Subpart 1-30.3 [Reserved] Subpart 1-30.4-Advance Payments § 1-30.400 Scope of subpart. on (a) This subpart covers policies and procedures for advance payments prime contracts, including advance payments on subcontracts under all types of prime contracts. It applies to all advance payments hereafter authorized pursuant to any legislation or other authority, except as provided in § 1-30.419. It is to be applied in conformity to the policies stated in Subpart 1-30.2. (b) The policies, standards and procedures of this subpart 1-30.4 are applicable to advance payments to subcontractors under all prime contracts, including fixed-price types and cost-reimbursement types of prime contracts. For the prime contractor to receive advances to, in turn, advance to subcontractors, or in order for the prime contractor to be reimbursed for advances to the subcontractor, it is required that the prime contract make provision for advance payments conforming to the regulations in this part, with appropriate provision for advance payments by the prime contractor to subcontractors or suppliers (see § 1-30.414-2 (q)). § 1-30.401 Types of contracts that may have advance payments. Advance payments may be made on any approved type of contract. § 1-30.402 Advance payments in addition to progress or partial payments. Where necessary and in accordance with this Part 1-30, advance payments may be authorized in addition to progress or partial payments on the same contract (see § 1-30.508). § 1-30.403 Interest. (a) Interest will be charged on the unliquidated balance of all advance payments at a rate to be fixed by the head of the agency for advance payments to be made by procuring activities under his cognizance, except that advance payments may be approved without interest when in connection with nonprofit contracts with nonprofit educational or research institutions for experimental, research and development work, or on contracts solely for the management and operation of Government-owned plants, or, in other classes of cases when spe cifically authorized by agency procedure. In fixing the rate consideration should be given to commercial and governmental rates of interest then prevailing on obligations of comparable maturity and the cost of borrowed money to the U.S. Treasury. In this connection, contracts for acquisition of facilities at cost, for Government ownership, in combination with or in contemplation of supply contracts or subcontracts, will be treated as ordinary profit contracts requiring interest on advance payments. (b) Contracts with interest-free advance payments, should provide that the contractor will charge interest (at the rate fixed by the agency head for advance payments) on subadvances or down payments to subcontractors, and that interest charged on such subadvances or down payments will be credited to the account of the Government. However, interest need not be charged on subadvances on nonprofit subcontracts with nonprofit educational or research institutions for experimental, research, or development work. (c) Interest on advance payments will not be allowed as a cost under any costreimbursement type contract nor costreimbursement subcontract thereunder, and no such contract or subcontract may provide or be amended to provide for allowance of such interest as an item of cost. (a) Advance payments should be used sparingly and care should be taken to see that advances outstanding are sufficient for but do not exceed the actual reasonable rquirements for the contract. The amount of the advance payment in any case should be based upon an analysis of the cash flow required under the contract, and as a general rule should not exceed the interim cash needs arising during the reimbursement cycle. (b) Generally, except for (1) nonprofit contracts with nonprofit educational or research institutions for experimental, research and development work, and (2) contracts solely for the management and operation of Government-owned plants, advance payments should not be authorized unless no other means of adequate financing is available to the contractor (not including loans or credit (i) at excessive interest rates or other exorbitant charges, or (ii) from other agencies of the Government), and the amount of the authorization is predicated upon use of the contractor's own working capital to the extent possible. § 1-30.405 Statutory requirements. The statutes authorizing advance payments apply equally to negotiated contracts and contracts awarded or to be awarded by formal advertising. Accordingly, advance payments under either method of contracting may be made only upon the following conditions: (a) The contractor shall give adequate security (see § 1-30.413); (b) The advance payments shall not exceed the unpaid contract price; (c) A determination shall be made by the agency head, or his authorized delegatee (see § 1-30.406), that the making of the advance payment is in the public interest when the action is pursuant to the authority of section 305 of the Property Act or 10 U.S.C. 2307, and such determination shall be based upon written findings (see § 1-30.410); or (d) A determination shall be made by the agency head, or his authorized delegatee (see §§ 1-30.406 and 1-17.301), that the making of the advance payment will