not apply if
there is a disagreement over quantity, quality, Contractor
compliance with a contract provision, or requested progress payment
amounts. These requirements also do not compel Government officials
to accept work or services, approve Contractor estimates, perform
contract administration functions, or make payment prior to
fulfilling their responsibilities.
(A) For work or services completed by the Contractor, Government
acceptance shall be deemed to have occurred constructively on the
7th day after the Contractor has completed the work or services in
accordance with the terms and conditions of the contract.
(B) For progress payments, Government approval shall be deemed
to have occurred on the 7th day after Contractor estimates have been
received by the designated billing office.
(ii) The following periods of time will not be included in the
determination of an interest penalty:
(A) The period taken to notify the Contractor of defects in
invoices submitted to the Government, but this may not exceed 7
days.
(B) The period between the defects notice and resubmission of
the corrected invoice by the Contractor.
(C) The period between the date of an attempted electronic funds
transfer and the date the Contractor furnishes correct electronic
funds transfer data; provided, the Government notifies the
Contractor of the defective data within 7 days after the Government
receives notice that the transfer could not be completed because of
defective data.
(iii) Interest penalties will not continue to accrue after the
filing of a claim for such penalties under the clause at 52.233-1,
Disputes, or for more than 1 year. Interest penalties of less than
$1 need not be paid.
(iv) Interest penalties are not required on payment delays due
to disagreement between the Government and Contractor over the
payment amount or other issues involving contract compliance, or on
amounts temporarily withheld or retained in accordance with the
terms of the contract. Claims involving disputes, and any interest
that may be payable will be resolved in accordance with the clause
at 52.233-1, Disputes.
(5) Prompt payment discounts. An interest penalty shall also be
paid automatically by the designated payment office, without request
from the Contractor, if a discount for prompt payment is taken
improperly. The interest penalty will be calculated on the amount of
discount taken for the period beginning with the first day after the
end of the discount period through the date when the Contractor is
paid.
(6) Additional interest penalty. (i) If this contract was
awarded on or after October 1, 1989, a penalty amount, calculated in
accordance with subdivision (a)(6)(iii) of this clause shall be paid
in addition to the interest penalty amount if the Contractor--
(A) Is owned an interest penalty;
(B) Is not paid the interest penalty within 10 days after the
date the invoice amount is paid; and
(C) Makes a written demand to the designated payment office for
additional penalty payment, in accordance with subdivision
(a)(6)(ii) of this clause, postmarked not later than 40 days after
the invoice amount is paid.
(ii)(A) Contractors shall support written demands for additional
penalty payments with the following data. No additional data shall
be required. Contractors shall--
(1) Specifically assert that late payment interest is due under
a specific invoice and request payment of all overdue late payment
interest penalty and such additional penalty as may be required;
(2) Attach a copy of the invoice on which the unpaid late
payment interest was due; and
(3) State that payment of the principal has been received,
including the date of receipt.
(B) Demands must be postmarked on or before the 40th day after
payment was made, except that--
(1) If the postmark is illegible or nonexistent, the demand must
have been received and annotated with the date of receipt by the
designated billing office on or before the 40th day after payment
was made, or
(2) If the postmark is illegible or nonexistent and the
designated billing office fails to make the required annotation, the
demand's validity will be determined by the date the Contractor has
placed on the demand; provided, such date is no later than the 40th
day after payment was made.
(iii)(A) The additional penalty shall be equal to 100 percent of
any original late payment interest penalty that is due on or after
January 22, 1990, except:
(1) For additional penalties due on or before January 22, 1992,
such penalties shall not exceed $2,500.
(2) After January 22, 1992, the additional penalty shall not
exceed $5,000.
(3) The additional penalty shall never be less than $25.
(B) If the interest penalty ceases to accrue in accordance with
the limits stated in subdivision (a)(4)(iii) of this clause, the
amount of the additional penalty shall be calculated on the amount
of interest penalty that would have accrued in the absence of these
limits, subject to the overall limits on the additional penalty
specified above.
