assumptions underlying cash forecasts should be checked, as may be prudent in the circumstances of the case, for reasonableness and realism. This checking should be done with the contractor, with Government personnel responsible in the areas of engineering, production scheduling, cost and price analysis, and with others (including prospective supply, subcontract, and loan or credit sources).

§ 1-30.214-3 Estimated profit and loss statements and balance sheets.

The cash budget or cash forecast does not show anticipated profit or loss, and is limited to the forecast of movements within a company's cash account. The concurrent submission of an estimated profit and loss statement covering the same period serves to tie in the anticipated cash transactions with the estimated sales and expense activity, and culminates in the estimated balance sheet position. The estimated profit and loss statement also can serve as a guide for evaluating the company's projections with respect to sales volume, cost of goods sold, gross profit and net profit in relation to the known results of past performance. The interrelationship between the cash budget, estimated profit and loss statement and estimated balance sheet, covering a given period, is illustrated by the suggested formats appearing in § 1-30.218 for use in financial projections.

§ 1-30.215 Termination financing.

It is recognized that adequate protection against the financial impact of termination of Government contracts and subcontracts will tend to encourage contractors to invest their own funds in performance under such contracts. Accordingly, termination financing may be 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. §§ 1-30.217-1-30.219

[Reserved]

§ 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 1– 30.511) 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 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 generally preferably that the loans be provided within the internal financial system of the foreign country concerned, without the guarantee of the procuring agency.

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

Assets;

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 addi

tion 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).

(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

socio-economic areas), or contracts solely for the management and operation 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 advance 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 subcontractors, and that interest charged on such subadvances or downpayments will be credited to the account of the Government. However, interest need not be charged on subadvances on subcontracts with nonprofit educational or research institutions for experimental, devlopmental, or research work (including studies, surveys, and demonstrations in socio-economic areas).

(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.

(d) Interest rates established by the Secretary of the Treasury pursuant to Pub. L. 92-41, 85 Stat. 97 may be obtained from the Chief, Investment Branch, Bureau of Government Financial Operations, Department of the Treasury, Washington, DC 20220, Tele. phone (202) 964-5651.

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