[Federal Register Volume 59, Number 87 (Friday, May 6, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10802]


[[Page Unknown]]

[Federal Register: May 6, 1994]


_______________________________________________________________________

Part II

Department of Defense

General Services Administration

National Aeronautics and Space Administration
_______________________________________________________________________



48 CFR Parts 32 and 52




Federal Acquisition Regulation; Prompt Payment Act; Proposed Rule
DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 32 and 52

[FAR Case 91-91]

 
Federal Acquisition Regulation; Prompt Payment Act

AGENCY: Department of Defense (DOD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council are proposing changes to the Federal 
Acquisition Regulation (FAR) to amend FAR policies and clauses on 
Prompt Payment. This proposed rule, in combination with changes made by 
Federal Acquisition Circular 84-45, dated March 31, 1989, will complete 
the implementation of changes made in OMB Circular A-125 (Revised), 
dated December 12, 1989, to comply with the Prompt Payment Act 
Amendments of 1988 (Public Law 100-496). Changes are also proposed to 
clarify, simplify, and correct inconsistencies in the existing FAR text 
and clauses. This regulatory action was not subject to Office of 
Management and Budget review pursuant to Executive Order No. 12866 
dated September 30, 1993.

DATES: Comments should be submitted to the FAR Secretariat at the 
address shown below on or before July 5, 1994 to be considered in the 
formulation of a final rule.

ADDRESSES: Interested parties should submit written comments to: 
General Services Administration, FAR Secretariat (VRS), 18th and F 
Streets, NW, Room 4037, Attn: Ms. Beverly Fayson, Washington, DC 20405. 
Please cite FAR case 91-91 in all correspondence related to this case.

FOR FURTHER INFORMATION CONTACT:
Mr. Jeremy Olson at (202) 501-3221 in reference to this FAR case. For 
general information, contact the FAR Secretariat, Room 4037, GS 
Building, Washington, DC 20405, (202) 501-4755. Please cite FAR case 
91-91.

SUPPLEMENTARY INFORMATION: 

A. Background

    Federal Acquisition Circular (FAC) 84-45 published a final FAR rule 
in the Federal Register at 54 FR 13332, March 31, 1989, to implement 
changes required by the Prompt Payment Act Amendments of 1988 (Public 
Law 100-496). The Office of Management and Budget (OMB) implemented the 
statutory requirements by revising OMB Circular A-125, Prompt Payment. 
The Circular was published as a final rule in the Federal Register on 
December 21, 1989, and became effective 30 days after publication. 
OMB's final guidance differed somewhat from earlier proposed coverage 
which served as the basis for the FAR changes published in FAC 84-45. 
This proposed FAR rule implements the guidance published in OMB 
Circular A-125 (Revised).
    Major FAR changes proposed include: (1) Clarifying policy on 
partial payments for partial performance by establishing coverage at 
FAR 32.102(d) and 32.903(f); (2) revising and adding definitions at FAR 
32.902 to be in consonance with definitions in OMB Circular A-125 and 
to make related editorial changes; (3) adding coverage at FAR 32.904 to 
address an ongoing problem with contracts containing more than one set 
of payment terms; (4) clarifying policy at FAR 32.905(a)(1)(ii) 
concerning use of extended acceptance periods; (5) adding coverage at 
FAR 32.905(c)(6) to address construction prime contractor certification 
requirements under the clause at FAR 52.232-5; (6) adding coverage at 
FAR 32.905(j) to address the use and payment of ``mixed'' invoices; (7) 
adding coverage at FAR 32.907-1(b)(3) concerning interest penalties in 
relation to electronic funds transfers; (8) adding coverage at FAR 
32.907-1(g) concerning additional interest penalties and contractor 
demands for such penalties; (9) adding coverage at FAR 32.910 to 
address construction contractors' payment of interest on unearned 
amounts under the clauses at FAR 52.232-5 and 52.232-27; and (10) 
revising the clause at FAR 52.232-5 to include the specific criteria 
required by A-125 for construction contractors' requests for progress 
payments. FAR clauses 52.232-5, 52.232-8, and 52.232-25, 52.232-26, 
52.232-27, and 52.232-28 are amended to reflect the proposed FAR text 
changes. In addition, numerous changes are proposed to clarify, 
simplify, and correct inconsistencies in the existing FAR text and 
clauses. (Note: The requirements that no late payment penalty payments 
be made to certain foreign vendors were removed from the FAR by FAC 90-
20, Item XIII, March 10, 1994, 59 FR 11368.)

B. Regulatory Flexibility Act

    The proposed changes to FAR 32.102, subpart 32.9, and related part 
52 clauses at 52.232-5, 52.232-8, 52.232-25, 52.232-26, 52.232-27, and 
52.232-28 may have a significant economic impact on a substantial 
number of small entities within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601, et seq., because the proposed rule will 
apply to all small businesses who contract with the Federal Government 
and to all small businesses who enter into construction contracts with 
contractors holding prime Federal construction contracts. An Initial 
Regulatory Flexibility Analysis (IRFA) has been prepared and will be 
provided to the Chief Counsel for Advocacy for the Small Business 
Administration. A copy of the IRFA may be obtained from the FAR 
Secretariat. Comments are invited. Comments from small entities 
concerning the affected FAR subparts will also be considered in 
accordance with 5 U.S.C. 610. Such comments must be submitted 
separately and should cite 5 U.S.C. 601, et seq. (FAR case 91-91), in 
correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
changes to the FAR do not impose recordkeeping information collection 
requirements, or collections of information from offerors, contractors, 
or members of the public which require the approval of the Office of 
Management and Budget under 44 U.S.C. 3501, et seq. Approval for the 
affected FAR segments was originally provided under OMB Control Number 
9000-0102.

List of Subjects in 48 CFR Parts 32 and 52

    Government procurement.

    Dated: April 29, 1994.
Albert A. Vicchiolla,
Director, Office of Federal Acquisition Policy.

    Therefore, it is proposed that 48 CFR parts 32 and 52 be amended as 
set forth below:
    1. The authority citation for 48 CFR parts 32 and 52 continues to 
read as follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 32--CONTRACT FINANCING

    2. Section 32.102 is amended by revising paragraph (d) to read as 
follows:


32.102  Description of contract financing methods.

* * * * *
    (d) Partial payments for accepted supplies and services that are 
only a part of the contract requirements are authorized under section 
305 of the Federal Property and Administrative Services Act (41 U.S.C. 
255). OMB Circular A-125, Prompt Payment, requires agencies to pay for 
partial delivery of supplies or partial performance of services unless 
specifically prohibited by the contract. Although partial payments are 
generally treated as a method of payment and not as a method of 
contract financing, using partial payments can assist contractors to 
participate in Government contracts without, or with minimal, contract 
financing. When appropriate, contract statements of work and pricing 
arrangements shall be designed to permit acceptance and payment for 
discrete portions of the work, as soon as accepted (but see 
32.903(f)(2)).
* * * * *
    3. Section 32.902 is amended by revising the definitions ``Day'', 
``Designated billing office'', ``Discount for prompt payment'', and 
``Payment date''; and adding, in alphabetical order, the definitions 
``Invoice'' and ``Specified payment date'' to read as follows:


32.902  Definitions.

* * * * *
    Day, as used in this subpart, means calendar day, including 
weekends and holidays, unless otherwise indicated. (However, see 
32.903(e)(3) concerning payments due on Saturdays, Sundays, and legal 
holidays.)
    Designated billing office, as used in this subpart, means the 
office or person (governmental or nongovernmental) designated in the 
contract where the contractor first submits invoices and contract 
financing requests. This might be the Government disbursing office, 
contract administration office, office accepting the supplies delivered 
or services performed by the contractor, contract audit office, or a 
nongovernmental agent. In some cases, different offices might be 
designated to receive invoices and contract financing requests.
* * * * *
    Discount for prompt payment means an invoice payment reduction 
voluntarily offered by the contractor, in conjunction with the clause 
at 52.232-8, Discounts for Prompt Payment, if payment is made by the 
Government prior to the due date. The due date is calculated from the 
date of the contractor's invoice. If the contractor has not placed a 
date on the invoice, the due date is calculated from the date the 
designated billing office receives a proper invoice, provided the 
agency annotates such invoice with the date of receipt at the time of 
receipt. When the discount date falls on a Saturday, Sunday, or legal 
holiday when Federal Government offices are closed and Government 
business is not expected to be conducted, payment may be made on the 
following business day and a discount may be taken.
* * * * *
    Invoice means a contractor's bill or written request for payment 
under the contract for supplies delivered or services performed.
* * * * *
    Payment date means the date on which a check for payment is dated 
or the date an electronic funds transfer is specified for settlement at 
a Federal Reserve Bank (see 32.903(e)(2)).
* * * * *
    Specified payment date means, for an electronic funds transfer 
(EFT) payment, the date which the Government has placed in the EFT 
payment transaction instruction given to the transfer network, as the 
date on which funds are to be transferred to the contractor's financial 
institution.
    4. Section 32.903 is revised to read as follows:


