Overview
This section identifies the specific legal statutes (10 U.S.C. 3805 and 41 U.S.C. 4505) that grant federal agencies the authority to use flexible, commercial-style payment terms when purchasing commercial products or services.
Key Rules
- Statutory Basis: Authority is derived from 10 U.S.C. 3805 (for defense agencies) and 41 U.S.C. 4505 (for civilian agencies).
- Scope: The authority applies exclusively to the acquisition of commercial products and commercial services.
- Decision Authority: The head of the agency is responsible for determining the appropriateness of the payment terms.
- Criteria for Approval: Payment terms must meet two primary conditions:
- They must be appropriate or customary within the specific commercial marketplace.
- They must be in the best interest of the United States government.
Practical Implications
- This section allows the government to bypass traditional, more restrictive government payment rules (such as the general prohibition on advance payments) to better align with standard private-sector business practices.
- Contracting officers can leverage this authority to attract commercial vendors who might otherwise refuse to do business with the government due to rigid traditional payment schedules.