Overview
This section prescribes the policies and procedures for contractors to request, and for the government to grant, installment payment plans or the deferment of debt collection. It establishes that while the Contracting Officer (CO) facilitates the process, the ultimate authority to approve or deny these requests rests with a specific office designated by agency procedures.
Key Rules
- Approval Authority: The Contracting Officer does not have the authority to approve or deny installment payments or deferments; they must forward requests with a recommendation to a designated agency office for a final decision.
- Eligibility Criteria: Arrangements may be granted if the contractor is unable to pay in full immediately or if immediate collection would seriously impair operations under national defense contracts.
- Mandatory Interest: Interest is a required element of any installment or deferment agreement, unless already applicable under specific contract terms (such as defective pricing or CAS noncompliance).
- Disputes and Appeals: Filing an action under the Disputes clause does not automatically suspend or delay collection; however, the government may grant a deferment during an appeal to avoid the risk of having to pay interest back to the contractor on "overcollections" if the contractor eventually wins.
- Required Documentation: For contractors not currently in the appeals process, requests must include detailed financial data, including contract backlog, projected cash receipts, and an analysis of how immediate payment would affect operations.
- Agreement Provisions: Formal agreements must include a specific payment schedule, provisions for government financial reviews, "acceleration" clauses for default or bankruptcy, and requirements for the contractor to diligently prosecute any pending appeals.
Practical Implications
- Financial Transparency: Contractors seeking relief from immediate debt collection must be prepared to grant the government significant oversight, including access to financial records and property for the duration of the agreement.
- Protection for Small Businesses: The regulation specifically allows for more leniency toward small businesses and "financially weak" contractors, balancing the contractor's hardship against the government's need for security.
- Operational Continuity: This section provides a vital "safety valve" for the industrial base, ensuring that a contractor's temporary liquidity crisis does not result in the failure of critical national defense projects.