(C) For determining the maximum and minimum additional
penalties, the test shall be the interest penalty due on each
separate payment made for each separate contract. The maximum and
minimum additional penalty shall not be based upon individual
invoices unless the invoices are paid separately. Where payments are
consolidated for disbursing purposes, the maximum and minimum
additional penalty determination shall be made separately for each
contract therein.
(D) The additional penalty does not apply to payments regulated
by other Government regulations (for example, payments under utility
contracts subject to tariffs and regulation).
(b) Contract financing payments--(1) Due dates for progress
payments. If this contract provides for contract financing, requests
for payment shall be submitted to the designated billing office as
specified in this contract or as directed by the Contracting
Officer. Contract financing payments shall be made on the (insert
day as prescribed by agency head; if not prescribed, insert 30th
day) day after receipt of a proper contract financing request by the
designated billing office. In the event that an audit or other
review of a specific financing request is required to ensure
compliance with the terms and conditions of the contract, the
designated payment office is not compelled to make payment by the
due date specified.
(2) Due dates for other contract financing. For advance
payments, loans, or other arrangements that do not involve recurrent
submissions of contract financing requests, payment shall be made in
accordance with the corresponding contract terms or as directed by
the Contracting Officer.
(3) Interest penalty not applicable. Contract financing payments
shall not be assessed an interest penalty for payment delays.
(End of clause)
14. Section 52.232-27 is revised to read as follows:
52.232-27 Prompt Payment for Construction Contracts.
As prescribed in 32.908(b), insert the following clause:
(a) As authorized in 32.905(c)(1), the Contracting Officer may
modify the date in subdivision (a)(1)(i)(A) of the clause to specify
a period longer than 14 days if required to afford the Government a
reasonable opportunity to adequately inspect the work and to
determine the adequacy of the Contractor's performance under the
contract.
(b) As authorized in 32.905(c)(5), the Contracting Officer may
modify the date in subdivision (a)(4)(i) of the clause to specify a
period longer than 7 days for constructive acceptance or
constructive approval if required to afford the Government a
reasonable opportunity to inspect and test the supplies furnished or
evaluate the services performed.
(c) If applicable, as authorized in 32.906(a) and only as
allowed under agency policies and procedures, the Contracting
Officer may insert in paragraph (b) of the clause a period shorter
than 30 days (but not less than 7 days) for making contract
financing payments.
Prompt Payment for Construction Contracts (Date)
Notwithstanding any other payment terms in this contract, the
Government will make invoice payments and contract financing
payments under the terms and conditions specified in this clause.
Payment shall be considered as being made on the day a check is
dated or the date of an electronic funds transfer. Definitions of
pertinent terms are set forth in Federal Acquisition Regulation
32.902. All days referred to in this clause are calendar days,
unless otherwise specified. (However, see paragraph (a)(3)
concerning payments due on Saturdays, Sundays, and legal holidays.)
(a) Invoice payments--(1) Types of invoice payments. For
purposes of this clause, there are several types of invoice payments
which may occur under this contract, as follows:
(i) Progress payments, if provided for elsewhere in this
contract, based on Contracting Officer approval of the estimated
amount and value of work or services performed, including payments
for reaching milestones in any project:
(A) The due date for making such payments shall be 14 days after
receipt of the payment request by the designated billing office. If
the designated billing office fails to annotate the payment request
with the actual date of receipt, at the time of receipt, the payment
due date shall be the 14th day after the date of the Contractor's
payment request, provided a proper payment request is received and
there is no disagreement over quantity, quality, or Contractor
compliance with contract requirements.
(B) The due date for payment of any amounts retained by the
Contracting Officer in accordance with the clause at 52.232-5,
Payments Under Fixed-Price Construction Contracts, shall be as
specified in the contract or, if not specified, 30 days after
approval for release to the Contractor by the Contracting Officer.
(ii) Final payments based on completion and acceptance of all
work and presentation of release of all claims against the
Government arising by virtue of the contract, and payments for
partial deliveries that have been accepted by the Government (e.g.,
each separate building, public work, or other division of the
contract for which the price is stated separately in the contract):
(A) The due date for making such payments shall be either the
30th day after receipt by the designated billing office of a proper
invoice from the Contractor, or the 30th day after Government
acceptance of the work or services completed by the Contractor,
whichever is later. If the designated billing office fails to
annotate the invoice with the date of actual receipt, at the time of
receipt, the invoice payment due date shall be the 30th day after
the date of the Contractor's invoice, provided a proper invoice is
received and there is no disagreement over quantity, quality, or
Contractor compliance with contract requirements.
