Overview
FAR 32.408 outlines the specific procedures and documentation required for a contractor to submit a written request for advance payments, whether the contract is already in place or currently in the solicitation phase. It establishes the administrative framework the government uses to evaluate the necessity, security, and financial impact of providing funds to a contractor before work is performed.
Key Rules
- Timing of Application: A contractor can apply for advance payments either before a contract is awarded (during the solicitation phase) or after the award has been made.
- Submission Format: All requests must be submitted in writing directly to the Contracting Officer (CO).
- Mandatory Financial Data: Applications must include a cash flow forecast detailing estimated disbursements and receipts for the period of performance.
- Banking Requirements: The contractor must identify the financial institution where a "special account" will be established to house the advance payments, unless an alternate agency method is approved.
- Exhaustion of Private Financing: Contractors must describe their efforts to obtain private financing or V-loans first; however, this requirement is waived for certain non-profit, educational, or research contracts defined in FAR 32.403(a) and (b).
- Risk Assessment Information: The application must provide sufficient data for the government to judge the contractor’s financial condition, technical reliability, accounting controls, and the adequacy of safeguards to protect the government's interest.
Practical Implications
- High Barrier to Entry: Because contractors must demonstrate they attempted to find private financing first, advance payments remain the least preferred method of contract financing and are generally reserved for cases where no other options exist.
- Administrative Burden: Contractors must possess sophisticated accounting systems capable of producing detailed cash flow forecasts and managing specialized bank accounts to meet the government's transparency and oversight requirements.