Page images
PDF
EPUB

(iii) Estimates that the procurement will involve approximately $100,000 or more and that bids are likely to be submitted by one or more small business concerns.

(2) Provision for progress payments ordinarily will not be made invitations for bids when the procurement is estimated to be less than $10,000, or is for quick turnover items of kinds for which predelivery financing by progress payments is not the custom or practice on sales by members of the industry to private commercial customers, such as (i) subsistence, (ii) clothing and apparel, (iii) "off-the-shelf" items, and (iv) standard commercial items or equivalent items (including medical and dental supplies), not requiring substantial accumulation of predelivery expenditures.

(3) Reasonable doubts should be resolved in favor of inclusion of progress payment provisions in invitations for bids, in order to (i) facilitate necessary contract financing assistance to small suppliers, and (ii) avoid the necessity for rejecting, as nonresponsive, bids conditioned on progress payments when the invitations for bids do not provide for progress payments.

(b) When progress payments are contemplated, the invitations for bids shall state (1) that the need for progress payments conforming to regulations will not be considered as a handicap or adverse factor in the award of contracts, and that bids including requests for progress payments will be evaluated on an equal basis with bids not including requests for progress payments, and (2) That upon written request by the prospective contractor a progress payment clause (to be included in the invitation for bids or identified by appropriate reference therein, and to be the appropriate one of the contract clauses at uniform standard percentages as specified in § 1-30.503) will be included in the contract at the time of awards. (See § 130.504-4(a) for notice to bidders.) This notice to bidders may be modified as provided in paragraph (c) of this section.

(c) In unusual circumstances, the Contracting Officer may consider it to be in the interest of the Government to contemplate progress payments but

to provide for application of the criteria specified in § 1-30.504-1(a)(1) after the opening of bids, and to select, at the time of award, a progress payment clause appropriate for the prospective contractor. In such event the invitations shall (in lieu of the requirement set forth in paragraph (b)(2) of this section) state that upon written request by the prospective contractor a progress payment clause, of a type considered appropriate to the circumstances, will be included in the contract at the time of award if the Contracting Officer considers the contractor eligible under applicable regulations. (See § 1-30.504-4(b) for appropriate notice to bidders.)

[29 FR 10356, July 24, 1964, as amended at 40 FR 43730, Sept. 23, 1975]

§ 1-30.504-2 Small business restricted advertising.

The above policy and standards also apply to procurement by "Small Business Restricted Advertising" and for procurement pursuant to § 1-30.504-3. When progress payments are contemplated in these cases, provision will be made for progress payment percentage at 85 percent of total costs or 90 percent of costs of direct labor and material.

[40 FR 43731, Sept. 23, 1975)

§ 1-30.504-3 Progress payments exclusively for small business.

*

A stated purpose of Pub. L. 85-800, 72 Stat. 966, is "to improve opportunities for small business concerns to obtain a fair proportion of Government purchases and contracts." One of the sections of the statute amended section 305 of the "Property Act" (41 U.S.C. 255) and 10 U.S.C. 2307 by providing that contracting agencies "may *** insert in bid solicitations *** a provision limiting to small business concerns progress payments." In furtherance of the purposes of this statute, whenever provision for progress payments is to be made in invitations for bids (as provided by §§ 130.504-1 and 1-30.504-4), careful consideration shall be given as to whether or not the contemplated availability of progress payments shall be restricted to small business concerns only. If it is

*

considered by the contracting officer that progress payments should not be reasonably necessary for prospective bidders other than small business concerns, the provisions for progress payments (§ 1-30.504-1) and the notice to bidders (§ 1-30.504-4(a) or (b)) will be supplemented by an additional notice to bidders appearing immediately adjacent thereto to the effect that the progress payment clause, if any, will be available to small business concerns only, and will not be included for contractors who are not small business concerns. (See § 1-30.504-4(c) for appropriate notice to bidders.) Also see § 1-30.504-6 when invitations for bids do not provide for progress payments at all.

[40 FR 43731, Sept. 23, 1975; 40 FR 51038 Nov. 3, 1975)

§ 1-30.504-4 Notice to bidders.

(a) Those invitations for bids that make provision for progress payments pursuant to § 1-30.504-1(b) should contain substantially the following notice to bidders:

PROGRESS PAYMENTS

The need for progress payments conforming to applicable regulations (Part 1-30, Federal Procurement Regulations) will not be considered as a handicap or adverse factor in the award of contracts hereunder. Bidders desiring progress payments in accordance with the Progress Payments clause attached hereto, shall include a written request therefor in their bids, and bids including requests for progress payments will be evaluated on an equal basis with bids not including such a request. Blanks, if any, in the attached Progress Payments clause, will be filled in by the Contracting Officer, before award, in conformity with regulations.* If a bid does not contain a request for progress payment provision, the Progress Payments clause will not be included in the contract as awarded.

