My company has a government contract with FFP line items for labor as well as materials. We are receiving Progress Payments with a 10% withholding. Our subcontractor has substantially the same terms. We have been invoicing the government for 90% of the costs that we have paid to our subcontractor. The subcontractor has completed delivery to our company for several line items and are requesting the full payment for those CLINs at 100%. Those line items aren't complete with my company and the government so there's no DD250. We are debating whether or not we can include in our invoice the full subcontract CLIN amount versus 90%. I'm trying to understand FAR 52.232-16 and I'm getting confused. Any help you can provide would be appreciated. Trying to figure out 14a vs. 14b on the SF1443. The instructions aren't clear.

Too many questions left unanswered in your post. By example are the progress payments to the sub considered financing payments? I do not need an answer because my overall suggestion is get the answer from your contracting officer. Afterall he/she is the one that will approve the progress payment to you.

Seems pretty clear to me that if your company flowed 52.232-16 to the supplier properly modified as to parties, the supplier is entitled to payment because your work progressed by the supplier delivery and by the way, is therefore eligible for progress payments from the government. My view is that work that progresses does not have to be delivered in order for progress to have taken place. But, what is the debate within your company and what are you confused about? Your company may still be liable to pay the supplier depending on the language in your contract with them. Your company could pay out of its own money and put the payment in a special account to be included in progress payment requests to the government when you deliver the end item to the government that contains the supplier product, if the internal squabble can't be resolved, where your company agrees it owes the supplier now.

Edited June 18Jun 18 by Neil Roberts
added word "now" at end

@Neil Roberts

So you are saying this- The prime has been invoicing the government for 90% of the costs that they have paid to the subcontractor - is okay? Pursuant to the clause paragraph (a)(4)(ii) I am not sure one can say so without more info. The clause differentiates between sub "costs", "payments" and "financing progress payments" does it not?

@C Culham I assumed that "costs" was meant to describe CLIN prices for items delivered by supplier or progress payment milestones completed. Like you say, there are many open items about this post re what is really going on. I hoped there would be a response to the question I asked that would clarify, The post states that the supplier terms are the same as the contractor's. I did not assume that the Government is paying the Contractor incurred costs, In any events,the post seems to be focusing on the 10% withhold, not payments already billed and received by contractor or supplier.

Thanks all. We have been talking to/still awaiting clarification from the contracting officer. We have flowed down 52.232-16 to our subcontractor and are paying them progress payments. and withholding 10% from their payments. We have requested payments from the government at 90% of our costs incurred which include the payments to the subcontractor at 90% of their invoiced amount. With our next progress payment request to the government, can we request the government give us the balance of the subcontractors invoiced amount since they have completed deliveries to us or do we have to wait until we complete our portion of the work and make final delivery to the customer? There's no disagreement on what we owe the supplier. They've completed their work and we will pay them in full. Only on whether we can get that $$ from the government sooner than later.

Also, in the SF1443 is 14a the total amount eligible for progress payments or what we've actually paid? It almost seems like 14a and 14b are requesting the same information to my non-financial brain. (luckily I'm not responsible for completing the form) but I'm just wanting to understand.

@Siwilliams. You have not clarified by responding to a previous question. Seems like paying the subcontractor now is no different than before.

I guess I don't know how to clarify my questiion. Please disregard.

To me, the key point here is that the subcontractor has completed work and delivered the product to the prime contractor. Accordingly, I would expect the prime to liquidate all progress payments made to the subK to date and make full FFP payment to the subK for the delivered goods. At that point, all costs paid to the subK are now prime contractor costs, and should be included in the prime's progress payment requests in accordance with the terms of the prime contract (i.e., 90% of costs incurred are eligible for reimbursement). That's my take, even though the original poster has moved on.

Agree with H2H. The result is the same whether the prime paid the sub in increments or in a lump sum.

Thanks. Yes this helps