facilitate the national defense when the action is pursuant to the Act of August 28, 1958, Public Law 85-804 (50 U.S.C. 1431-1435), hereinafter referred to in this Part 1-30 as "the Act," and Executive Order No. 10789 (see Part 1-17) and such determination shall be based upon written findings (see § 1-30.410). proval of the terms and conditions thereof (see § 1-30.410), shall be exercised at an organizational level sufficiently high to assure uniform application of the policies set forth in this Part 1-30; and (b) Prior to committing the Government to the making of an advance payment, the approving agency official shall obtain the advice and concurrence of the head (or an authorized alternate) of the activity which is required to provide contract finance advice and assistance to the procuring activity. [31 F.R. 349, Jan. 12, 1966] § 1-30.407 The Act of August 28, 1958, Public Law 85-804-Formally advertised contracts. (a) Pursuant to the Act of August 28, 1958, Public Law 85-804 (50 U.S.C. 14311435), hereinafter referred to in this § 1-30.407 as "the Act," and Executive Order No. 10789 of November 14, 1958 (3 CFR 1958, Supp., pp. 72-74), as amended by Executive Order No. 11051 of October 2, 1962, hereinafter referred to in this § 1-30.407 as "the Executive order," certain agencies (see § 1-17.502) are authorized to make advance payments under contracts heretofore or hereafter made, without regard to other provisions of law relating to contracts, including advance payments under contracts awarded on competitive bids after formal advertising, and to amend such contracts to provide for advance payments, whenever the national defense will be facilitated thereby. (b) Pursuant to the Act and the Executive order (as well as section 305 of the Property Act and other authority) and subject to these regulations, advance payments may be granted at or after awards of contracts made on competitive bids after formal advertising (as well as on negotiated contracts) notwithstanding the absence of provision for or with regard to advance payments in the invitations for bids. Bids shall be rejected if they are conditioned, quali fied, or limited in such way that binding awards can be made only with provision for advance payments. Bids shall not be treated as nonresponsive because they contain, or are accompanied by or supplemented by a request for advance payments or other indication that advance payments are desired or needed, so long as the advance payment aspect is not a condition, qualification, or limitation of the bid. In the cases mentioned in the previous sentence, or if the need for advance payments becomes apparent in the course of inquiry as to whether the necessary funds will be available for performance by the prospective contractor, (1) the award may be made with provision for advance payments, in conformity with this Part 1-30, or (2) the award may be made without provision for advance payments if the prospective contractor is determined to be a responsible contractor and advance payments are considered not necessary, or (3) the award may be denied because funds for performance are not otherwise available to the prospective contractor and the making of advance payments has been declined in accordance with this Part 1-30. § 1-30.407-1 Special contract provi sions. All contracts providing for advance payments under the authority of the Act and the Executive order shall: (a) Make reference to the Act and the Executive order; and (b) Include appropriate clauses required by the Act and the Executive order, or by other applicable regulations. § 1-30.407-2 Data. Complete data shall be maintained by each executive agency as to all contracts and amendments to contracts relating to advance payments made pursuant to the Act and the Executive order. § 1-30.408 Uses of advance payments. Advance payments are last in the general order of preferences stated in § 130.209. Subject to the provisions of this Part 1-30, advance payments are considered useful and appropriate for (a) nonprofit contracts with nonprofit educational or research institutions for experimental research and development work (see § 1-30.404), (b) contracts solely for the management and operation of Government-owned plants (see § 130.404), (c) contracts for acquisition of facilities at cost, for Government ownership, (d) contracts involving operations so remote from a financial institution that the financing institution could not be expected to provide suitable administration of a guaranteed loan, (e) contracts of such highly classified nature that the agency considers it undesirable for national security to permit assignment of claims under the contract, (f) rare but essential contracts of those contractors, unusually weak or overextended financially in those cases in which performance may be better fostered and risks of financial loss most effectively minimized by very close control of funds and supervision of performance by personnel of the agency concerned, (g) contracts for the financing of which a financing institution will not (1) assume a reasonable portion of the risks under a guaranteed loan, or (2) provide funds except at excessive interest rates or other exorbitant charges, and (h) exceptional cases in which the utilization of advance payments will be more beneficial to the interests of the Government than any other available method of financing. Circumstances will occur, especially on contracts with small business concerns, in which advance payments will be more beneficial to the interests of the Government and more suitable to the situation of the contractor than other methods of contract financing. If, incident to a bid or proposal, or after award of a contract, an otherwise qualified contractor is found to require advance payments, there should be no hesitation in recommending to approving authority that advance payments be established. § 1-30.409 and §§ 1-30.202 through 1-30.