32.903  Policy.

    (a) All solicitations and contracts subject to this subpart shall 
specify payment procedures, payment due dates, and interest penalties 
for late invoice payment.
    (b) The Government shall not make invoice and contract financing 
payments earlier than 7 days prior to the due dates specified in the 
contract unless the agency head, or designee, determines to make 
earlier payment on a case-by-case basis (see 32.908 for required 
clauses).
    (c) Payment will be based on receipt of a proper invoice or 
contract financing request and satisfactory contract performance.
    (d) Agency procedures shall ensure that, when specifying due dates, 
full consideration is given to the time reasonably required by 
Government officials to fulfill their administrative responsibilities 
under the contract.
    (e)(1) Checks shall be mailed on the same day they are dated.
    (2) Payments made by electronic funds transfer shall be specified 
by the Government (see 32.902 definition of specified payment date) for 
settlement at a Federal Reserve Bank on or before the established due 
date.
    (3) When the due date falls on a Saturday, Sunday, or legal holiday 
when Federal Government offices are closed and Government business is 
not expected to be conducted, payment may be made on the following 
business day without incurring a late payment interest penalty.
    (f)(1) Contracting officers shall, where the nature of the work 
permits, write contract statements of work and pricing arrangements 
that allow contractors to deliver, and receive invoice payments for, 
discrete portions of the work as soon as completed and found acceptable 
by the Government (see 32.102(d)).
    (2) Unless specifically prohibited by the contract, the contractor 
is entitled to payment for accepted partial deliveries of supplies or 
partial performance of services that comply with all applicable 
contract requirements and for which prices can be calculated from the 
contract terms.
    (3) Under some types of contracts, such as many cost-reimbursement 
contracts, partial payments cannot be made because the invoice price 
cannot be determined until after settlement of total contract costs and 
other contract-wide final arrangements. However, interim payments or 
contract financing payments may be made in accordance with the terms of 
the contract.
    (g) Discounts for prompt payment offered by the contractor shall be 
taken only when payments are made within the discount period specific 
by the contractor.
    (h) Agencies shall pay an interest penalty, without request from 
the contractor, for late invoice payments or improperly taken discounts 
for prompt payment. The interest penalty shall be absorbed within funds 
available for administration or operation of the program for which the 
penalty was incurred. The temporary unavailability of funds to make a 
timely payment does not relieve an agency from the obligation to pay 
interest penalties or the additional interest penalties discussed in 
32.903(i) and 32.907-1(g).
    (i) For contracts awarded after October 1, 1989, if the interest 
penalty is not paid within 10 days after it is due and the contractor 
makes a written demand for payment within 40 days after payment of the 
principal amount due, agencies shall pay an additional penalty amount, 
which shall be calculated in accordance with 32.907-1(g).
    (j) If the contractor has assigned a contractor identifier (such as 
an invoice number) to an invoice or financing request, each payment 
shall use the contractor identifier (in addition to any Government or 
contract information) in describing any payment made.
    5. Section 32.904 is revised to read as follows:


32.904  Responsibilities.

    (a) Agency heads--
    (1) Shall establish policies and procedures to implement this 
subpart;
    (2) May prescribe additional standards for establishing due dates 
on voice payments (32.905) and contract financing payments (32.906) 
necessary to support agency programs and foster prompt payment to 
contractors;
    (3) May adopt different payment procedures to accommodate unique 
circumstances, provided such procedures are consistent with the 
policies in this subpart; and
    (4) Shall inform contractors of points of contact within their 
cognizant payment offices to enable contractors to obtain status of 
invoices.
    (b) Contracting officers, in drafting solicitations and contracts, 
shall identify for each contract line item number, subline item number, 
or exhibit line item number--
    (1) Which of the applicable Prompt Payment clauses applies to each 
item when the solicitation or contract contains items which will be 
subject to different payment terms; and
    (2) The applicable Prompt Payment food category (i.e., which item 
numbers are meat or meat food products, which are perishable 
agricultural commodities, etc.), when using the clause at 52.232-25 
which contains multiple payment terms for various classes of foods and 
edible products.
    6. Section 32.905 is revised to read as follows:


