Progress Payments versus Payment Schedule

[Whynot]

I have a fixed priced proposal for equipment and various services - I am unclear if I propose a payment plan based on some milestones if this payment plan is considered Progress Payments. I am under the belief that Progress Payments are cost based - my payment plan is not based on incurred cost.

[Navy_Contracting_4]

I have a fixed priced proposal for equipment and various services - I am unclear if I propose a payment plan based on some milestones if this payment plan is considered Progress Payments. I am under the belief that Progress Payments are cost based - my payment plan is not based on incurred cost.

Not all progress payments are based on cost. Is this a proposal in response to an RFP? If so, read the RFP to see what it says about payments. Does it include FAR 52.232-16, Progress Payments? If not, it may include FAR 52.232-30, Installment Payments for Commercial Items, or FAR 52.232-32, Performance Based Payments.

If any of these clauses are included, it's usually best to review them carefully and structure your proposal accordingly.

If your proposal is not in response to an RFP, then you may propose any kind of contract financing you shoose, however, you should be aware that the contracting officer will review and consider that aspect of your proposal against the policies in FAR Part 32, and particularly FAR 32.106 and 32.113. Read them carefully, and if your proposed financing method is not in accordance with those policies, then you should be prepared to change your proposal or support the need for an alternative method with a convincing business case.

[Whynot]

I have 232.501-1. I would like to set a payment method based on accepted supplies and services (partial deliveries). Is such a payment method in conflict with the progress payment clause? Or does the progress payment clause merely limit the amount of the last payment based on final acceptance - as stated in the clause it is not less than 20%?

[napolik]

I have 232.501-1. I would like to set a payment method based on accepted supplies and services (partial deliveries). Is such a payment method in conflict with the progress payment clause? Or does the progress payment clause merely limit the amount of the last payment based on final acceptance - as stated in the clause it is not less than 20%?

Please look at the definition of "contract financing payment" in FAR 32.001. Paragraph 92) of the definition says this

"Contract financing payments do not include--

(i) Invoice payments;

(ii) Payments for partial deliveries; or

(iii) Lease and rental payments."

You should get paid the unit price for each unit of the supplies or services you are providing. You do not need to deliver all the units to invoice and receive payment for deliveries / performances. Check the payment clause of your solicitation. There are several clauses depending upon the method of acquisition being used. In any event, for a firm fixed price contract, the clause should say will get paid for delivery of supplies accepted or for services rendered and accepted. If your solicitation has the DFARS clause, ask the CO why you cannot propose firm fixed unit price for the items.

[Navy_Contracting_4]

I have 232.501-1. I would like to set a payment method based on accepted supplies and services (partial deliveries). Is such a payment method in conflict with the progress payment clause? Or does the progress payment clause merely limit the amount of the last payment based on final acceptance - as stated in the clause it is not less than 20%?

232.501-1 is the DFARS section listing the customary progress payment rates for use with FAR 52.232-16. If this clause applies, then the government is offering progress payments based on costs, however, as napolik points out, your description of what you're contemplating sounds like you're not talking about "progress payments."

[Whynot]

I think the clause is inappropriate for the solicitation. However, I think it is more or less harmless - although the 20% final payment is above my normal commercial practices.

[here_2_help]

I think the clause is inappropriate for the solicitation. However, I think it is more or less harmless - although the 20% final payment is above my normal commercial practices.

Whynot,

Consider the FAR policy at 32.10, the solicitation clause at 52.232-32, and DoD's User's Guide to Performance-Based Payments. You may be able to get the contracting officer to move from cost-based progess payments to PBPs, which are the Government's "preferred" method of contract financing.

Hope this helps.

[Whynot]

H2H

Thanks. I might try it.

Are you relocating to the Washington DC area?