(B) On a final invoice where the payment amount is subject to
contract settlement actions (e.g., release of claims), acceptance
shall be deemed to have occurred on the effective date of the
contract settlement.
(2) Contractor's invoice. The Contractor shall prepare and
submit invoices to the designated billing office specified in the
contract. A proper invoice must include the items listed in
subdivisions (a)(2)(i) through (a)(2)(ix) of this clause. If the
invoice does not comply with these requirements, the Contractor will
be notified of the defect within 7 days after receipt of the invoice
at the designated billing office. Untimely notification will be
taken into account in computing any interest penalty owed the
Contractor in the manner described in subparagraph (a)(4) of this
clause:
(i) Name and address of the Contractor.
(ii) Invoice date. (Contractors are encouraged to date invoices
as close as possible to the date of mailing or transmission.)
(iii) Contract number or other authorization for work or
services performed (including order number and contract line item
number).
(iv) Description of work or services performed.
(v) Delivery and payment terms (e.g., prompt payment discount
terms).
(vi) Name and address of contractor official to whom payment is
to be sent (must be the same as that in the contract or in a proper
notice of assignment).
(vii) Name (where practicable), title, phone number, and mailing
address of person to be notified in event of a defective invoice.
(viii) For payments described in subdivision (a)(1)(i) of this
clause, substantiation of the amounts requested and certification in
accordance with the requirements of the clause at 52.232-5, Payments
under Fixed-Price Construction Contracts.
(ix) Any other information or documentation required by the
contract.
(x) While not required, Contractors are strongly encouraged to
assign an identification number to each invoice.
(3) Interest penalty. An interest penalty shall be paid
automatically by the designated payment office, without request from
the Contractor, if payment is not made by the due date and the
conditions listed in subdivisions (a)(3)(i) through (a)(3)(iii) of
this clause are met, if applicable. However, when the due date falls
on a Saturday, Sunday, or legal holiday when Federal Government
offices are closed and Government business is not expected to be
conducted, payment may be made on the following business day without
incurring a late payment interest penalty.
(i) A proper invoice was received by the designated billing
office.
(ii) A receiving report or other Government documentation
authorizing payment was processed and there was no disagreement over
quantity, quality, Contractor compliance with any contract term or
condition, or requested progress payment amount.
(iii) In the case of a final invoice for any balance of funds
due the Contractor for work or services performed, the amount was
not subject to further contract settlement actions between the
Government and the Contractor.
(4) Computing penalty amount. The interest penalty shall be at
the rate established by the Secretary of the Treasury under section
12 of the Contract Disputes Act of 1978 (41 U.S.C. 611) that is in
effect on the day after the due date, except where the interest
penalty is prescribed by other governmental authority (e.g.,
tariffs). This rate is referred to as the ``Renegotiation Board
Interest Rate,'' and it is published in the Federal Register
semiannually on or about January 1 and July 1. The interest penalty
shall accrue daily on the invoice payment amount approved by the
Government and be compounded in 30-day increments inclusive from the
first day after the due date through the payment date. That is,
interest accrued at the end of any 30-day period will be added to
the approved invoice payment amount and be subject to interest
penalties if not paid in the succeeding 30-day period. If the
designated billing office failed to notify the Contractor of a
defective invoice within the periods prescribed in subparagraph
(a)(2) of this clause, the due date on the corrected invoice will be
adjusted by subtracting from such date the number of days taken
beyond the prescribed notification of defects period. Any interest
penalty owed the Contractor will be based on this adjusted due date.
Adjustments will be made by the designated payment office for errors
in calculating interest penalties.
