made available, with appropriate protection of the Government's interest, either in connection with or independently of performance financing (see § 1-8.212-1 regarding partial payments upon termination).

§ 1-30.216 Report of adverse developments-prompt decisions.

When materially adverse developments concerning a borrower having a guaranteed loan, or concerning a contractor having advance payments or progress payments, become known to a procuring activity, pertinent facts, including information as to remedial or protective action taken or proposed, should be furnished by the procuring activity to the appropriate financing activity so that timely appropriate protective or remedial action may be taken by coordinated action of all concerned. However, the furnishing of such information does not relieve the personnel responsible for administration of the contract from taking such action as is deemed proper, prudent, and beneficial to the Government. When there are reasons to doubt the prudence of continuing progress payments or advance payments in cases involving performance difficulties or financial deterioration, decision must be made promptly and with proper regard to the harmful effects of delay on the continued operation of the contractors concerned.

§ 1-30.220 Foreign procurement.

This Part 1-30 applies equally to domestic and foreign procurement, with the exceptions and qualifications stated below. The enforceability of a contract provision in a foreign jurisdiction is dependent on local law and procedure. It may sometimes become necessary to take action in foreign countries to enforce collateral security or other contract financing protective provisions, or to recover property pursuant to a progress payment clause, and to collect contract financing indebtedness. In such cases, the nature and extent of remedies available for enforcement of contract provisions is necessarily determined by the laws, rules, and procedures of the country in which the relief is sought.

§ 1-30.220-1 Progress payments on

contracts for foreign performance. When progress payments are contemplated for contracts to be performed wholly or partly in a foreign country, appropriate legal advice should be obtained with respect to the validity, enforceability, and effectiveness of the contemplated progress payment clause (see §§ 1-30.510-1, 1-30.510-2, and 130.511) and of any proposed guarantees, pledges, or other special protective arrangements, within the foreign country involved. Such legal advice should also cover the need, if any, for additional protective provisions (§ 1-30.511-6) or for deviations (§ 1-30.509-9) from the uniform clauses, that may be required to comply with the applicable foreign law and to provide for the most effective protection and enforcement of the interests of the United States.

§ 1-30.220-2 Advance payments on contracts for foreign performance.

When advance payments are proposed for contracts to be performed wholly or partly in a foreign country, the recommendation for advance payments (see § 1-30.412) should include appropriate legal advice as referred to in § 1-30.220-1. When advance payments are proposed to be made on contracts with foreign governments, it is expected that the advance payment arrangement, if approved, would not include provisions generally unsuitable for government-togovernment agreements, such as those for special bank accounts, unilateral withdrawal of funds, liens, insurance, additional security, or representations, warranties and covenants of the kinds set forth in §§ 1-30.414-2(p)) and 1-30.414-2(r). It is recognized that advance payments to foreign governments, when authorized, will need to be adapted to the special circumstances of each case to provide appropriate protection in the light of the relationship of the United States to each affected foreign government and with due recognition of the sovereign status of the contracting parties.

§ 1-30.220-3 Guaranteed loans for foreign contract performance.

When contracts or subcontracts are to be performed in a foreign country, financing by means of guaranteed loans

§ 1-30.221-2 Format 221-2, Interrelationship of projection of financial statements.

Liabilities;

(31)

Subpart 1-30.3 [Reserved] Subpart 1-30.4-Advance Payments § 1-30.400 Scope of subpart.

(a) This subpart covers policies and procedures for advance payments on 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 specifically authorized by agency procedure. In fixing the rate consideration should be given to commercial and governmental

rate 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 costreim bursement 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.

§ 1-30.404

Standards-amounts―need.

(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 requirements 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 riade 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 inade 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 § 1-30.10);

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.£10). § 1-30.406 Responsibility delegation

of authority.

Each agency, utilizing section 305 of the Property Act or other authority for advance payments, should provide by agency procedure that:

(a) The responsibility and authority for making findings and determinations with respect to advance payments, and in each case for approval of contract provisions for advance payments, or for approval 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 con

tract 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 adver. tised 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, 1954-1958 Comp., pp. 426-428), 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, qualified, 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