[Omit the third sentence, above, when either Total Costs clause of § 1-30.510-1 is used.]

(b) Those invitations for bids that make provision for progress payments pursuant to § 1-30.504-1(c) should contain the following notice to bidders:

AVAILABILITY OF PROGRESS PAYMENTS The need for progress payments conforming to applicable regulations (Part 1-30, Federal Procurement Regulations) will not

be considered as a handicap or adverse factor in the award of contracts hereunder. Bidders desiring progress payments shall inIclude a written request therefor in their bids, and bids including requests for progress payments will be evaluated on an equal basis with bids not including such a request. If the Contracting Officer considers the Contractor eligible for progress payments under applicable regulations an appropriate Progress Payment clause will be included in the contract as awarded. If the bid does not contain a request for progress payment provision, the Progress Payments clause will not be included in the contract as awarded.

(c) Those invitations for bids that make provision for progress payments pursuant to § 1-30.504-3 shall contain the following notice to bidders adjacent to the notice set forth in paragraph (a) or (b) of this section:

PROGRESS PAYMENTS EXCLUSIVELY FOR
SMALL BUSINESS

The Progress Payments clause will be available to small business concerns only, and will not be included for contractors who are not small business concerns.

(End of notice)

[29 FR 10356, July 24, 1964, as amended at 40 FR 43731, Sept. 23, 1975]

§ 1-30.504-5 Total costs clause preferable.

The Total Costs clause (§ 1-30.510-1) is preferable to the Direct Labor and Materials Cost clause (§ 1-30.510-2) in procurement by formal advertising and in Small Business Restricted Advertising. When the Total Costs clause (§ 1-30.510-1) is used, it is not necessary to make the cost estimates and computations that are required before the appropriate percentages can be determined for (a)(3)(ii), (a)(4) and (b) of the Direct Labor and Materials Cost clause (§ 1-30.510-2). Generally, the principles of § 1-30.523 and § 1-30.5246 should be simpler to apply to the Total Costs clause (§ 1-30.510-1) than to the Direct Labor and Materials Cost clause (§ 1-30.510-2).

§ 1-30.504-6 Nonresponsive bids-uninvited progress payment condition.

To minimize the possibility of misunderstandings, the recipients of invitations for bids, or those included on bidders lists, should be informed and kept aware that when invitations for bids do not provide for progress pay

ments. Progress Payment clauses cannot be included in the contract at time of award, and that bids conditioned upon provision for progress payments will have to be rejected as nonresponsive. This precautionary warning notice may be included in invitations for bids, or may accompany invitations for bids, or may be otherwise circulated or made known to prospective bidders by such means as are considered appropriate. Also, prospective bidders who are not small business concerns should be given appropriate precautionary warning notice that when invitations for bids provide for progress payments for small business concerns only (§ 1-30.504-3), progress payment provision cannot be made for contractors who are not small business concerns, and that bids of those who are not small business concerns, if conditioned upon provision for progress payments, will have to be rejected as nonresponsive.

§ 1-30.505 Unusual progress paymentsstandards-procedure.

(a) Progress payments based on costs, other than progress payments of the class and within the percentage limits set forth in §§ 1-30.503 and 130.504, will be regarded as unusual, and require special approval. This is deemed necessary for the purpose of minimizing risks, and in order to establish and maintain the greatest practicable uniformity with regard to such progress payments within and among the executive agencies. Any contractor seeking provision for progress payments that is "unusual," within the meaning of the regulations in this part, should be required to demonstrate fully his actual need therefor, with due regard to the preference for private financing, including guaranteed loans. Requests for "unusual" progress payments should be approved only under exceptional circumstances in accordance with agency procedures and should have the specific approval of the head of the procuring activity, or an official duly designated for that purpose.

(b) Such cases must involve a preparatory period requiring contractor's predelivery expenditures that are large in relation to the contract price

and in relation to the contractor's working capital and credit. Contract provisions for progress payments in this category will be only supplementary to private financing, including guaranteed loans, in amounts necessary for contract performance. The percentage rates and cost bases for progress payments on new procurement in this category will be determined on a minimum basis commensurate with the contractor's production schedule requirements and minimum inventory lead time, with due regard to the contractor's projected cash needs, cash resources, and their planned application.

(c) Progress payments of a class and within the limits set forth in § 1-30.503 on letter contracts and on definitive contracts superseding letter contracts are not deemed unusual.

[29 FR 10356, July 24, 1964, as amended at 40 FR 43731, Sept. 23, 1975]

§ 1-30.506 Accounting system and controls.

The contractor's accounting system and controls must be adequate for the proper administration of progress payments. If the contractor's accounting system and controls have been found (by experience or by audit examination) to be sufficient and reliable for segregation and accumulation of contract costs, no further examination should be necessary as long as the efficiency and reliability of the contractor's system and controls are maintained. In all doubtful cases, including contracts with contractors with whom the procuring activity has had no experience within the preceding 12 months, the adequacy of the contractor's accounting system and controls shall be determined, and any necessary changes accomplished. Until such time as the necessary changes are made, the accounting system and controls shall be deemed inadequate and progress payments suspended. For this purpose, audit examination should be utilized to the greatest extent practicable.