(i) For the sole purpose of computing an interest penalty that
might be due the Contractor for payments described in subdivision
(a)(1)(ii) of this clause, Government acceptance or approval shall
be deemed to have occurred constructively on the 7th day after the
Contractor has completed the work or services in accordance with the
terms and conditions of the contract. In the event that actual
acceptance or approval occurs within the constructive acceptance or
approval period, the determination of an interest penalty shall be
based on the actual date of acceptance or approval. Constructive
acceptance or constructive approval requirements do not apply if
there is a disagreement over quantity, quality, or Contractor
compliance with a contract provision. These requirements also do not
compel Government officials to accept work or services, approve
Contractor estimates, perform contract administration functions, or
make payment prior to fulfilling their responsibilities.
(ii) The following periods of time will not be included in the
determination of an interest penalty:
(A) The period taken to notify the Contractor of defects in
invoices submitted to the Government, but this may not exceed 7
days.
(B) The period between the defects notice and resubmission of
the corrected invoice by the Contractor.
(C) The period between the date of an attempted electronic funds
transfer and the date the Contractor furnishes correct electronic
funds transfer data; provided, the Government notifies the
Contractor of the defective data within 7 days after the Government
receives notice that the transfer could not be completed because of
defective data.
(iii) Interest penalties will not continue to accrue after the
filing of a claim for such penalties under the clause at 52.233-1,
Disputes, or for more than 1 year. Interest penalties of less than
$1 need not be paid.
(iv) Interest penalties are not required on payment delays due
to disagreement between the Government and Contractor over the
payment amount or other issues involving contract compliance, or on
amounts temporarily withheld or retained in accordance with the
terms of the contract. Claims involving disputes, and any interest
that may be payable, will be resolved in accordance with the clause
at 52.233-1, Disputes.
(5) Prompt payment discounts. An interest penalty shall also be
paid automatically by the designated payment office, without request
from the Contractor, if a discount for prompt payment is taken
improperly. The interest penalty will be calculated on the amount of
discount taken for the period beginning with the first day after the
end of the discount period through the date when the Contractor is
paid.
(6) Additional interest penalty. (i) If this contract was
awarded on or after October 1, 1989, a penalty amount, calculated in
accordance with (a)(6)(iii) of this clause shall be paid in addition
to the interest penalty amount if the Contractor--
(A) Is owed an interest penalty;
(B) Is not paid the interest penalty within 10 days after the
date the invoice amount is paid; and
(C) Makes a written demand to the designated payment office for
additional penalty payment, in accordance with (a)(6)(ii) of this
clause, postmarked not later than 40 days after the invoice amount
is paid.
(ii) (A) Contractors shall support written demands for
additional penalty payments with the following data. No additional
data shall be required. Contractors shall--
(1) Specifically assert that late payment interest is due under
a specific invoice and request payment of all overdue late payment
interest penalty and such additional penalty as may be required;
(2) Attach a copy of the invoice on which the unpaid late
payment interest was due; and
(3) State that payment of the principal has been received,
including the date of receipt.
(B) Demands must be postmarked on or before the 40th day after
payment was made, except that--
(1) If the postmark is illegible or nonexistent, the demand must
have been received and annotated with the date of receipt by the
designated billing office on or before the 40th day after payment
was made, or
(2) If the postmark is illegible or nonexistent and the
designated billing office fails to make the required annotation, the
demand's validity will be determined by the date the Contractor has
placed on the demand; provided, such date is no later than the 40th
day after payment was made.
(iii)(A) The additional penalty shall be equal to 100 percent of
any original late payment interest penalty that is due on or after
January 22, 1990, except--
(1) For additional penalties due on or before January 22, 1992,
such penalties shall not exceed $2,500.
(2) After January 22, 1992, the additional penalty shall not
exceed $5,000.
(3) The additional penalty shall never be less than $25.
(B) If the interest penalty ceases to accrue in accordance with
the limits stated in subdivision (a)(4)(iii) of this clause, the
amount of the additional penalty shall be calculated on the amount
of interest penalty that would have accrued in the absence of these
limits, subject to the overall limits on the additional penalty
specified above.
(C) For determining the maximum and minimum additional
penalties, the test shall be the interest penalty due on each
separate payment made for each separate contract. The maximum and
minimum additional penalty shall not be based upon individual
invoices unless the invoices are paid separately. Where payments are
consolidated for disbursing purposes, the maximum and minimum
additional penalty determination shall be made separately for each
contract therein.
