Overview
This section establishes the specific conditions under which a Contracting Officer may reimburse a prime contractor for financing payments made to subcontractors under a cost-reimbursement contract.
Key Rules
- Authorized Financing Types: Reimbursement is limited to payments made as customary progress payments (Subpart 32.5), commercial product/service financing (32.202-1), or performance-based payments (32.1003).
- Rate Limitations: Progress payments must not exceed standard rates defined in FAR 32.501-1 unless "unusual progress payments" are formally approved.
- Liquidation Compliance: Subcontractors must follow specific regulatory liquidation principles for both progress payments (FAR 32.503) and performance-based payments (FAR 32.1004(d)).
- Contractual Requirement: The subcontract agreement must explicitly include the financing payment terms prescribed in FAR Part 32 to be eligible for reimbursement.
Practical Implications
- Prime contractors must ensure their subcontracting agreements are strictly aligned with FAR Part 32 financing and liquidation standards to avoid the government withholding reimbursement for those costs.
- Contracting Officers act as a gatekeeper, verifying that subcontractor financing mirrors government-approved methods before allowing the prime contractor to recover those outlays as allowable costs.