SOURCE: 29 FR 10356, July 25, 1964, unless otherwise noted.

§ 1-30.000 Scope of part.

(a) This part contains general contract financing policies and procedures applicable to the financing of all types of contracts for all kinds of work, supplies, and nonpersonal services (including construction) except as provided in § 1-30.500-1 or as otherwise indicated herein. The term "contract financing" as used in these regulations covers Government guaranteed loans, advance payments, partial payments, and progress payments necessary for both performance and termination purposes. Also, Subpart 1-30.7 covers the assignment of moneys due under Government contracts.

(b) The regulations in this Part 1-30 are intended to (1) state basic contract financing policy, (2) assure proper uniformity in policies and procedures, (3) provide for application of the fundamental management principle of internal check and balance, (4) insure that the need for advance or progress payments by contractors will not be treated as a handicap in awarding contracts, (5) facilitate and accelerate the making of progress payments requested by small business concerns under Government contracts, and (6) emphasize the usefulness and desirability of providing proper contract financing assistance to small business concerns.

(c) Basic authority for advance, partial, progress, or other payments under contracts for property or services is contained in section 305 of the Federal Property and Administrative Services Act of 1949, 41 U.S.C. 255 (hereafter referred to in this Part 1-30 as the "Property Act"). No attempt is made in this part to enumerate all authorities for contract filnance assistance. However, when for cogent reasons, agencies employ the authority of other applicable laws in the field of contract financing, the policies and procedures of this part shall, unless inconsistent with the provisions of such authority, be applicable in order to further the objectives of consistency and uniformity of Government procurement practices. Accordingly, references made in this part to authorizing sections of the Property Act shall be deemed likewise as references to comparable authorizing

sections and requirements under other applicable laws.

129 F.R. 10356, July 24, 1964, as amended at 81 F.R. 348, Jan. 12, 1966] Subpart 1-30.1-Forms of Financing § 1-30.100 Scope of subpart.

This subpart states the authority for and describes the methods of contract financing by guaranteed loans, advance payments, partial payments, and progress payments.

§ 1-30.101 Guaranteed loans-authority.

(a) Under section 301(a) of the Defense Production Act of 1950, as amended (50 U.S.C. 2091), and section 301 of Executive Order No. 10480 (3 CFR, 1949-1953 Comp., p. 962), the Department of the Army, the Department of the Navy, the Department of the Air Force, the Atomic Energy Commission, the Department of Commerce, the Department of the Interior, the Department of Agriculture, and the General Services Administration are designated as "guaranteeing agencies," and authorized by section 302(a) of Executive Order No. 10480 "to guarantee in whole or in part any public or private financing institution (including any Federal Reserve Bank), by commitment to purchase, agreement to share losses, or otherwise, against loss of principal or interest on any loan

which may be made by such financing institution for the purpose of financing any contractor, subcontractor, or other person in connection with the performance of any contract or other operation deemed by the guaranteeing agency to be necessary to expedite production and deliveries or services under Government contracts for the procurement of materials or the performance of services for the national defense, or for the purpose of financing any contractor, subcontractor, or other person in connection with or in contemplation of the termination, in the interest of the United States, of any contract made for the national defense."

(b) As defined in section 702(d) of the Defense Production Act of 1950, as amended (50 U.S.C. 2152 (d)), "the term 'national defense' means programs for military and atomic energy production or construction, military assistance to any foreign nation, stockpiling, and directly related activity."

§ 1-30.102 Guaranteed loans-description.

(a) Guaranteed loans, usually called "V-loans," are essentially the same as other loans made by financing institutions without guarantee, except that under a standard form of guarantee agreement the guaranteeing agency is obligated on demand of the lender to purchase a stated percentage of the loan and to share losses in the amount of the guaranteed percentage. Guaranteed loans afford an especially convenient medium for financing borrowers who hold subcontracts, or numerous prime contracts, or prime contracts with several contracting agencies. Funds are disbursed and collected by the lending institution, and its personnel administer the loan. Government funds are not involved except for purchases of the guaranteed portion of loans or settlement of losses.

(b) Under section 302(b) of Executive Order No. 10480, pursuant to section 301 (b) of the Defense Production Act of 1950, as amended, each Federal Reserve Bank is designated and authorized to act, on behalf of each guaranteeing agency, as fiscal agent of the United States in the making of contracts of guarantee and in otherwise carrying out the purposes of section 301 of the Defense Production Act of 1950, as amended, in respect of private financing institutions. Pursuant to Regulation V of the Board of Governors of the Federal Reserve System, any private financing institution may submit to the Federal Reserve Bank of its district an application for guarantee of a loan or credit. This application is in substantially standard form, as approved by the Board of Governors of the Federal Reserve System, after consultation with the guaranteeing agencies. Forms of application, and information and guidance concerning applications, are available at all Federal Reserve Banks. § 1-30.103 ity.