(D) The additional penalty does not apply to payments regulated
by other Government regulations (for example, payments under utility
contracts subject to tariffs and regulation).
(b) Contract financing payments--(1) Due dates for progress
payments. If this contract provides for contract financing, requests
for payment shall be submitted to the designated billing office as
specified in this contract or as directed by the Contracting
Officer. Contract financing payments shall be made on the (insert
day as prescribed by agency head; if not prescribed, insert 30th
day) day after receipt of a proper contract financing request by the
designated billing office. In the event that an audit or other
review of a specific financing request is required to ensure
compliance with the terms and conditions of the contract, the
designated payment office is not compelled to make payment by the
due date specified.
(2) Due dates for other contract financing. For advance
payments, loans, or other arrangements that do not involve recurrent
submissions of contract financing requests, payment shall be made in
accordance with the corresponding contract terms or as directed by
the Contracting Officer.
(3) Interest penalty not applicable. Contract financing payments
shall not be assessed an interest penalty for payment delays.
(c) Subcontract clauses requirements. The Contractor shall
include in each subcontract for property or services (including a
material supplier) for the purpose of performing this contract the
following:
(1) Prompt payment for subcontractors. A payment clause which
obligates the Contractor to pay the subcontractor for satisfactory
performance under its subcontract not later than 7 days from receipt
of payment out of such amounts as are paid to the Contractor under
this contract.
(2) Interest for subcontractors. An interest penalty clause
which obligates the Contractor to pay to the subcontractor an
interest penalty for each payment not made in accordance with the
payment clause--
(i) For the period beginning on the day after the required
payment date and ending on the date on which payment of the amount
due is made; and
(ii) Computed at the rate of interest established by the
Secretary of the Treasury, and published in the Federal Register,
for interest payments under section 12 of the Contract Disputes Act
of 1978 (41 U.S.C. 611) in effect at the time the Contractor accrues
the obligation to pay an interest penalty.
(3) Subcontractor clauses flowdown. A clause requiring each
subcontractor to include a payment clause and an interest penalty
clause conforming to the standards set forth in subparagraphs (c)(1)
and (c)(2) of this clause in each of its subcontracts, and to
require each of its subcontractors to include such clauses in their
subcontracts with each lower-tier subcontractor or supplier.
(d) Subcontract clauses interpretation. The clauses required by
paragraph (c) of this clause shall not be construed to impair the
right of the Contractor or a subcontractor at any tier to negotiate,
and to include in their subcontract, provisions which--
(1) Retainage permitted. Permit the Contractor or a
subcontractor to retain (without cause) a specified percentage of
each progress payment otherwise due to a subcontractor for
satisfactory performance under the subcontract without incurring any
obligation to pay a late payment interest penalty, in accordance
with terms and conditions agreed to by the parties to the
subcontract, giving such recognition as the parties deem appropriate
to the ability of a subcontractor to furnish a performance bond and
a payment bond;
(2) Withholding permitted. Permit the Contractor or
subcontractor to make a determination that part or all of the
subcontractor's request for payment may be withheld in accordance
with the subcontract agreement; and
(3) Withholding requirements. Permit such withholding without
incurring any obligation to pay a late payment penalty if--
(i) A notice conforming to the standards of paragraph (g) of
this clause has been previously furnished to the subcontractor; and
(ii) A copy of any notice issued by a Contractor pursuant to
subdivision (d)(3)(i) of this clause has been furnished to the
Contracting Officer.