32.905  Invoice payments.

    (a) Except as prescribed in paragraphs (b), (c), and (d) of this 
section, the due date for making an invoice payment by the designated 
payment office shall be as follows:
    (1) The 30th day after the designated billing office has received a 
proper invoice from the contractor (except as provided in paragraph 
(a)(2) of this section); or the 30th day after Government acceptance of 
supplies delivered or services performed by the contractor, whichever 
is later.
    (i) On a final invoice where the payment amount is subject to 
contract settlement actions, acceptance shall be deemed to have 
occurred on the effective date of the contract settlement.
    (ii) For the sole purpose of computing an interest penalty that 
might be due the contractor, Government acceptance shall be deemed to 
have occurred constructively on the 7th day after the contractor has 
delivered supplies or performed services in accordance with the terms 
and conditions of the contract, unless there is a disagreement over 
quantity, quality, or contractor compliance with a contract 
requirement. In the event that actual acceptance occurs within the 
constructive acceptance period, the determination of an interest 
penalty shall be based on the actual date of acceptance. The 
constructive acceptance requirement does not, however, compel 
Government officials to accept supplies or services, perform contract 
administration functions, or make payment prior to fulfilling their 
responsibilities. Except in the case of a contract for the purchase of 
a commercial item or service as defined in 15.804-3(c)(3), including a 
brand name commercial item for authorized resale (e.g., commissary 
items), the contracting officer may specify a longer period for 
constructive acceptance in the solicitation and resulting contract, if 
required to afford the Government a reasonable opportunity to inspect 
and test the supplies furnished or to evaluate the services performed. 
The contract file shall indicate the justification for extending the 
constructive acceptance period beyond 7 days. Extended acceptance 
periods shall not be a routine agency practice but shall be used only 
when necessary to permit proper Government inspection and testing of 
the supplies delivered or services rendered.
    (iii) If the contract does not require submission of an invoice for 
payment (e.g., periodic lease payments), the due date will be as 
specified in the contract.
    (2) If the designated billing office fails to annotate the invoice 
with the actual date of receipt at the time of receipt, the invoice 
payment due date shall be the 30th day after the date of the 
contractor's invoice, provided a proper invoice is received and there 
is no disagreement over quantity, quality, or contractor compliance 
with contract requirements.
    (b) The due date for making payments on contracts that contain the 
clause at 52.232-10, Payments under Fixed-Price Architect-Engineer 
Contracts, shall be as follows:
    (1) The due date for work or services completed by the contractor 
shall be the later of the following two events:
    (i) The 30th day after the designated billing office has received a 
proper invoice from the contractor.
    (ii) The 30th day after Government acceptance of the work or 
services completed by the contractor. On a final invoice where the 
payment amount is subject to contract settlement actions (e.g., release 
of claims), acceptance shall be deemed to have occurred on the 
effective date of the settlement. For the sole purpose of computing an 
interest penalty that might be due the contractor, Government 
acceptance shall be deemed to have occurred constructively on the 7th 
day after the contractor has completed the work or services in 
accordance with the terms and conditions of the contract (see also 
paragraph (b)(4) of this section). In the event that actual acceptance 
occurs within the constructive acceptance period, the determination of 
an interest penalty shall be based on the actual date of acceptance.
    (2) The due date for progress payments shall be the 30th day after 
Government approval of contractor estimates of work or services 
accomplished. For the sole purpose of computing an interest penalty 
that might be due the contractor, Government approval shall be deemed 
to have occurred constructively on the 7th day after contractor 
estimates have been received by the designated billing office (see also 
paragraph (b)(4) of this section). In the event that actual approval 
occurs within the constructive approval period, the determination of an 
interest penalty shall be based on the actual date of approval.
    (3) If the designated billing office fails to annotate the invoice 
or payment request with the actual date of receipt at the time of 
receipt, the payment due date shall be the 30th day after the date of 
the contractor's invoice or payment request, provided a proper invoice 
or payment request is received and there is no disagreement over 
quantity, quality, or contractor compliance with contract requirements.
    (4) The constructive acceptance and constructive approval 
requirements described in paragraphs (b)(1) and (b)(2) of this section 
are conditioned upon receipt of a proper payment request and no 
disagreement over quantity, quality, contractor compliance with 
contract requirements, or the requested progress payment amount. These 
requirements do not compel Government officials to accept work or 
services, approve contractor estimates, perform contract administration 
functions, or make payment prior to fulfilling their responsibilities. 
The contracting officer may specify a longer period for constructive 
acceptance or constructive approval, if required to afford the 
Government a reasonable opportunity to inspect and test the supplies 
furnished or to evaluate the services performed.
    (c) The due date for making payments on construction contracts 
shall be as follows:
    (1) The due date for making progress payments based on contracting 
officer approval of the estimated amount and value of work or services 
performed, including payments for reaching milestones in any project, 
shall be 14 days after receipt of a proper payment request by the 
designated billing office. If the designated billing office fails to 
annotate the payment request with the actual date of receipt at the 
time of receipt, the payment due date shall be the 14th day after the 
date of the contractor's payment request, provided a proper payment 
request is received and there is no disagreement over quantity, 
quality, or contractor compliance with contract requirements. The 
contracting officer may specify a longer period in the solicitation and 
resulting contract if required to afford the Government a reasonable 
opportunity to adequately inspect the work and to determine the 
adequacy of the contractor's performance under the contract. The 
contract file shall indicate the justification for extending the due 
date beyond 14 days. The contracting officer or his representative 
shall not approve progress payment requests unless the certification 
and substantiation of amounts requested are provided as required by the 
clause at 52.232-5, Payments under Fixed-Price Construction Contracts.
    (2) The due date for payment of any amounts retained by the 
contracting officer in accordance with the clause at 52.232-5, Payments 
under Fixed-Price Construction Contracts, shall be as specified in the 
contract or, if not specified, 30 days after approval by the 
contracting officer for release to the contractor. This release of 
retained amounts shall be based on the contracting officer's 
determination that satisfactory progress has been made.
    (3) The due date for final payments based on completion and 
acceptance of all work (including any retained amounts), and payments 
for partial deliveries that have been accepted by the Government (e.g., 
each separate building, public work, or other division of the contract 
for which the price is stated separately in the contract) shall be as 
follows:
    (i) Either the 30th day after receipt by the designated billing 
office of a proper invoice from the contractor, or the 30th day after 
Government acceptance of the work or services completed by the 
contractor, whichever is later. If the designated billing office fails 
to annotate the invoice with the actual date of receipt at the time of 
receipt, the invoice payment due date shall be the 30th day after the 
date of the contractor's invoice, provided a proper invoice is received 
and there is no disagreement over quantity, quality, or contractor 
compliance with contract requirements.
    (ii) On a final invoice where the payment amount is subject to 
contract settlement action (e.g., release of contractor claims), 
acceptance shall be deemed to have occurred on the effective date of 
the contract settlement.
    (4) For the sole purpose of computing an interest penalty that 
might be due the contractor for payments described in paragraph 
(c)(3)(i) of this section, Government acceptance or approval shall be 
deemed to have occurred constructively on the 7th day after the 
contractor has completed the work or services in accordance with the 
terms and conditions of the contract (see also paragraph (c)(5) of this 
section). In the event that actual acceptance occurs within the 
constructive acceptance period, the determination of an interest 
penalty shall be based on the actual date of acceptance.
    (5) The constructive acceptance and constructive approval 
requirements described in paragraph (c)(4) of this section are 
conditioned upon receipt of a proper payment request and no 
disagreement over quantity, quality, contractor compliance with 
contract requirements, or the requested amount. These requirements do 
not compel Government officials to accept work or services, approve 
contractor estimates, perform contract administration functions, or 
make payment prior to fulfilling their responsibilities. The 
contracting officer may specify a longer period for constructive 
acceptance or constructive approval in the solicitation and resulting 
contract, if required to afford the Government a reasonable opportunity 
to adequately inspect the work and to determine the adequacy of the 
contractor's performance under the contract.
    (6) Construction prime contracts contain special provisions 
concerning prime contractor payments to subcontractors, along with 
special prime contractor certification requirements. The Office of 
Management and Budget has determined that these certifications are not 
to be construed as final acceptance of the subcontractor's performance. 
The certification in 52.232-5(c) implements this determination; 
however, certificates are still acceptance if the contractor deletes 
paragraph (c)(4) of 52.232-5.
    (d) Due dates for payments of contractor invoices for meat, meat 
food products, or fish; perishable agricultural commodities; and dairy 
products, edible fats or oils, and food products prepared from edible 
fats or oils are as follows:
    (1) For meat or meat food products, as defined in section 2(a)(3) 
of the Packers and Stockyard Act of 1921 (7 U.S.C. 182(3)), as further 
defined in Public Law 98-181, including any edible fresh or frozen 
poultry meat, any perishable poultry meat food product, fresh eggs, and 
any perishable egg product, as close as possible to, but not later 
than, the 7th day after product delivery.
    (2) For fresh or frozen fish, as defined in section 204(3) of the 
Fish and Seafood Promotion Act of 1986 (16 U.S.C. 4003(3)), will be as 
close as possible to, but not later than, the 7th day after product 
delivery.
    (3) For perishable agricultural commodities, as defined in section 
1(4) of the Perishable Agricultural Commodities Act of 1930 (7 U.S.C. 
499a(4)), as close as possible to, but not later than, the 10th day 
after product delivery, unless another date is specified in the 
contract.
    (4) For dairy products, as defined in section 111(e) of the Dairy 
Production Stabilization Act of 1983 (7 U.S.C. 4502(e)), edible fats or 
oils, and food products prepared from edible fats or oils, as close as 
possible to, but not later than, the 10th day after the date on which a 
proper invoice has been received. Liquid milk, cheese, certain 
processed cheese products, butter, yogurt, ice cream, mayonnaise, salad 
dressings, and other similar products, fall within this classification. 
Nothing in the Act limits this classification to refrigerated products. 
When questions arise about the proper classification of a specific 
product, prevailing industry practices should be followed in specifying 
a contract payment due date. The burden of proof that a classification 
of a specific product is, in fact, prevailing industry practice is upon 
the bidder making the representation.
    (e) A proper invoice must include the items listed in paragraphs 
(e)(1) through (e)(8) of this section. If the invoice does not comply 
with these requirements, the contractor must be notified of the defect 
within 7 days after receipt of the invoice at the designated billing 
office (3 days on contracts for meat, meat food products, or fish; 5 
days on contracts for perishable agricultural commodities, dairy 
products, edible fats or oils, and food products prepared from edible 
fats or oils). The reason that the invoice is not a proper invoice must 
be specified. If such notice is not timely, then an adjusted due date 
for the purpose of determining an interest penalty, if any, will be 
established in accordance with 32.907-1(b).
    (1) Name and address of the contractor.
    (2) Invoice date. (Contractors are encouraged to date invoices as 
close as possible to the date of mailing or transmission.)
    (3) Contract number or other authorization for supplies delivered 
or services performed (including order number and contract line item 
number).
    (4) Description, quantity, unit of measure, unit price, and 
extended price of supplies delivered or services performed.
    (5) Shipping and payment terms (e.g., shipment number and date of 
shipment, Prompt Payment discount terms). Bill of lading number and 
weight of shipment will be shown for shipments on Government bills of 
lading.
    (6) Name and address of contractor official to whom payment is to 
be sent (must be the same as that in the contract or in a proper notice 
of assignment).
    (7) Name (where practicable), title, phone number, and mailing 
address of person to be notified in event of a defective invoice.
    (8) Any other information or documentation required by the contract 
(such as evidence of shipment).
    (9) While not required, contractors are strongly encouraged to 
assign an identification number to each invoice.
    (f) All invoice payments shall be supported by a receiving report 
or any other Government documentation authorizing payment. The agency 
receiving official should forward the receiving report or other 
Government documentation to the designated payment office by the 5th 
working day after Government acceptance or approval, unless other 
arrangements have been made. This period of time does not extend the 
due dates prescribed in 32.905. Acceptance should be completed as 
expeditiously as possible. The receiving report or other Government 
documentation authorizing payment shall, as a minimum, include the 
following:
    (1) Contract number or other authorization for supplies delivered 
or services performed.
    (2) Description of supplies delivered or services performed.
    (3) Quantities of supplies received and accepted, if applicable.
    (4) Date supplies delivered or services performed.
    (5) Date supplies or services were accepted by the designated 
Government official (or progress payment request was approved if being 
made under the clause at 52.232-5, Payments under Fixed-Price 
Construction Contracts, or the clause at 52.232-10, Payments under 
Fixed-Price Architect-Engineer Contracts).
    (6) Signature, or when permitted by agency regulations, electronic 
equivalent, printed name, title, mailing address, and telephone number 
of the designated Government official responsible for acceptance or 
approval functions.
    (7) If the contract provides for the use of Government certified 
invoices in lieu of a separate receiving report, the Government 
certified invoice must also contain the information described in 
paragraphs (f)(1) through (f)(6) of this section.
    (g) When a discount for prompt payment is to be taken, payment will 
be made as close as possible to, but not later than, the end of the 
discount period. Payment terms are specified in the clause at 52.232-8, 
Discounts for Prompt Payment.
    (h) The designated billing office shall immediately annotate each 
invoice with the actual date it receives the invoice.
    (i) The designated payment office shall annotate each invoice and 
receiving report with the date a proper invoice or receiving report was 
received by the designated payment office.
    (j) Contractors may be encouraged, but cannot be required to submit 
separate invoices for products with different payment due dates under 
the same contract or order. When an invoice is received which contains 
items with different payment periods (a mixed invoice), the payment 
office shall comply with all contractual and statutory payment 
provisions. In dealing with mixed invoices the payment office may, 
subject to agency policy--
    (1) Pay all items at the later of the due dates, provided 
applicable interest penalties are also paid;
    (2) Pay all items at the earlier of the due dates; or
    (3) Split invoice payments, making payment by the due date 
applicable to each payment class.