[40 FR 43731, Sept. 23, 1975]

[blocks in formation]

costs, after such delinquency, to the extent provided in § 1-30.524-4.

§ 1-30.509-5 Incurred costs.

Incurred costs are those costs identified through the use of the accrual method of accounting and reporting. As to invoices, incurred costs include only invoices for (a) completed work to which the prime contractor has acquired title; (b) materials delivered (to which the prime contractor has acquired title); (c) services rendered; (d) costs billed under cost reimbursement or time and material subcontracts for work to which the prime contractor has acquired title; and (e) invoices for progress payments to subcontractors which have been paid or approved for current payment in the ordinary course of business (as specified in the prime contract), all properly recorded on the books of the contractor and identified with the contract. Costs incurred include costs of direct labor, direct material, and direct services identified with and necessary for the performance of the contract, and also all properly allocated and allowable overhead (indirect) costs as shown by the books of the contractor.

§ 1-30.509-6 Unliquidated progress pay

ments.

Unliquidated progress payments are the aggregate sum of all progress payments made, less the aggregate sum of amounts applied to reduce progress payments.

§ 1-30.509-7 Contract price.

The term "contract price" means the total amount fixed by the contract (other than any portion of the contract specifically providing for cost reimbursement only), as amended, to be paid for complete performance of the contract. If the contract provides for escalation or for redetermination of price, this term means the initial price until changed and not the ceiling price. If the contract is of the incentive type, this term means the initial or target price until changed, and not the ceiling or maximum price. For letter contracts and similar preliminary contractual instruments, this term means the maximum expendi

[blocks in formation]

Progress payments shall be made to the Contractor as work progresses, from time to time upon request, in amounts approved by the Contracting Officer upon the following terms and conditions:

(a) Computation of amounts. (1) Unless a smaller amount is requested, each progress payment shall be (i) 80 percent of the amount of the Contractor's total costs (except that this percentage shall be 85 percent if the Contractor is a small business concern) incurred under this contract, except as provided herein with respect to costs of pension contributions, plus (ii) the amount of progress payments to subcontractors as provided in (j) below; all less the sum of previous progress payments. With respect to costs of pension contributions, when pension contributions are paid by the Contractor to the retirement fund less frequently than quarterly, accruals of the costs of these pension contributions shall be excluded from the Contractor's total costs for

progress payment purposes until such cost are paid. If pension contributions are pai on a quarterly or more frequent basis, ac cruals of the costs of these pension contri butions may be included in the Contractor: total costs for progress payment purposes Provided, That the pension contribution: are paid to the retirement fund within 30 days after the close of the period covered by the payment. If payments are not made to the fund within such 30-day period, pension contributions costs shall be excluded from the Contractor's total costs for progress payment purposes until payment therefor has been made. (2) The Contractor's total costs ((a)(1)(i)) shall be reasonable, allocable to this contract, and consistent with sound and generally accepted accounting principles and practices. However, such costs shall not include (i) any costs incurred by subcontractors or suppliers, or (ii) any payments or amounts payable to subcontractors or suppliers, except for completed work (including partial deliveries) to which the Contractor has acquired title and except for amounts paid or payable under cost-reimbursement or time and material subcontracts for work to which the Contractor has acquired title, or (iii) costs ordinarily capitalized and subject to depreciation or amor. tization except for the properly depreciated or amortized portion of such costs. (3) The amount of unliquidated progress payments shall not exceed the lesser of (i) 80 percent of the costs (except that this percentage shall be 85 if the Contractor is a small business concern) mentioned in (a)(1)(i) of this clause, plus any unliquidated progress payments mentioned in item (a)(1)(ii), both of which are applicable only to the supplies and services not yet delivered and invoiced to and accepted by the Government, or (ii) 80 percent (except that this percentage shall be 85 percent if the Contractor is a small business concern) of the total contract price of supplies and services not yet delivered and invoiced to and accepted by the Government, less unliquidated advance payments. (4) The aggregate amount of progress payments made shall not exceed 80 percent of the total contract price (except that this percentage shall be 85 percent if the Contractor is a small business concern).

(b) Liquidation. Except as provided in the clause entitled "Termination for Convenience of the Government," all progress payments shall be liquidated by deducting from any payment under this contract, other than advance or progress, the amount of unliquidated progress payments, or 80 percent (except that this percentage shall be 85 percent if the Contractor is a small business concern) [see 41 CFR 1-30.512-2 for citation of lower percentages for this paragraph (b) and for (a)(3)(ii)] of the gross amount invoiced, whichever is less. Repayment to the Government required by a retroactive price

« PreviousContinue »