(e) Subcontractor withholding procedures. If a Contractor, after
making a request for payment to the Government but before making a
payment to a subcontractor for the subcontractor's performance
covered by the payment request, discovers that all or a portion of
the payment otherwise due such subcontractor is subject to
withholding from the subcontractor in accordance with the
subcontract agreement, the Contractor shall--
(1) Subcontractor notice. Furnish to the subcontractor a notice
conforming to the standards of paragraph (g) of this clause as soon
as practicable upon ascertaining the cause giving rise to a
withholding, but prior to the due date for subcontractor payment;
(2) Contracting Officer notice. Furnish to the Contracting
Officer, as soon as practicable, a copy of the notice furnished to
the subcontractor pursuant to subparagraph (e)(1) of this clause;
(3) Subcontractor progress payment reduction. Reduce the
subcontractor's progress payment by an amount not to exceed the
amount specified in the notice of withholding furnished under
subparagraph (e)(1) of this clause;
(4) Subsequent subcontractor payment. Pay the subcontractor as
soon as practicable after the correction of the identified
subcontract performance deficiency, and--
(i) Make such payment within--
(A) Seven days after correction of the identified subcontract
performance deficiency (unless the funds therefor must be recovered
from the Government because of a reduction under subdivision
(e)(5)(i) of this clause); or
(B) Seven days after the Contractor recovers such funds from the
Government; or
(ii) Incur an obligation to pay a late payment interest penalty
computed at the rate of interest established by the Secretary of the
Treasury, and published in the Federal Register, for interest
payments under section 12 of the Contract Disputes Act of 1978 (41
U.S.C. 611) in effect at the time the Contractor accrues the
obligation to pay an interest penalty;
(5) Notice to Contracting Officer. Notify the Contracting
Officer upon--
(i) Reduction of the amount of any subsequent certified
application for payment; or
(ii) Payment to the subcontractor of any withheld amounts of a
progress payment, specifying--
(A) The amounts withheld under subparagraph (e)(1) of this
clause; and
(B) The dates that such withholding began and ended.
(6) Interest to Government. Be obligated to pay to the
Government an amount equal to interest on the withheld payments
(computed in the manner provided in 31 U.S.C. 3903(c)(1), from the
8th day after receipt of the withheld amounts from the Government
until--
(i) The day the identified subcontractor performance deficiency
is corrected; or
(ii) The date that any subsequent payment is reduced under
subdivision (e)(5)(i) of this clause.
(f) Third party deficiency reports--(1) Withholding from
subcontractor. If a Contractor, after making payment to a first-tier
subcontractor, receives from a supplier or subcontractor of the
first-tier subcontractor (hereafter referred to as a ``second-tier
subcontractor'') a written notice in accordance with section 2 of
the Act of August 24, 1935 (40 U.S.C. 270b, Miller Act), asserting a
deficiency in such first-tier subcontractor's performance under the
contract for which the Contractor may be ultimately liable, and the
Contractor determines that all or a portion of future payments
otherwise due such first-tier subcontractor is subject to
withholding in accordance with the subcontract agreement, the
Contractor may, without incurring an obligation to pay an interest
penalty under subparagraph (e)(6) of this clause--
(i) Furnish to the first-tier subcontractor a notice conforming
to the standards of paragraph (g) of this clause as soon as
practicable upon making such determination; and
(ii) Withhold from the first-tier subcontractor's next available
progress payment or payments an amount not to exceed the amount
specified in the notice of withholding furnished under subdivision
(f)(1)(i) of this clause.
(2) Subsequent payment or interest charge. As soon as
practicable, but not later than 7 days after receipt of satisfactory
written notification that the identified subcontract performance
deficiency has been corrected, the Contractor shall--
(i) Pay the amount withheld under subdivision (f)(1)(ii) of this
clause to such first-tier subcontractor, or
(ii) Incur an obligation to pay a late payment interest penalty
to such first-tier subcontractor computed at the rate of interest
established by the Secretary of the Treasury, and published in the
Federal Register, for interest payments under section 12 of the
Contracts Disputes Act of 1978 (41 U.S.C. 611) in effect at the time
the Contractor accrues the obligation to pay an interest penalty.
(g) Written notice of subcontractor withholding. A written
notice of any withholding shall be issued to a subcontractor (with a
copy to the Contracting Officer of any such notice issued by the
Contractor), specifying--
(1) The amount to be withheld;
(2) The specific causes for the withholding under the terms of
the subcontract; and
(3) The remedial actions to be taken by the subcontractor in
order to receive payment of the amounts withheld.
(h) Subcontractor payment entitlement. The Contractor may not
request payment from the Government of any amount withheld or
retained in accordance with paragraph (d) of this clause until such
time as the Contractor has determined and certified to the
Contracting Officer that the subcontractor is entitled to the
payment of such amount.
