FAR 52.232-31 - Invitation to Propose Financing Terms

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Prescribed in 32.205(b) 32.206
Effective Date:	1 May 2014
Clause or Provision:	Provision
Provision or Clause Number:	52.232-31 - Invitation to Propose Financing Terms
Principle Type And/Or Purpose of Contract:
Required:
Applicable:	Fixed Price, Supply; Fixed Price, Service
Optional:	Utility Services; Simplified Acquisition Procedures (Excludes Micro-Purchase); Facilities; Indefinite Delivery; Dismantling, Demolition or Removal of Improvements; Leasing of Motor Vehicles; Fixed Price, Construction; Time & Material/Labor Hour; Cost Reimbursement, Construction; Cost Reimbursement, Supply; Cost Reimbursement, Service
Subject:
ProcurementType:
Contract Threshold:
Prescription Overview:	Prescription (b) Solicitations The contracting officer must include in the solicitation the provision at 52.232-31, Invitation to Propose Financing Terms. The contracting officer must also— (1) Specify the delivery payment (invoice) dates that will be used in the evaluation of financing proposals; and (2) Specify the interest rate to be used in the evaluation of financing proposals (see paragraph (c)(4) of this section). (c) Evaluation of proposals (1) When contract financing terms vary among offerors, the contracting officer must adjust each proposed price for evaluation purposes to reflect the cost of providing the proposed financing in order to determine the total cost to the Government of that particular combination of price and financing. (2) Contract financing results in the Government making payments earlier than it otherwise would. In order to determine the cost to the Government of making payments earlier, the contracting officer must compute the imputed cost of those financing payments and add it to the proposed price to determine the evaluated price for each offeror. (3) The imputed cost of a single financing payment is the amount of the payment multiplied by the annual interest rate, multiplied by the number of years, or fraction thereof, between the date of the financing payment and the date the amount would have been paid as a delivery payment. The imputed cost of financing is the sum of the imputed costs of each of the financing payments. (4) The contracting officer must calculate the time value of proposal-specified contract financing arrangements using as the interest rate the nominal discount rate specified in Appendix C of the Office of Management and Budget (OMB) Circular A-94, “Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs,” appropriate to the period of contract financing. Where the period of proposed financing does not match the periods in the OMB Circular, the interest rate for the period closest to the finance period shall be used. Appendix C is updated yearly, and is available from the Office of Economic Policy in the Office of Management and Budget (OMB). 32.206 Solicitation provisions and contract clauses (a) The contract shall contain the paragraph entitled “Payment” of the clause at 52.212-4, Contract Terms and Conditions—Commercial Items. If the contract will provide for contract financing, the contracting officer shall construct a solicitation provision and contract clause. This solicitation provision shall be constructed in accordance with 32.204 or 32.205. If the procedure at 32.205 is used, the solicitation provision at 52.232-31, Invitation to Propose Financing Terms, shall be included. The contract clause shall be constructed in accordance with the requirements of this subpart and any agency regulations. (b) Each contract financing clause shall include: (1) A description of the— (i) Computation of the financing payment amounts (see paragraph (c) of this section); (ii) Specific conditions of contractor entitlement to those financing payments (see paragraph (c) of this section); (iii) Liquidation of those financing payments by delivery payments (see paragraph (e) of this section); (iv) Security the contractor will provide for financing payments and any terms or conditions specifically applicable thereto (see 32.202-4); and (v) Frequency, form, and any additional content of the contractor’s request for financing payment (in addition to the requirements of the clause at 52.232-29, Terms for Financing of Purchases of Commercial Items; and (2) Unless agency regulations authorize alterations, the unaltered text of the clause at 52.232-29, Terms for Financing of Purchases of Commercial Items. (c) Computation of amounts, and contractor entitlement provisions (1) Contracts shall provide that delivery payments shall be made only for completed supplies and services accepted by the Government in accordance with the terms of the contract. Contracts may provide for commercial advance and commercial interim payments based upon a wide variety of bases, including (but not limited to) achievement or occurrence of specified events, the passage of time, or specified times prior to the delivery date(s). The basis for payment must be objectively determinable. The clause written by the contracting officer shall specify, to the extent access is necessary, the information and/or facilities to which the Government shall have access for the purpose of verifying the contractor’s entitlement to payment of contract financing. (2) If the contract is awarded using the offeror-proposed procedure at 32.205, the clause constructed by the contracting officer under paragraph (b)(1) of this section shall contain the following: (i) A statement that the offeror’s proposed listing of earliest times and greatest amounts of projected financing payments submitted in accordance with paragraph (d)(2) of the provision at 52.232-31, Invitation to Propose Financing Terms, is incorporated into the contract, and (ii) A statement that financing payments shall be made in the lesser amount and on the later of the date due in accordance with the financing terms of the contract, or in the amount and on the date projected in the listing of earliest times and greatest amounts incorporated in the contract. (3) If the security accepted by the contracting officer is the contractor’s financial condition, the contracting officer shall incorporate in the clause constructed under paragraph (b)(1) of this section the following— (i) A statement that the contractor’s financial condition has been accepted as adequate security for commercial