Advance payments-author

Advance payments on all contracts are authorized in accordance with the provisions of section 305 of the Property Act. When appropriate, advance payments by certain departments and agencies exercising functions in connection with the national defense are also authorized pur

suant to the Act of August 28, 1958, "to authorize the making, amendment, and modification of contracts to facilitate the national defense," (Public Law 85-804, 72 Stat. 972; 50 U.S.C. 1431-1435), and Executive Order No. 10789 of November 14, 1958 (3 CFR, 1954-1958 Comp., pp. 426428). (See Part 1-17 of this chapter.) § 1-30.104 Advance payments-description.

Advance payments are advances of money, made by the Government to a contractor prior to, in anticipation of, and for the purpose of complete performance under a contract or contracts. Advance payments are made only to prime contractors. They are expected to be liquidated from payments due to the contractor incident to performance of contracts. Since they are not measured by performance, they differ from partial, progress, or other payments made because of and on the basis of performance or part performance of a contract. Advance payments may be made to prime contractors for the purpose of making subadvances to subcontractors. § 1-30.104-1 Letters of credit.

Whenever the criteria set forth by the Department of the Treasury in Department Circular No. 1075, 3rd Revision, 38 FR 5242, February 27, 1973 (31 CFR Part 205), are met, the letter of credit method of financing advance payments must be used unless waived by the Department of the Treasury.

[40 FR 43728, Sept. 23, 1975]

§ 1-30.105 Progress payments-authority.

Progress payments are authorized in accordance with the provisions of section 305 of the Property Act.

§ 1-30.106 Progress payments-description.

The term "progress payments," as used In this part signifies payments made as work progresses under a contract, upon the basis of costs incurred, of percentage of completion accomplished, or of a particular stage of completion. As used in these regulations this term does not include payments for partial deliveries accepted by the Government under a contract, or partial payments on contract termination claims.

Partial payments are authorized in accordance with the provisions of section 305 of the Property Act.

§ 1-30.109 Partial payments—description.

The term "partial payments” as used herein means payments made under a contract, upon the submission of proper invoices or vouchers, for supplies delivered and accepted or services rendered and accepted, where such supplies or services are only a part of the total contract requirement. (See § 1-8.212-1 re partial payments upon termination.)

Subpart 1-30.2-Basic Policies

§ 1-30.200 Scope of subpart.

This subpart sets forth basic policies applicable to guaranteed loans, advance payments, partial payments, and progress payments; and also deals generally with payments to contractors. Policies and procedures more particularly pertaining to advance payments and progress payments are contained in Subparts 1-30.4 and 1-30.5, respectively. § 1-30.201 Acceleration of payments.

Executive agencies shall take such actions as is required to facilitate and accelerate the making of proper payments on all contracts when due, and shall adopt a liberal policy in making partial payments in order to assist business concerns in participating in Government procurement. This should minimize the need for contractors to request progress payments. Agencies shall develop and maintain standards and/or criteria against which agency payment actions can be evaluated relative to the Government's policy of prompt payment to contractors.

[29 FR 10356, July 24, 1964, as amended at 40 FR 43728, Sept. 23, 1975]

sonnel should utilize vigorously all proper means available to them for ascertainment and payment of amounts payable to contractors as rapidly as possible.

(b) Whenever it appears that it will be necessary to provide additional funds on contracts, it is of great importance that there be appropriate early action to assure the availability of funds for payment of amounts earned by contractors. Significant examples of situations in which it is of particular importance that there be timely and effective action, and no unnecessary Government delay, include: (1) Negotiation and agreement on amounts earned by contractors (i) pursuant to change orders or unilateral contract modifications, (ii) for other equitable adjustments pursuant to contracts, (iii) under contract provisions for price revision or fee adjustment, (iv) under contract provisions for payment for special tooling, and (v) for final payments on contract terminations; (2) finalization of actual overhead rates under contracts providing for provisional overhead billing rates; (3) contract provision to support billing and payment for (i) cost overruns properly incurred by contractors after appropriate notice in conformity to contract provisions, and (ii) spare parts deliveries effected before issuance of appropriate contract supplement; (4) definitization of letter contracts; and (5) appropriate release of any withholdings deemed unnecessary on contracts where deliveries and services have been completed and amounts being withheld pending final

are

settlements.

[29 FR 10356, July 24, 1964, as amended at 40 FR 43729, Sept. 23, 1975]

§ 1-30.203 Supplemental agreement.

