Overview
FAR 32.500 defines the applicability of Subpart 32.5, establishing the policies and procedures for contract financing specifically through progress payments based on costs incurred. It distinguishes this method of financing from other payment types and identifies specific contract categories that are exempt from these rules.
Key Rules
- Primary Application: Applies to contract financing provided via progress payments based on costs.
- Cost-Reimbursement Exclusion: Does not apply to cost-reimbursement contracts, though it references FAR 32.110 regarding progress payments for subcontractors under those contracts.
- Construction/Shipbuilding Exclusion: Does not apply to construction, shipbuilding, or ship repair/conversion/alteration contracts if those contracts use progress payments based on a percentage or stage of completion (milestone-based).
- Regulatory Scope: Covers the full administrative lifecycle, including forms, solicitation provisions, and mandatory contract clauses.
Practical Implications
- Contract Selection: Contracting officers must ensure they do not apply Subpart 32.5 regulations to construction or shipbuilding projects that rely on "percentage of completion" milestones, as these are governed by different standards.
- Subcontractor Management: Prime contractors on cost-reimbursement contracts must look to FAR 32.110 rather than this subpart to determine the rules for making progress payments to their subcontractors.