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Chapter 1-Federal Procurement Regulations

When progress payments are contem. contemplated progress payment clause

30.511) and of any proposed guarantees

assumptions underlying cash forecasts progress payments, become known to s should be checked, as may be prudent procuring activity, pertinent facts, Inin the circumstances of the case, for rea cluding information as to remedial or sonableness and realism. This check protective action taken or proposed, ing should be done with the contractor, should be furnished by the procuring with Government personnel responsible activity to the appropriate financing in the areas of engineering, production activity so that timely appropriate proscheduling, cost and price analysis, and tective or remedial action may be taken with others (including prospective sup by coordinated action of all concerned ply, subcontract, and loan or credit However, the furnishing of such Inforsources).

mation does not relieve the personnel g 1-30.214,3 Estimated profit and loss

responsible for administration of the statements and balance sheets

contract from taking such action as is The cash budget or cash forecast does

deemed proper, prudent, and beneficial not show anticipated profit or loss, and

to the Government. When there are reais limited to the forecast of movements

sons to doubt the prudence of continuwithin a company's cash account. The

Ing progress payments or advance pay. concurrent submission of an estimated

ments in cases involving performance profit and loss statement covering the

difficulties or financial deterioration,

decision must be made promptly and same period serves to tie in the anticipated cash transactions with the esti

with proper regard to the harmful elmated sales and expense activity, and

fects of delay on the continued operaculminates in the estimated balance

tion of the contractors concerned. sheet position. The estimated profit and

$S 1-30.217–1-30.219 (Reserved] loss statement also can serve as a guide § 1-30.220 Foreign procurement. for evaluating the company's projections with respect to sales volume, cost

This Part 1-30 applies equally to do

mestic and foreign procurement, with of goods sold, gross profit and net profit in relation to the known results of past

the exceptions and qualifications stated performance. The Interrelationship be

below. The enforceability of a contract tween the cash budget, estimated profit

provision in a foreign jurisdiction is de and loss statement and estimated bal

pendent on local law and procedure. It ance sheet, covering a given period, is

may sometimes become necessary to Illustrated by the suggested formats ap

take action in foreign countrles to enpearing in g 1-30.218 for use in financia)

force collateral security or other conprojections.

tract financing protective provisions, or $1–30.215 Termination financing.

to recover property pursuant to a prog.

ress payment clause, and to collect con. It is recognized that adequate protec

tract financing indebtedness. In such tion against the financial Impact of ter

cases, the nature and extent of remedies mination of Government contracts and

avallable for enforcement of contract subcontracts will tend to encourage con

provisions is necessarily determined by tractors to invest their own funds in

the laws, rules, and procedures of the performance under such contracts. Ac

country in which the relief is sought. cordingly, termination financing may be made available, with appropriate pro

§ 1-30.220-1

Progress payments on tection of the Government's Interest,

contracts for foreign performance

. either in connection with or independently of performance financing (see § 1-8.212–1 regarding partial payments upon termination). 8 1-30.216 Report of adverse develop

ments-prompt decisions. When materially adverse developments concerning a borrower having a guaranteed loan, or concerning a contractor having advance payments or

involved. Such legal advice should also warranties and coven:
cover the need, if any, for additional set forth in $$ 1-30.41
protective provisions (1–30.511-6) or 414–2(r). It is recogn
for deviations ($ 1–30.509-9) from the payments to foreign g
uniform clauses, that may be required to authorized, will need to
comply with the applicable foreign law special circumstances
and to provide for the most effective provide appropriate
protection and enforcement of the in- light of the relations
terests of the United States.

States to each affecte 1-30.220–2_Advance payments on con.

ment and with due tracts for foreign performance.

sovereign status of th

ties.
When advance payments are proposed
for contracts to be performed wholly or

§ 1-30.220-3 Guara partly in a foreign country, the recom

eign contract peri mendation for advance payments (see When contracts or 11-30.412) should include appropriate be performed in a f legal advice as referred to in $ 1-30.220–1. nancing by means of When advance payments are proposed seldom will be prac to be made on contracts with foreign difficulties of loan a povernments, it is expected that the ad- enforcement. When Face payment arrangement, if ap- utilized for financing proved, would not include provisions or subcontracts, it i jezerally unsuitable for government-to- ally preferably that prernment agreements, such as those vided within the te special bank accounts, unilateral system of the foreign Tihdrawal of funds, liens, insurance, without the guarant

adiditional security, or representations, agency.

plated for contracts to be performed wholly or partly in a foreign country, appropriate legal advice should be obtained with respect to the validity, elforceability, and effectiveness of the

(see $$ 1-30.510-1, 1-30.510-2, and l-
pledges, or other special protective al
rangements, within the foreign country

uld also Iditional 1-6) or rom the quired to eign law effective the in

son conce. proposed holly or e recomnts (see ropriate 30.220-1. proposed

foreign the ad

if apovisions nent-toas those nilateral surance, ntations,

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 govern-
ment and with due recognition of the
sovereign status of the contracting par-
ties.
$ 1-30.220–3 Guaranteed loans for for.

eign contract performance.
When contracts or subcontracts are to
be performed in a foreign country, fi-
nancing by means of guaranteed loans
seldom will be practicable because of
difficulties of loan administration and
enforcement. When loans are to be
utilized for financing of such contracts
or subcontracts, it is considered gener-
ally preferably that the loans be pro-
vided within the internal financial
system of the foreign country concerned,
without the guarantee of the procuring
agency.