32.906  [Amended]

    7. Section 32.906 is amended in the first sentence of paragraph (a) 
by inserting the words ``or designee,'' after the word ``head,''.
    8. Section 32.907-1 is amended in paragraphs (a)(1) and (a)(2) by 
removing the words ``has been'' and inserting ``was'' in their place; 
and by revising paragraphs (b), (d), and (g) to read as follows:


32.907-1  Late invoice payment.

* * * * *
    (b) The interest penalty computation shall not include--
    (1) The time taken by the Government to notify the contractor of a 
defective invoice, unless it exceeds the periods prescribed in 
32.905(e);
    (2) The time taken by the contractor to correct the invoice. If the 
designated billing office failed to notify the contractor of a 
defective invoice within the periods prescribed in 32.905(e), the due 
date on the corrected invoice will be adjusted by subtracting from such 
date the number of days taken beyond the prescribed notification of 
defects period. Any interest penalty owed the contractor will be based 
on this adjusted due date; and
    (3) The period between the date of an attempted electronic funds 
transfer and the date the contractor furnishes correct electronic funds 
transfer data; provided, the Government notifies the contractor of the 
defective data within 7 days after the Government receives notice that 
the transfer could not be completed because of defective data.
* * * * *
    (d) The interest penalty shall be at the rate established by the 
Secretary of the Treasury under section 12 of the Contract Disputes Act 
of 1978 (41 U.S.C. 611) that is in effect on the day after the due 
date, except where the interest penalty is prescribed by other 
governmental authority (e.g., tariffs). The rate in effect on the day 
after the due date shall remain fixed during the period for which an 
interest penalty is calculated. This rate is referred to as the 
``Renegotiation Board Interest Rate,'' and it is published in the 
Federal Register semiannually on or about January 1 and July 1. 
Information concerning this interest rate can be obtained from the 
Department of the Treasury, Finance Management Branch, Washington, DC 
20227, telephone (202) 208-1515. Interest calculations shall be based 
upon a 360-day year. The interest penalty will accrue daily on the 
invoice payment amount approved by the Government and be compounded in 
30-day increments inclusive from the first day after the due date 
through the payment date. That is, interest accrued at the end of any 
30-day period will be added to the approved invoice payment amount and 
be subject to interest penalties if not paid in the succeeding 30-day 
period. The interest penalty amount, interest rate and the period for 
which the interest penalty was computed, will be separately stated by 
the designated payment office on the check, in accompanying remittance 
advice, or for Electronic Funds Transfer (EFT) by an appropriate 
electronic or other remittance advice. Adjustments will be made by the 
designated payment office for errors in calculating interest penalties.
* * * * *
    (g)(1) For contracts awarded on or after October 1, 1989, a penalty 
amount (calculated in accordance with paragraph (g)(3) of this section) 
shall be paid, in addition to the interest penalty amount, only if the 
contractor--
    (i) Is owed an interest penalty;
    (ii) Is not paid the interest penalty within 10 days after the date 
the invoice amount is paid; and
    (iii) Makes a written demand to the designated payment office for 
additional penalty payment in accordance with paragraph (g)(2) of this 
section, postmarked not later than 40 days after the date the invoice 
amount is paid.
    (2)(i) Contractors shall support written demands for additional 
penalty payments with the following data. No additional data shall be 
required. Contractors shall--
    (A) Specifically assert that late payment interest is due under a 
specific invoice and request payment of all overdue late payment 
interest penalty and such additional penalty as may be required;
    (B) Attach a copy of the invoice on which the unpaid late payment 
interest was due; and
    (C) State that payment of the principal has been received, 
including the date of receipt.
    (ii) Demands must be postmarked on or before the 40th day after 
payment was made, except that--
    (A) If the postmark is illegible or nonexistent, the demand must 
have been received and annotated with the date of receipt by the 
designated payment office on or before the 40th day after payment was 
made, or
    (B) If the postmark is illegible or nonexistent and the designated 
payment office fails to make the required annotation, the demand's 
validity will be determined by the date the contractor has placed on 
the demand; provided, such date is no later than the 40th day after 
payment was made.
    (3)(i) The additional penalty shall be equal to 100 percent of any 
original late payment interest penalty that is due on or after January 
22, 1990, except--
    (A) For additional penalties due on or before January 22, 1992, 
such penalties shall not exceed $2,500;
    (B) After January 22, 1992, the additional penalty shall not exceed 
$5,000;
    (C) The additional penalty shall never be less than $25.
    (ii) If the interest penalty ceases to accrue in accordance with 
the limits stated in paragraphs (e) (1) and (2) of this section, the 
amount of the additional penalty shall be calculated on the amount of 
interest penalty that would have accrued in the absence of these 
limits, but shall not exceed the limits specified in paragraph 
(g)(3)(i) of this section.
    (iii) For determining the maximum and minimum additional penalties, 
the test shall be the interest penalty due on each separate payment 
made for each separate contract. The maximum and minimum additional 
penalty shall not be based upon individual invoices unless the invoices 
are paid separately. Where payments are consolidated for disbursing 
purposes, the maximum and minimum additional penalty determination 
shall be made separately for each contract therein.
    (iv) The additional penalty does not apply to payments regulated by 
other Government regulations (for example, payments under utility 
contracts subject to tariffs and regulation).
    9. Section 32.910 is added to read as follows:


Sec. 32.910  Additional Construction Policies.

    (a) The Payments under Fixed-Price Construction clause (52.232-5), 
paragraph (d), and Prompt Payment for Construction Contracts clause 
(52.232-27), subparagraph (e)(6), provide for the contractor to pay 
interest on unearned amounts in certain circumstances. This interest 
shall be recovered from subsequent payments to the contractor. 
Therefore, no demand for payment shall normally be made. Contracting 
officers shall--
    (1) Compute the amount in accordance with the clause;
    (2) Provide the contractor with a final decision; and
    (3) Notify the payment office of the amount to be withheld.
    (b) The payment office shall be responsible for making the 
deduction of interest. Amounts collected in accordance with these 
provisions shall revert to the Treasury of the United States.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    10. Section 52.232-5 is amended by revising paragraphs (b), (c), 
and (d)(2); adding paragraph (j); and adding paragraph headings to 
paragraphs (a), and (d) through (i) to read as follows:


52.232-5  Payments Under Fixed-Price Construction Contracts.

