Overview
This section mandates that Contracting Officers (COs) follow the established policy and procedures for progress payments when suspending or reducing performance-based payments (PBPs). It ensures procedural consistency across different contract financing methods by cross-referencing the safeguards and criteria found in FAR 32.503-6.
Key Rules
- Procedural Alignment: The CO must apply the specific procedures detailed in FAR 32.503-6(a), (b), (c), and (e) when taking action against PBPs.
- Authorized Basis: Suspension or reduction must be executed in accordance with the authority granted by paragraph (e) of the mandatory clause at FAR 52.232-32, Performance-Based Payments.
- Conditions for Action: Actions are typically triggered by specific contractor failures, such as:
- Failure to comply with any material requirement of the contract.
- Failure to make progress, endangering performance.
- Unsatisfactory financial condition that endangers contract completion.
- Discovery that the amount of payments exceeds the value of the work performed.
Practical Implications
- Due Process for Contractors: Because this section invokes 32.503-6, contractors are entitled to notice and a "show cause" opportunity before payments are suspended, preventing arbitrary government action.
- Standardized Oversight: Contractors should manage PBPs with the same administrative rigor as progress payments, as the government uses the same "red flag" criteria (e.g., financial instability or lack of progress) to halt cash flow for both.