= 212, and 1-30.404 through 1-30.408. =Affirmative recommendations should be = made in favor of granting advance payI ments when (a) advance payments are = necessary to supplement other funds or I credit available to a contractor or pros#pective contractor, (b) the contractor or = prospective contractor is otherwise quali=fied as a responsible contractor (see = §§ 1-1.310 and 1-30.211), (c) there will be a benefit to the Government from = performance prospects or other practical advantages, and (d) the case is within = one or more of the categories described in § 1-30.408. These recommendations =should be approved unless the responsible contract financing office (see § 1-30.212), or other authorized official concerned (see § 1-30.406), considers that under all the =relevant circumstances the making of advance payments would be unreason=able or imprudent or would involve undue = risks of monetary loss to the Government, or would otherwise fail to conform to this Part 1-30. § 1-30.410 Findings, determinations, and authorization. Each determination required by § 1-30.405 shall be based on written findings made by the official making such determination, which findings shall be final and shall be available for a period of at least 6 years following the date of the determination. A copy of the findings shall be filed with the General Accounting Office copy of the contract to which it applies. The following is a suggested form and text of findings, determinations, and authorization for use in establishing advance payments. FINDINGS, DETERMINATIONS, AND AUTHORIZATION FOR ADVANCE PAYMENTS (Procuring activity) (Contractor) have entered (propose to enter) into negotiated (formally advertised) Contract No. (dated --). [Summary of the specific facts and significant circumstances concerning the contract and the contractor, which, together with the other findings, will clearly support the determinations below.] b. Advance payments (in an amount not to exceed $ at any time outstanding) (in aggregate amount not exceeding $ -less the aggregate amounts repaid, or withdrawn by the Government) are required by ------) the contractor in order to perform under the contract. Such amount does not exceed the unpaid contract price, nor the estimated interim cash needs arising during the reimbursement cycle. c. The advance payments are necessary for prompt and efficient performance of the contract, which will be of benefit to the Government. d. The proposed advance payment clause contains appropriate provisions for the protection of the Government, as security for the advance payments. These include provision that all payments will be deposited in a special bank account, and that the United States will have a paramount lien upon (1) the credit balance in the special bank account, (2) any supplies contracted for, and (3) any material or other property acquired for performance of the contract. (Advance payment bond is required.) Such security is deemed to be adequate. e. Within the meaning of applicable regulations, no means of adequate financing other than by advance payments are available to the contractor, and the amount designated above is predicated upon the use of the contractor's own working capital to the extent possible in performing the contract. f. The contractor is a nonprofit (educational) (and) (research) institution, and the contract is for (experimental) (,) (research and development) work, without profit to the contractor. g. The contract is solely for the management and operation of a Government-owned plant. h. The following unusual facts and circumstances favor the making of advance payments to the contractor without interest: [Recitation of pertinent facts and circumstances] DETERMINATIONS 2. Upon the basis of the foregoing findings, I hereby determine that the making of the proposed advance payments with interest at the rate of -- percent per annum on the unliquidated balance of such advance payments (without interest except as provided by the proposed advance payment clause) (is in the public interest) (will facilitate the national defense). AUTHORIZATION Such advance payments, of which (the amount at any time outstanding) (the aggregate amount, less the aggregate amounts repaid, or withdrawn by the Government), shall not exceed $--. are hereby authorized pursuant to section 305 of the Federal Property and Administrative Services Act of 1949, as amended (or 10 U.S.C. 2307) (or the Act of August 28, 1958, Public Law 85-804, 72 Stat. 972, and Executive Order No. 10789) (or if other, cite appropriate authority) upon (terms and conditions substantially as contained in the |