* * * * *

Payments Under Fixed-Price Construction Contracts (Date)

    (a) Payment of price. * * *
    (b) Progress payments. The Government shall make progress 
payments monthly as the work proceeds, or at more frequent intervals 
as determined by the Contracting Officer, on estimates of work 
accomplished which meets the standards of quality established under 
the contract, as approved by the Contracting Officer.
    (1) The Contractor's request for progress payment shall include 
the following substantiation:
    (i) An itemization of the amounts requested related to the 
various elements of work required by the contract covered by the 
payment request.
    (ii) A listing of the amount included for work performed by each 
subcontractor under the contract.
    (iii) A listing of the total amount of each subcontract under 
the contract.
    (iv) A listing of the amounts previously paid to each such 
subcontractor under the contract.
    (v) Additional supporting data in a form and detail required by 
the Contracting Officer.
    (2) In the preparation of estimates, the Contracting Officer may 
authorize material delivered on the site and preparatory work done 
to be taken into consideration. Material delivered to the Contractor 
at locations other than the site may also be taken into 
consideration if--
    (i) Consideration is specifically authorized by this contract; 
and
    (ii) The Contractor furnishes satisfactory evidence that it has 
acquired title to such material and that the material will be used 
to perform this contract.
    (c) Contractor certification. Along with each request for 
progress payments, the Contractor shall furnish the following 
certification, or payment shall not be made:
    I hereby certify, to the best of my knowledge and belief, that--
    (1) The amounts requested are only for performance in accordance 
with the specifications, terms, and conditions of the contract;
    (2) Payments to subcontractors and suppliers have been made from 
previous payments received under the contract, and timely payments 
will be made from the proceeds of the payment covered by this 
certification, in accordance with subcontract agreements and the 
requirements of chapter 39 of title 31, United States Code;
    (3) This request for progress payments does not include any 
amounts which the prime contractor intends to withhold or retain 
from a subcontractor or supplier in accordance with the terms and 
conditions of the subcontract; and
    (4) This certification is not to be construed as final 
acceptance of a subcontractor's performance.

----------------------------------------------------------------------
Name

----------------------------------------------------------------------
Title

----------------------------------------------------------------------
Date

    (d) Refund of unearned amounts. * * *
* * * * *
    (2) Be obligated to pay the Government an amount (computed by 
the Contracting Officer in the manner provided in paragraph (j) of 
this clause) equal to interest on the unearned amount from the 8th 
day after the date of receipt of the unearned amount until--
* * * * *
    (e) Retainage. * * *
    (f) Title, liability, and reservation of rights. * * *
    (g) Reimbursement for bond premiums. * * *
    (h) Final payment. * * *
    (i) Limitation because of undefinitized work. * * *
    (j) Interest computation on unearned amounts. In accordance with 
31 U.S.C. 3903(c)(1), the amount payable under paragraph (d)(2) of 
this clause shall be--
    (1) Computed at the rate of average bond equivalent rates of 91-
day Treasury bills auctioned at the most recent auction of such 
bills prior to the date the Contractor receives the unearned amount; 
and
    (2) Deducted from the next available payment to the Contractor.

(End of clause)

    11. Section 52.232-8 is amended by revising paragraph (b) of the 
clause to read as follows:


52.232-8   Discounts for Prompt Payment.

* * * * *

Discounts for Prompt Payment (Date)

* * * * *
    (b) In connection with any discount offered for prompt payment, 
time shall be computed from the date of the invoice. If the 
Contractor has not placed a date on the invoice, the due date shall 
be calculated from the date the designated billing office receives a 
proper invoice, provided the agency annotates such invoice with the 
date of receipt at the time of receipt. For the purpose of computing 
the discount earned, payment shall be considered to have been made 
on the date which appears on the payment check or the date on which 
an electronic funds transfer is specified for settlement at a 
Federal Reserve Bank. When the discount date falls on a Saturday, 
Sunday, or legal holiday when Federal Government offices are closed 
and Government business is not expected to be conducted, payment may 
be made on the following business day.

(End of clause)

    12. Section 52.232-25 is revised to read as follows:


52.232-25   Prompt Payment.

    As prescribed in 32.908(c), insert the following clause:

    (a) As authorized in 32.905(a)(1)(ii), the Contracting Officer 
may modify the date in subdivision (a)(5)(i) of this clause to 
specify a period longer than 7 days for constructive acceptance, if 
required to afford the Government a reasonable opportunity to 
inspect and test the supplies furnished or evaluate the services 
performed, except in the case of a contract for the purchase of a 
commercial item or service as defined in FAR 15.804-3(c)(3), 
including a brand-name commercial item for authorized resale (e.g., 
commissary items).
    (b) As prescribed in 32.906(a), and only as allowed under agency 
policies and procedures, the Contracting Officer may insert in 
paragraph (b) of the clause a period shorter than 30 days (but not 
less than 7 days) for making contract financing payments.

Prompt Payment (Date)