financing payments; and (ii) A statement that the contracting officer may exercise the Government’s rights to require other security under paragraph (c), Security for Government Financing, of the clause at 52.232-29, Terms for Financing of Purchases of Commercial Items, in the event the contractor’s financial condition changes and is found not to be adequate security. (d) Instructions for multiple appropriations If contract financing is to be computed for the contract as a whole, and if there is more than one appropriation account (or subaccount) funding payments under the contract, the contracting officer shall include, in the contract, instructions for distribution of financing payments to the respective funds accounts. Distribution instructions and contract liquidation instructions must be mutually consistent. (e) Liquidation Liquidation of contract financing payments shall be on the same basis as the computation of contract financing payments; that is, financing payments computed on a whole contract basis shall be liquidated on a whole contract basis; and a payment computed on a line item basis shall be liquidated against that line item. If liquidation is on a whole contract basis, the contracting officer shall use a uniform liquidation percentage as the liquidation method, unless the contracting officer obtains the concurrence of the cognizant payment office that the proposed liquidation provisions can be executed by that office, or unless agency regulations provide alternative liquidation methods. (f) Prompt payment for commercial purchase payments The provisions of Subpart 32.9, Prompt Payment, apply to contract financing and invoice payments for commercial purchases in the same manner they apply to non-commercial purchases. The contracting officer is responsible for including in the contract all the information necessary to implement prompt payment. In particular, contracting officers must be careful to clearly differentiate in the contract between contract financing and invoice payments and between items having different prompt payment times. (g) Installment payment financing for commercial items Contracting officers may insert the clause at 52.232-30, Installment Payments for Commercial Items, in solicitations and contracts in lieu of constructing a specific clause in accordance with paragraphs (b) through (e) of this section, if the contract action qualifies under the criteria at 32.202-1(b) and installment payments for the item are either customary or are authorized in accordance with agency procedures. (1) Description. Installment payment financing is payment by the Government to a contractor of a fixed number of equal interim financing payments prior to delivery and acceptance of a contract item. The installment payment arrangement is designed to reduce administrative costs. However, if a contract will have a large number of deliveries, the administrative costs may increase to the point where installment payments are not in the best interests of the Government. (2) Authorized types of installment payment financing and rates. Installment payments may be made using the clause at 52.232-30, Installment Payments for Commercial Items, either at the 70 percent financing rate cited in the clause or at a lower rate in accordance with agency procedures. (3) Calculating the amount of installment financing payments. The contracting officer shall identify in the contract schedule those items for which installment payment financing is authorized. Monthly installment payment amounts are to be calculated by the contractor pursuant to the instructions in the contract clause only for items authorized to receive installment payment financing. (4) Liquidating installment payments. If installment payments have been made for an item, the amount paid to the contractor upon acceptance of the item by the Government shall be reduced by the amount of installment payments made for the item. The contractor’s request for final payment for each item is required to show this calculation.
Clause Overview:	Provision (a) The offeror is invited to propose terms under which the Government shall make contract financing payments during contract performance. The financing terms proposed by the offeror shall be a factor in the evaluation of the offeror’s proposal. The financing terms of the successful offeror and the clause, Terms for Financing of Purchases of Commercial Items, at 52.232-29, shall be incorporated in any resulting contract. (b) The offeror agrees that in the event of any conflict between the terms proposed by the offeror and the terms in the clause at 52.232-29, Terms for Financing of Purchases of Commercial Items, the terms of the clause at 52.232-29 shall govern. (c) Because of statutory limitations (10 U.S.C. 2307(f) and 41 U.S.C. 4505), the offeror’s proposed financing shall not be acceptable if it does not conform to the following limitations: (1) Delivery payments shall be made only for supplies delivered and accepted, or services rendered and accepted in accordance with the payment terms of this contract; (2) Contract financing payments shall not exceed 15 percent of the contract price in advance of any performance of work under the contract; (3) The terms and conditions of the contract financing must be appropriate or customary in the commercial marketplace; and (4) The terms and conditions of the contract financing must be in the best interests of the United States. (d) The offeror’s proposal of financing terms shall include the following: (1) The proposed contractual language describing the contract financing (see FAR 32.202-2 for appropriate definitions of types of payments); and (2) A listing of the earliest date and greatest amount at which each contract financing payment may be payable and the amount of each delivery payment. Any resulting contract shall provide that no contract financing payment shall be made at any earlier date or in a greater amount than shown in the offeror’s listing. (e) The offeror’s proposed prices and financing terms shall be evaluated to determine the cost to the United States of the proposal using the interest rate and delivery schedule specified elsewhere in this solicitation.
Important Notes/Requirements:
Subcontract Threshold:
Incorporated by Reference:	No
Uniform Contract Format:	L
Editor:	Marshall

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Personal notes.