After negotiations involving agreement on an amount to be paid to a contractor, an appropriate supplemental agreement should be prepared expeditiously and executed without delay. To the greatest extent practicable, all such supplemental agreements should be limited to appropriate coverage of the matters directly related and leading to the contemplated payment by the Government; and their preparation and issuance should not be held up pending the consummation of agreements on other separate matters on which contract amendments are desired or contemplated.

Immediate and continuing attention must be given to insure that constructive measures will be taken to facilitate and accelerate necessary contract financing assistance to small business concerns. Every reasonable effort must be made to assist small business concerns in the resolution of their problems relative to the financing of contract performance, including any cases in which it may be reasonably necessary to increase the rate for progress payments and to assist them in understanding and complying with the requirements of performance as to payment forms, inspection and cost accounting. However, the issuance of a certificate of competency by the Small Business Administration shall not be considered as a requirement that contract financing must be provided by the procuring activity.

§ 1-30.205 Purpose of contract financing.

Contract financing is to be regarded as a useful working tool that may be used to the benefit of the Government in aiding procurement by expediting production and delivery under Government contracts. Prudent contract financing supports procurement and production and fosters the small business policy by providing necessary funds to supplement other funds available to contractors for contract performance. § 1-30.206 Support of procurementminimizing monetary loss.

Financing must support procurement and should be designed to aid, not impede, essential procurement, but should be so administered as to avoid the risk of monetary loss to the Government to the extent compatible with aiding essential procurement.

§ 1-30.207 Reasonable need.

Government financing for production or services should be provided only if, and to the extent, reasonably required for prompt and efficient performance of Government contracts and subcontracts. § 1-30.208 Working capital purposes.

Guaranteed loans under section 301 of the Defense Production Act of 1950, as amended, are used primarily for working capital purposes and are not ordinarily used for loans for facilities expansion. However, it is not the intent of these

cases:

(a) Private financing on reasonable terms (without governmental guarantee)-supplemented when reasonably necessary by Government financing to the extent reasonably required;

(b) Customary progress payments, as described in § 1-30.503, including progress payments incident to "Small Business Restricted Advertising" or incident to procurement by formal advertising, as authorized herein (see § 1-30.504) except that guaranteed loans may be preferable to customary progress payments when so indicated by a contractor and financing institution; or progress payments based on percentage or stage of completion, confined to contracts for construction, alteration, or repair;

(c) Guaranteed loans (with financing institutions participating to an extent appropriate to the risk involved);

(d) All unusual progress payments, as described herein (§ 1-30.505), not including contracts involving advance payments;

(e) Advance payments (§ 1-30.408). However, see "Policy on Use of Advance Payments" with respect to research contracts or grants with nonprofit educational institutions (Part IV, Attachment A to Federal Management Circular 73-7, Administration of college and university research grants, December 19, 1973).

[29 FR 10356, July 24, 1964, as amended at 40 FR 43729, Sept. 23, 1975]

§ 1-30.210 Financing not a handicap.

(a) The need for advance payments or for progress payments or for a guaranteed loan (with reasonable percentage of guarantee) shall not be treated as a handicap in awarding contracts to those qualified contractors who are deemed competent and capable of satisfactory performance (see §§ 1-1.1204, 1-2.407, 130.211, and 1-30.212). The ability of the contractor to perform the contract, including the availability of money or credit necessary for performance, must be reasonably assured in all cases. Awards which are otherwise proper must not be deterred by the necessity for providing reasonable contract financing. A contractor deemed reliable, competent, capable, and otherwise responsible, must not be regarded as any less responsible by reason of the need for reasonable contract financing provided or guaranteed by a procuring agency. Responsible personnel must endeavor to assure that full, proper, and prudent use is made of contract financing, in such ways that financial difficulties will not bring about delay or failure in performance or result in monetary losses to the Government. In selection of an appropriate method for provision of funds, contractors will not be expected to seek or obtain loans or credit (1) at excessive interest rates or other exorbitant charges, or (2) from agencies of the Government other than the procurement agency.

(b) Before contract awards, contractors sometimes indicate that contract financing by guaranteed loan, progress payments or advance payments will not be required. In some of those cases, the need for such contract financing later arises, usually from changed circumstances differing from those projected at the time of the award. The fact that a contractor did not indicate before award that he would require contract financing, or that he stated that he would not require such financing, does not disqualify the contractor for proper contract financing conforming to these regulations and should not be permitted to deter such financing. Each such case should be dealt with and decided on its merits, without giving weight to the contractor's earlier error with regard to the need for contract financing.

[29 F.R. 10536, July 24, 1964, as amended at 36 F.R. 17422, Aug. 31, 19711