    Notwithstanding any other payment clause in this contract, the 
Government will make invoice payments and contract financing 
payments under the terms and conditions specified in this clause. 
Payment shall be considered as being made on the day a check is 
dated or the date of an electronic funds transfer. Definitions of 
pertinent terms are set forth in Federal Acquisition Regulation 
32.902. All days referred to in this clause are calendar days, 
unless otherwise specified. (However, see paragraph (a)(4) of this 
clause concerning payments due on Saturdays, Sundays, and legal 
holidays.)
    (a) Invoice payments--(1) Due date. (i) Except as indicated in 
subparagraph (a)(2) and paragraph (c) of this clause, the due date 
for making invoice payments by the designated payment office shall 
be the later of the following two events:
    (A) The 30th day after the designated billing office has 
received a proper invoice from the Contractor (except as provided in 
paragraph (a)(1)(ii) of this clause).
    (B) The 30th day after Government acceptance of supplies 
delivered or services performed by the Contractor. On a final 
invoice where the payment amount is subject to contract settlement 
actions, acceptance shall be deemed to have occurred on the 
effective date of the contract settlement.
    (ii) If the designated billing office fails to annotate the 
invoice with the actual date of receipt, at the time of receipt, the 
invoice payment due date shall be the 30th day after the date of the 
Contractor's invoice; provided  a proper invoice is received and 
there is no disagreement over quantity, quality, or Contractor 
compliance with contract requirements.
    (2) Certain food products and other payments. (i) Due dates on 
Contractor invoices for meat, meat food products, or fish; 
perishable agricultural commodities; and dairy products, edible fats 
or oils, and food products prepared from edible fats or oils, are--
    (A) For meat or meat food products, as defined in section 
2(a)(3) of the Packers and Stockyard Act of 1921 (7 U.S.C. 182(3)), 
as further defined in Public Law 98-181, including any edible fresh 
or frozen poultry meat, any perishable poultry meat food product, 
fresh eggs, and any perishable egg product, as close as possible to, 
but not later than, the 7th day after product delivery.
    (B) For fresh or frozen fish, as defined in section 204(3) of 
the Fish and Seafood Promotion Act of 1986 (16 U.S.C. 4003(3)), as 
close as possible to, but not later than, the 7th day after product 
delivery.
    (C) For perishable agricultural commodities, as defined in 
section 1(4) of the Perishable Agricultural Commodities Act of 1930 
(7 U.S.C. 499a(44)), as close as possible to, but not later than, 
the 10th day after product delivery, unless another date is 
specified in the contract.
    (D) For dairy products, as defined in section 111(e) of the 
Dairy Production Stabilization Act of 1983 (7 U.S.C. 4502(e)), 
edible fats or oils, and food products prepared from edible fats or 
oils, as close as possible to, but not later than, the 10th day 
after the date on which a proper invoice has been received. Liquid 
milk, cheese, certain processed cheese products, butter, yogurt, ice 
cream, mayonnaise, salad dressings, and other similar products, fall 
within this classification. Nothing in the Act limits this 
classification to refrigerated products. When questions arise about 
the proper classification of a specific product, prevailing industry 
practices will be followed in specifying a contract payment due 
date. The burden of proof that a classification of a specific 
product is, in fact, prevailing industry practice is upon the bidder 
making the representation.
    (ii) If the contract does not require submission of an invoice 
for payment (e.g., periodic lease payments), the due date will be as 
specified in the contract.
    (3) Contractor's invoice. The Contractor shall prepare and 
submit invoices to the designated billing office specified in the 
contract. A proper invoice must include the items listed in 
subdivisions (a)(3)(i) through (a)(3)(viii) of this clause. If the 
invoice does not comply with these requirements, the Contractor will 
be notified of the defect within 7 days after receipt of the invoice 
at the designated billing office (3 days for meat, meat food 
products, or fish; 5 days for perishable agricultural commodities, 
edible fats or oils, and food products prepared from edible fats or 
oils). Untimely notification will be taken into account in computing 
any interest penalty owed the Contractor in the manner described in 
subparagraph (a)(5) of the clause.
    (i) Name and address of the Contractor.
    (ii) Invoice date. (Contractors are encouraged to date invoices 
as close as possible to the date of the mailing or transmission.)
    (iii) Contract number of other authorization for supplies 
delivered or services performed (including order number and contract 
line item number).
    (iv) Description, quantity, unit of measure, unit price, and 
extended price of supplies delivered or services performed.
    (v) Shipping and payment terms (e.g., shipment number and date 
of shipment, prompt payment discount terms). Bill of lading number 
and weight of shipment will be shown for shipments on Government 
bills of lading.
    (vi) Name and address of Contractor official to whom payment is 
to be sent (must be the same as that in the contract or in a proper 
notice of assignment).
    (vii) Name (where practicable), title, phone number, and mailing 
address of person to be notified in event of a defective invoice.
    (viii) Any other information or documentation required by the 
contract (such as evidence of shipment).
    (ix) While not required, Contractors are strongly encouraged to 
assign an identification number to each invoice.
    (4) Interest penalty. An interest penalty shall be paid 
automatically by the designated payment office, without request from 
the Contractor, if payment is not made by the due date and the 
conditions listed in subdivisions (a)(4)(i) through (a)(4)(iii) of 
this clause are met, if applicable. However, when the due date falls 
on a Saturday, Sunday, or legal holiday when Federal Government 
offices are closed and Government business is not expected to be 
conducted, payment may be made on the following business day without 
incurring a late payment interest penalty.
    (i) A proper invoice was received by the designated billing 
office.
    (ii) A receiving report or other Government documentation 
authorizing payment was processed and there was no disagreement over 
quantity, quality, or contractor compliance with any contract term 
or condition.
    (iii) In the case of a final invoice for any balance of funds 
due the Contractor for supplies delivered or services performed, the 
amount was not subject to further contract settlement actions 
between the Government and the Contractor.
    (5) Computing penalty amount. The interest penalty shall be at 
the rate established by the Secretary of the Treasury under section 
12 of the Contract Disputes Act of 1978 (41 U.S.C. 611) that is in 
effect on the day after the due date, except where the interest 
penalty is prescribed by other governmental authority (e.g., 
tariffs). This rate is referred to as the ``Renegotiation Board 
Interest Rate,'' and it is published in the Federal Register 
semiannually on or about January 1 and July 1. The interest penalty 
shall accrue daily on the invoice payment amount approved by the 
Government and be compounded in 30-day increments inclusive from the 
first day after the due date through the payment date. That is, 
interest accrued at the end of any 30-day period will be added to 
the approved invoice payment amount and be subject to interest 
penalties if not paid in the succeeding 30-day period. If the 
designated billing office failed to notify the Contractor of a 
defective invoice within the periods prescribed in subparagraph 
(a)(3) of this clause, the due date on the corrected invoice will be 
adjusted by subtracting from such date the number of days taken 
beyond the prescribed notification of defects period. Any interest 
penalty owed the Contractor will be based on this adjusted due date. 
Adjustments will be made by the designated payment office for errors 
in calculating interest penalties.
    (i) For the sole purpose of computing an interest penalty that 
might be due the Contractor, Government acceptance shall be deemed 
to have occurred constructively on the 7th day (unless otherwise 
specified in this contract) after the Contractor delivered the 
supplies or performed the services in accordance with the terms and 
conditions of the contract, unless there is a disagreement over 
quantity, quality, or contractor compliance with a contract 
provision. In the event that actual acceptance occurs within the 
constructive acceptance period, the determination of an interest 
penalty shall be based on the actual date of acceptance. The 
constructive acceptance requirement does not, however, compel 
Government officials to accept supplies or services, perform 
contract administration functions, or make payment prior to 
fulfilling their responsibilities.
    (ii) The following periods of time will not be included in the 
determination of an interest penalty:
    (A) The period taken to notify the Contractor of defects in 
invoices submitted to the Government, but this may not exceed 7 days 
(3 days for meat, meat food products, or fish; 5 days for perishable 
agricultural commodities, dairy products, edible fats or oils, and 
food products prepared from edible fats or oils).
    (B) The period between the defects notice and resubmission of 
the corrected invoice by the Contractor.
    (C) The period between the date of an attempted electronic funds 
transfer and the date the Contractor furnishes correct electronic 
funds transfer data; provided, the Government notifies the 
Contractor of the defective data within 7 days after the Government 
receives notice that the transfer could not be completed because of 
defective data.
    (iii) Interest penalties will not continue to accrue after the 
filing of a claim for such penalties under the clause at 52.233-1, 
Disputes, or for more than 1 year. Interest penalties of less than 
$1 need not be paid.
    (iv) Interest penalties are not required on payment delays due 
to disagreement between the Government and Contractor over the 
payment amount or other issues involving contract compliance or on 
amounts temporarily withheld or retained in accordance with the 
terms of the contract. Claims involving disputes, and any interest 
that may be payable, will be resolved in accordance with the clause 
at 52.233-1, Disputes.
    (6) Prompt payment discounts. An interest penalty shall also be 
paid automatically by the designated payment office, without request 
from the Contractor, if a discount for prompt payment is taken 
improperly. The interest penalty will be calculated as described in 
subparagraph (a)(5) of this clause on the amount of discount taken 
for the period beginning with the first day after the end of the 
discount period through the date when the Contractor is paid.
    (7) Additional interest penalty. (i) If this contract was 
awarded on or after October 1, 1989, a penalty amount, calculated in 
accordance with (a)(7)(iii) of this clause shall be paid in addition 
to the interest penalty amount if the Contractor--
    (A) Is owed an interest penalty;
    (B) Is not paid the interest penalty within 10 days after the 
date the invoice amount is paid; and
    (C) Makes a written demand to the designated payment office for 
additional penalty payment, in accordance with (a)(7)(ii) of this 
clause, postmarked not later than 40 days after the invoice amount 
is paid.
    (ii)(A) Contractors shall support written demands for additional 
penalty payments with the following data. No additional data shall 
be required. Contractors shall--
    (1) Specifically assert that late payment interest is due under 
a specific invoice and request payment of all overdue late payment 
interest penalty and such additional penalty as may be required;
    (2) Attach a copy of the invoice on which the unpaid late 
payment interest was due; and
    (3) State that payment of the principal has been received, 
including the date of receipt.
    (B) Demands must be postmarked on or before the 40th day after 
payment was made, except that--
    (1) If the postmark is illegible or nonexistent, the demand must 
have been received and annotated with the date of receipt by the 
designated payment office on or before the 40th day after payment 
was made, or
    (2) If the postmark is illegible or nonexistent and the 
designated payment office fails to make the required annotation, the 
demand's validity will be determined by the date the Contractor has 
placed on the demand; provided, such date is no later than the 40th 
day after payment was made.
    (iii)(A) The additional penalty shall be equal to 100 percent of 
any original late payment interest penalty that is due on or after 
January 22, 1990, except--
    (1) For additional penalties due on or before January 22, 1992, 
such penalties shall not exceed $2,500;
    (2) After January 22, 1992, the additional penalty shall not 
exceed $5,000;
    (3) The additional penalty shall never be less than $25.
    (B) If the interest penalty ceases to accrue in accordance with 
the limits stated in subdivision (a)(5)(iii) of this clause, the 
amount of the additional penalty shall be calculated on the amount 
of interest penalty that would have accrued in the absence of these 
limits, subject to the overall limits on the additional penalty 
specified above.
    (C) For determining the maximum and minimum additional 
penalties, the test shall be the interest penalty due on each 
separate payment made for each separate contract. The maximum and 
minimum additional penalty shall not be based upon individual 
invoices unless the invoices are paid separately. Where payments are 
consolidated for disbursing purposes, the maximum and minimum 
additional penalty determination shall be made separately for each 
contract therein.
    (D) The additional penalty does not apply to payments regulated 
by other Government regulations (for example, payments under utility 
contracts subject to tariffs and regulation).
    (b) Contract financing payments--(1) Due dates for progress 
payments. For contracts that provide for contract financing, 
requests for payment shall be submitted to the designated billing 
office as specified in this contract or as directed by the 
Contracting Officer. Contract financing payments shall be made on 
the (insert day as prescribed by agency head; if not prescribed, 
insert 30th day) day after receipt of a proper contract financing 
request by the designated billing office. In the event that an audit 
or other review of a specific financing request is required to 
ensure compliance with the terms and conditions of the contract, the 
designated payment office is not compelled to make payment by the 
due date specified.
    (2) Due dates for other contract financing. For advance 
payments, loans, or other arrangements that do not involve recurrent 
submissions of contract financing requests, payment shall be made in 
accordance with the corresponding contract terms or as directed by 
the Contracting Officer.
    (3) Interest penalty not applicable. Contract financing payments 
shall not be assessed an interest penalty for payment delays.
    (c) Fast payment procedure due dates. If this contract contains 
the clause at 52.213-1, Fast Payment Procedure, payments will be 
made within 15 days after the date of receipt of the invoice.

