Overview
This section outlines the two primary methods a contracting officer may use to establish financing terms in a solicitation for commercial items once the qualifying criteria are met.
Key Rules
- Prerequisite: The criteria for commercial interim payments and commercial advance payments established in FAR 32.202-1(b) must be satisfied before applying these methods.
- Method 1 (Solicitation Specified): The contracting officer may specify the financing terms directly in the solicitation, provided they have sufficient market research to identify terms that are customary in the commercial marketplace.
- Method 2 (Offeror Proposed): Alternatively, the contracting officer may allow each offeror to propose its own customary financing terms as part of their proposal.
- Cross-References: Specified terms must follow FAR 32.204, while offeror-proposed terms must follow FAR 32.205.
Practical Implications
- Contracting officers must conduct thorough market research to justify specifying terms; if the marketplace is diverse or the government's knowledge is limited, allowing offerors to propose their own terms is the safer, more flexible approach.
- The choice of method impacts how proposals are evaluated, as varying financing terms between offerors may require the government to calculate the cost of money to ensure a fair price comparison.