(i) Prime-subcontractor disputes. A dispute between the
Contractor and subcontractor relating to the amount or entitlement
of a subcontractor to a payment or a late payment interest penalty
under a clause included in the subcontract pursuant to paragraph (c)
of this clause does not constitute a dispute to which the United
States is a party. The United States may not be interpleaded in any
judicial or administrative proceeding involving such a dispute.
(j) Preservation of prime-subcontractor rights. Except as
provided in paragraph (i) of this clause, this clause shall not
limit or impair any contractual, administrative, or judicial
remedies otherwise available to the Contractor or a subcontractor in
the event of a dispute involving late payment or nonpayment by the
Contractor or deficient subcontract performance or nonperformance by
a subcontractor.
(k) Non-recourse for prime contractor interest penalty. The
Contractor's obligation to pay an interest penalty to a
subcontractor pursuant to the clauses included in a subcontract
under paragraph (c) of this clause shall not be construed to be an
obligation of the United States for such interest penalty. A cost
reimbursement claim may not include any amount for reimbursement of
such interest penalty.
(End of clause)
15. Section 52.232-28 is revised to read as follows:
52.232-28 Electronic Funds Transfer Payment Methods.
As prescribed in 32.908(d), insert the following clause:
Electronic Funds Transfer Payment Methods (Date)
Payments under this contract will be made by the Government
either by check or electronic funds transfer (through the Treasury
Fedline Payment System (FEDLINE) or the Automated Clearing House
(ACH), at the option of the Government. No later than 14 days before
an invoice or contract financing request is submitted, the
Contractor shall designate a financial institution for receipt of
electronic funds transfer payments, and shall submit this
designation to the Contracting Officer or other Government official,
as directed.
(a) FEDLINE information. For payment through FEDLINE, the
Contractor shall provide the following information:
(1) Name, address, and telegraphic abbreviation of the financial
institution receiving payment.
(2) The American Bankers Association 9-digit identifying number
for wire transfer of the financing institution receiving payment if
the institution has access to the Federal Reserve Communications
System.
(3) Payee's account number at the financial institution where
funds are to be transferred.
(4) If the financial institution does not have access to the
Federal Reserve Communications System, name, address, and
telegraphic abbreviation of the correspondent financial institution
through which the financial institution receiving payment obtains
wire transfer activity. Provide the telegraphic abbreviation and
American Bankers Association identifying number for the
correspondent institution.
(b) ACH information. For payment through ACH, the Contractor
shall provide the following information:
(1) Routing transit number of the financial institution
receiving payment (same as American Bankers Association identifying
number used for FEDLINE).
(2) Number of account to which funds are to be deposited.
(3) Type of depositor account (``C'' for checking, ``S'' for
savings).
(4) If the Contractor is a new enrollee to the ACH system, a
``Payment Information Form,'' SF 3881, must be completed before
payment can be processed.
(c) Change of institution. In the event the Contractor, during
the performance of this contract, elects to designate a different
financial institution for the receipt of any payment made using
electronic funds transfer procedures, notification of such change
and the required information specified above must be received by the
appropriate Government official 30 days prior to the date such
change is to become effective.
(d) Contractor documents. The documents furnishing the
information required in this clause must be dated and contain
signature, title, and telephone number of the contractor official
authorized to provide it, as well as the Contractor's name and
contract number.
(e) Delay of payment. Contractor failure to properly designate a
financial institution or to provide appropriate payee bank account
information may delay payments of amounts otherwise properly due.
(f) Prompt payment. (1) Payments made by electronic funds
transfer shall be specified (see 32.902 definition of specified
payment date) for settlement at a Federal Reserve Bank by the
established due date.
(2) When payment by electronic funds transfer cannot be made
because the Contractor furnished incorrect or incomplete data, no
interest penalty is due for the period between the date of the
attempted transfer and the date on which the Contractor furnishes
correct data; provided, the Government notifies the Contractor
within 7 days after the Government receives notice that the transfer
could not be completed because of defective data.
(End of clause)
[FR Doc. 94-10802 Filed 5-5-94; 8:45 am]
BILLING CODE 6820-34-M