(End of clause)

    13. Section 52.232-26 is revised to read as follows:


52.232-26  Prompt Payment for Fixed-Price Architect-Engineer Contracts.

    As prescribed in 32.908(a), insert the following clause:

    (a) As authorized in 32.905(b)(4), the Contracting Officer may 
modify the date in subdivision (a)(4)(i) of this clause to specify a 
period longer than 7 days for constructive acceptance or 
constructive approval, if required, to afford the Government a 
practicable opportunity to inspect and test the supplies furnished 
or evaluate the services performed.
    (b) If applicable, as authorized in 32.906(a) and only as 
allowed under agency policies and procedures, the Contracting 
Officer may insert in paragraph (b) of this clause a period shorter 
than 30 days (but not less than 7 days) for making contract 
financing payments.

Prompt Payment for Fixed-Price Architect-Engineer Contracts (Date)

    Notwithstanding any other payment terms in this contract, the 
Government will make invoice payments and contract financing 
payments under the terms and conditions specified in this clause. 
Payment shall be considered as being made on the day a check is 
dated or the date of an electronic funds transfer. Definitions of 
pertinent terms are set forth in Federal Acquisition Regulation 
32.902. All days referred to in this clause are calendar days, 
unless otherwise specified. (However, see paragraph (a)(3) of this 
clause concerning payments due on Saturdays, Sundays, and legal 
holidays.)
    (a) Invoice payments--(1) Due date. The due date for making 
invoice payments shall be--
    (i) For work or services completed by the Contractor, the later 
of the following two events:
    (A) The 30th day after the designated billing office has 
received a proper invoice from the Contractor (except as provided in 
subdivision (a)(1)(iii) of this clause).
    (B) The 30th day after Government acceptance of the work or 
services completed by the Contractor. On a final invoice where the 
payment amount is subject to contract settlement actions (e.g., 
release of claims), acceptance shall be deemed to have occurred on 
the effective date of the contract settlement.
    (ii) The due date for progress payments shall be the 30th day 
after Government approval of Contractor estimates of work or 
services accomplished.
    (iii) If the designated billing office fails to annotate the 
invoice or payment request with the actual date of receipt, at the 
time of receipt, the payment due date shall be the 30th day after 
the date of the Contractor's invoice or payment request, provided a 
proper invoice or payment request is received and there is no 
disagreement over quantity, quality, or Contractor compliance with 
contract requirements.
    (2) Contractor's invoice. The Contractor shall prepare and 
submit invoices to the designated billing office specified in the 
contract. A proper invoice must include the items listed in 
subdivisions (a)(2)(i) through (a)(2)(viii) of this clause. If the 
invoice does not comply with these requirements, the Contractor will 
be notified of the defect within 7 days after receipt of the invoice 
at the designated billing office. Untimely notification will be 
taken into account in computing any interest penalty owed the 
Contractor in the manner described in subparagraph (a)(4) of this 
clause.
    (i) Name and address of the Contractor.
    (ii) Invoice date. (Contractors are encouraged to date invoices 
as close as possible to the date of mailing or transmission.)
    (iii) Contract number or other authorization for work or 
services performed (including order number and contract line item 
number).
    (iv) Description of work or services performed.
    (v) Delivery and payment terms (e.g., prompt payment discount 
terms).
    (vi) Name and address of Contractor official to whom payment is 
to be sent (must be the same as that in the contract or in a proper 
notice of assignment).
    (vii) Name (where practicable), title, phone number, and mailing 
address of person to be notified in event of a defective invoice.
    (viii) Any other information or documentation required by the 
contract.
    (ix) While not required, Contractors are strongly encouraged to 
assign an identification number to each invoice.
    (3) Interest penalty. An interest penalty shall be paid 
automatically by the designated payment office, without request from 
the Contractor, if payment is not made by the due date and the 
conditions listed in subdivisions (a)(3)(i) through (a)(3)(iii) of 
this clause are met, if applicable. However, when the due date falls 
on a Saturday, Sunday, or legal holiday when Federal Government 
offices are closed and Government business is not expected to be 
conducted, payment may be made on the following business day without 
incurring a late payment interest penalty.
    (i) A proper invoice was received by the designated billing 
office.
    (ii) A receiving report or other Government documentation 
authorizing payment was processed and there was no disagreement over 
quantity, quality, Contractor compliance with any contract term or 
condition, or requested progress payment amount.
    (iii) In the case of a final invoice for any balance of funds 
due the Contractor for work or services performed, the amount was 
not subject to further contract settlement actions between the 
Government and the Contractor.
    (4) Computing penalty amount. The interest penalty shall be at 
the rate established by the Secretary of the Treasury under section 
12 of the Contract Disputes Act of 1978 (41 U.S.C. 611) that is in 
effect on the day after the due date, except where the interest 
penalty is prescribed by other governmental authority (e.g., 
tariffs). This rate is referred to as the ``Renegotiation Board 
Interest Rate,'' and it is published in the Federal Register 
semiannually on or about January 1 and July 1. The interest penalty 
shall accrue daily on the invoice payment amount approved by the 
Government and be compounded in 30-day increments inclusive from the 
first day after the due date through the payment date. That is, 
interest accrued at the end of any 30-day period will be added to 
the approved invoice payment amount and be subject to interest 
penalties if not paid in the succeeding 30-day period. If the 
designated billing office failed to notify the Contractor of a 
defective invoice within the periods prescribed in subparagraph 
(a)(2) of this clause, the due date on the corrected invoice will be 
adjusted by subtracting from such date the number of days taken 
beyond the prescribed notification of defects period. Any interest 
penalty owed the Contractor will be based on this adjusted due date. 
Adjustments will be made by the designated payment office for errors 
in calculating interest penalties.
    (i) For the sole purpose of computing an interest penalty that 
might be due the Contractor, Government acceptance or approval shall 
be deemed to have occurred constructively as shown in subdivisions 
(a)(4)(i) (A) and (B) of this clause. In the event that actual 
acceptance or approval occurs within the constructive acceptance or 
approval period, the determination of an interest penalty shall be 
based on the actual date of acceptance or approval. Constructive 
acceptance or constructive approval requirements do not apply if 
there is a disagreement over quantity, quality, Contractor 
compliance with a contract provision, or requested progress payment 
amounts. These requirements also do not compel Government officials 
to accept work or services, approve Contractor estimates, perform 
contract administration functions, or make payment prior to 
fulfilling their responsibilities.
    (A) For work or services completed by the Contractor, Government 
acceptance shall be deemed to have occurred constructively on the 
7th day after the Contractor has completed the work or services in 
accordance with the terms and conditions of the contract.
    (B) For progress payments, Government approval shall be deemed 
to have occurred on the 7th day after Contractor estimates have been 
received by the designated billing office.
    (ii) The following periods of time will not be included in the 
determination of an interest penalty:
    (A) The period taken to notify the Contractor of defects in 
invoices submitted to the Government, but this may not exceed 7 
days.
    (B) The period between the defects notice and resubmission of 
the corrected invoice by the Contractor.
    (C) The period between the date of an attempted electronic funds 
transfer and the date the Contractor furnishes correct electronic 
funds transfer data; provided, the Government notifies the 
Contractor of the defective data within 7 days after the Government 
receives notice that the transfer could not be completed because of 
defective data.
    (iii) Interest penalties will not continue to accrue after the 
filing of a claim for such penalties under the clause at 52.233-1, 
Disputes, or for more than 1 year. Interest penalties of less than 
$1 need not be paid.
    (iv) Interest penalties are not required on payment delays due 
to disagreement between the Government and Contractor over the 
payment amount or other issues involving contract compliance, or on 
amounts temporarily withheld or retained in accordance with the 
terms of the contract. Claims involving disputes, and any interest 
that may be payable will be resolved in accordance with the clause 
at 52.233-1, Disputes.
    (5) Prompt payment discounts. An interest penalty shall also be 
paid automatically by the designated payment office, without request 
from the Contractor, if a discount for prompt payment is taken 
improperly. The interest penalty will be calculated on the amount of 
discount taken for the period beginning with the first day after the 
end of the discount period through the date when the Contractor is 
paid.
    (6) Additional interest penalty. (i) If this contract was 
awarded on or after October 1, 1989, a penalty amount, calculated in 
accordance with subdivision (a)(6)(iii) of this clause shall be paid 
in addition to the interest penalty amount if the Contractor--
    (A) Is owned an interest penalty;
    (B) Is not paid the interest penalty within 10 days after the 
date the invoice amount is paid; and
    (C) Makes a written demand to the designated payment office for 
additional penalty payment, in accordance with subdivision 
(a)(6)(ii) of this clause, postmarked not later than 40 days after 
the invoice amount is paid.
    (ii)(A) Contractors shall support written demands for additional 
penalty payments with the following data. No additional data shall 
be required. Contractors shall--
    (1) Specifically assert that late payment interest is due under 
a specific invoice and request payment of all overdue late payment 
interest penalty and such additional penalty as may be required;
    (2) Attach a copy of the invoice on which the unpaid late 
payment interest was due; and
    (3) State that payment of the principal has been received, 
including the date of receipt.
    (B) Demands must be postmarked on or before the 40th day after 
payment was made, except that--
    (1) If the postmark is illegible or nonexistent, the demand must 
have been received and annotated with the date of receipt by the 
designated billing office on or before the 40th day after payment 
was made, or
    (2) If the postmark is illegible or nonexistent and the 
designated billing office fails to make the required annotation, the 
demand's validity will be determined by the date the Contractor has 
placed on the demand; provided, such date is no later than the 40th 
day after payment was made.
    (iii)(A) The additional penalty shall be equal to 100 percent of 
any original late payment interest penalty that is due on or after 
January 22, 1990, except:
    (1) For additional penalties due on or before January 22, 1992, 
such penalties shall not exceed $2,500.
    (2) After January 22, 1992, the additional penalty shall not 
exceed $5,000.
    (3) The additional penalty shall never be less than $25.
    (B) If the interest penalty ceases to accrue in accordance with 
the limits stated in subdivision (a)(4)(iii) of this clause, the 
amount of the additional penalty shall be calculated on the amount 
of interest penalty that would have accrued in the absence of these 
limits, subject to the overall limits on the additional penalty 
specified above.
    (C) For determining the maximum and minimum additional 
penalties, the test shall be the interest penalty due on each 
separate payment made for each separate contract. The maximum and 
minimum additional penalty shall not be based upon individual 
invoices unless the invoices are paid separately. Where payments are 
consolidated for disbursing purposes, the maximum and minimum 
additional penalty determination shall be made separately for each 
contract therein.
    (D) The additional penalty does not apply to payments regulated 
by other Government regulations (for example, payments under utility 
contracts subject to tariffs and regulation).
    (b) Contract financing payments--(1) Due dates for progress 
payments. If this contract provides for contract financing, requests 
for payment shall be submitted to the designated billing office as 
specified in this contract or as directed by the Contracting 
Officer. Contract financing payments shall be made on the (insert 
day as prescribed by agency head; if not prescribed, insert 30th 
day) day after receipt of a proper contract financing request by the 
designated billing office. In the event that an audit or other 
review of a specific financing request is required to ensure 
compliance with the terms and conditions of the contract, the 
designated payment office is not compelled to make payment by the 
due date specified.
    (2) Due dates for other contract financing. For advance 
payments, loans, or other arrangements that do not involve recurrent 
submissions of contract financing requests, payment shall be made in 
accordance with the corresponding contract terms or as directed by 
the Contracting Officer.
    (3) Interest penalty not applicable. Contract financing payments 
shall not be assessed an interest penalty for payment delays.