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search institutions for experimental, upon the following conditions:

(c) Interest on advance payments will be the unpald contract price;

(d) Interest rates established by the such determination shall be based formal advertising,

citate the national defense when the and subject to

ta written findings (see $ 1-30.410). In the Invitation

be credited to the account of the late and contracts awarded or to be
be charged on subadvances on subcon-, edvance payments under elther 1435, hereinafter re
provide or be amended to provide for alle interest when the action is pur- provisions of law r
and no such contract or subcontract may 14 the advance payment is in the hereafter made, wit
lowance of such interest as an item o to the authority of section 305 Including advance
Secretary of the Treasury pursuant to a written findings (see $ 1-30.410); contracts to provi
(29 FR 10356, July 24, 1964, as amended SP 1958, Public Law 85-804 (50 U.S.C. after awards of ce

191-1935), hereinafter referred to in petitive bids after
a Part 1-30 as "the Act," and Execu. well as on nego
i such determination shall be based for or with regar

lach agency, utilizing section 305 of Kance payments, should provide by be treated as no bea mairing findings and determinations ments or other

The responsibility and authority plemented by a the contract, and as a general rule shonk not exceed the interim cash needs arisini

6) Generally

, except for (1) contracts with respect to advance 51-30.400

with nonprofit educational or research in each case for approval institutions for experimental, develop- visions for advance pays metal

, or research work, and (2) con- proval of the terms tracta solely for the management and thereof (see $ 1-30.410) operation of Government-owned plants, cised at an organizati Ddvance payments should not be author ciently high to assure 2.d unless no other means of adequate tion of the policies set francing is available to the contractor 1-30; and Ist including loans or credit (i) at ex (b) Prior to commit oskite interest rates or other exorbitant ment to the making of harges

, or (i) from other agencies of ment, the approving ag the Government), and the amount of the obtain the advice and thorization is predicated upon use of head (or an authorized te contractor's own working capital to activity which is requir

tract finance advice an 3 FR 10956, July 24, 1964, as amended at procuring activity.

(31 F.R. 349, Jan. 12, 1966 § 1-30.407 The Acto

Public Law 85-804

tised contracts. (a) Pursuant to the

Title 41— Public Contracts, Property Management

socio-economic areas), or contracts
solely for the management and opera-
tion of Government-owned plants, or, in
other classes of cases when specifically
authorized by agency procedure. 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 contracts
requiring interest on advance payments.
This interest rate applies to increases
and extensions.

(b) Contracts with interest-free ad-
vance payments should provide that the
contractor will charge interest at the
rate established by the Secretary of the
Treasury pursuant to Pub. L. 92–41 on
subadvances or downpayments to sub-
contractors, and that interest charged on

subadvances or

as extent possible

4. TE 48729, Bept. 23, 1975)
11-30.405 Statutory requirements.

The statutes authorizing advance pay-
sets apply equally to negotiated con-

wurded by formal advertising. Accord- 1958, Public Law 85–8

Government. However, interest need not

tracts with nonprofit

devlopmental, or research work (includ-
ing studies, surveys, and demonstrations
in socio-economic areas).

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)). 81-30.401 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 addi

tion to progress or partial payments. Where necessary and in accordance with this Part 1–30, advance payments inay 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 the rate established by the Secretary of the Treasury pursuant to Pub. L. 92–41, 85 Stat. 97, for the Renegotiation Board. The rate in effect at the time the advance payment is authorized shall be used throughout the term of repayment for advances made under this Subpart 1-30.4. However, advance payments may be approved without interest in connection with contracts with nonprofit educational or research institutions for experimental, developmental, or research work (including studies, surveys, and demonstrations in

tsbod of contracting may be made $1-30.407 as "the A

Order No. 10789 of * The contractor shall give adequate (3 CFR, 1954–1958 C kunty see f 1-30.413);

as amended by Execu The advance payments shall not of October 2, 1962,

to in this $1-30.407 0) A determination shall be made order," certain aged the agency head, or his authorized

are authorized to sebagate (see $ 1-30.406), that the mak- ments under contı

not be allowed as a cost under any costo
reimbursement type contract nor cost
reimbursement subcontract thereunder,

the property Act or 10 U.S.C. 2307, tracts awarded on

cost.

Pub. L. 92-41, 85 Stat. 97 may be ob-
tained from the Chief, Investment
Branch, Bureau of Government Finan-
cial Operations, Department of the
Treasury, Washington, DC 20220, Tele.
phone (202) 964–5651.

d A determination shall be made by Le agency head, or his authorized deleDhee (see $$ 1-30.406 and 1–17.301), that

e making of the advance payment will

ments, whenever will be facilitated t

(b) Pursuant to ecutive order (as the Property Act

kion is pursuant to the Act of August

vance payments

Order No. 10789 (see Part 1-17)

withstanding the

11-20.406 Responsibility – delegation

40 FR 43729, Sept. 23, 1975)
§ 1–30.404 Standards amounts-need

(a) Advance payments should be used
sparingly and care should be taken
see that advances outstanding are suf;
cient for but do not exceed the actual
reasonable requirements for the contract
The amount of the advance payment !
any case should be based upon an
ysis of the cash flow required under

of authority.

8 Property Act or other authority for

anal

rejected II they fied, or limited 11 awards can be for advance pa

ko se procedure that:

contain, or are

during the reimbursement cycle.

847

(b) Generally, except for (1) contracts with nonprofit educational or research institutions for experimental, developmental, or research 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. [29 FR 10356, July 24, 1964, as amended at 40 FR 43729, Sept. 23, 1975) 31-30.405 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). $ 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 contract finance advice and assistance to the procuring activity. 131 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 cther 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, quallfied, 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

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