(End of clause)

    14. Section 52.232-27 is revised to read as follows:


52.232-27  Prompt Payment for Construction Contracts.

    As prescribed in 32.908(b), insert the following clause:

    (a) As authorized in 32.905(c)(1), the Contracting Officer may 
modify the date in subdivision (a)(1)(i)(A) of the clause to specify 
a period longer than 14 days if required to afford the Government a 
reasonable opportunity to adequately inspect the work and to 
determine the adequacy of the Contractor's performance under the 
contract.
    (b) As authorized in 32.905(c)(5), the Contracting Officer may 
modify the date in subdivision (a)(4)(i) of the clause to specify a 
period longer than 7 days for constructive acceptance or 
constructive approval if required to afford the Government a 
reasonable opportunity to inspect and test the supplies furnished or 
evaluate the services performed.
    (c) If applicable, as authorized in 32.906(a) and only as 
allowed under agency policies and procedures, the Contracting 
Officer may insert in paragraph (b) of the clause a period shorter 
than 30 days (but not less than 7 days) for making contract 
financing payments.

Prompt Payment for Construction Contracts (Date)

    Notwithstanding any other payment terms in this contract, the 
Government will make invoice payments and contract financing 
payments under the terms and conditions specified in this clause. 
Payment shall be considered as being made on the day a check is 
dated or the date of an electronic funds transfer. Definitions of 
pertinent terms are set forth in Federal Acquisition Regulation 
32.902. All days referred to in this clause are calendar days, 
unless otherwise specified. (However, see paragraph (a)(3) 
concerning payments due on Saturdays, Sundays, and legal holidays.)
    (a) Invoice payments--(1) Types of invoice payments. For 
purposes of this clause, there are several types of invoice payments 
which may occur under this contract, as follows:
    (i) Progress payments, if provided for elsewhere in this 
contract, based on Contracting Officer approval of the estimated 
amount and value of work or services performed, including payments 
for reaching milestones in any project:
    (A) The due date for making such payments shall be 14 days after 
receipt of the payment request by the designated billing office. If 
the designated billing office fails to annotate the payment request 
with the actual date of receipt, at the time of receipt, the payment 
due date shall be the 14th day after the date of the Contractor's 
payment request, provided a proper payment request is received and 
there is no disagreement over quantity, quality, or Contractor 
compliance with contract requirements.
    (B) The due date for payment of any amounts retained by the 
Contracting Officer in accordance with the clause at 52.232-5, 
Payments Under Fixed-Price Construction Contracts, shall be as 
specified in the contract or, if not specified, 30 days after 
approval for release to the Contractor by the Contracting Officer.
    (ii) Final payments based on completion and acceptance of all 
work and presentation of release of all claims against the 
Government arising by virtue of the contract, and payments for 
partial deliveries that have been accepted by the Government (e.g., 
each separate building, public work, or other division of the 
contract for which the price is stated separately in the contract):
    (A) The due date for making such payments shall be either the 
30th day after receipt by the designated billing office of a proper 
invoice from the Contractor, or the 30th day after Government 
acceptance of the work or services completed by the Contractor, 
whichever is later. If the designated billing office fails to 
annotate the invoice with the date of actual receipt, at the time of 
receipt, the invoice payment due date shall be the 30th day after 
the date of the Contractor's invoice, provided a proper invoice is 
received and there is no disagreement over quantity, quality, or 
Contractor compliance with contract requirements.
    (B) On a final invoice where the payment amount is subject to 
contract settlement actions (e.g., release of claims), acceptance 
shall be deemed to have occurred on the effective date of the 
contract settlement.
    (2) Contractor's invoice. The Contractor shall prepare and 
submit invoices to the designated billing office specified in the 
contract. A proper invoice must include the items listed in 
subdivisions (a)(2)(i) through (a)(2)(ix) of this clause. If the 
invoice does not comply with these requirements, the Contractor will 
be notified of the defect within 7 days after receipt of the invoice 
at the designated billing office. Untimely notification will be 
taken into account in computing any interest penalty owed the 
Contractor in the manner described in subparagraph (a)(4) of this 
clause:
    (i) Name and address of the Contractor.
    (ii) Invoice date. (Contractors are encouraged to date invoices 
as close as possible to the date of mailing or transmission.)
    (iii) Contract number or other authorization for work or 
services performed (including order number and contract line item 
number).
    (iv) Description of work or services performed.
    (v) Delivery and payment terms (e.g., prompt payment discount 
terms).
    (vi) Name and address of contractor official to whom payment is 
to be sent (must be the same as that in the contract or in a proper 
notice of assignment).
    (vii) Name (where practicable), title, phone number, and mailing 
address of person to be notified in event of a defective invoice.
    (viii) For payments described in subdivision (a)(1)(i) of this 
clause, substantiation of the amounts requested and certification in 
accordance with the requirements of the clause at 52.232-5, Payments 
under Fixed-Price Construction Contracts.
    (ix) Any other information or documentation required by the 
contract.
    (x) While not required, Contractors are strongly encouraged to 
assign an identification number to each invoice.
    (3) Interest penalty. An interest penalty shall be paid 
automatically by the designated payment office, without request from 
the Contractor, if payment is not made by the due date and the 
conditions listed in subdivisions (a)(3)(i) through (a)(3)(iii) of 
this clause are met, if applicable. However, when the due date falls 
on a Saturday, Sunday, or legal holiday when Federal Government 
offices are closed and Government business is not expected to be 
conducted, payment may be made on the following business day without 
incurring a late payment interest penalty.
    (i) A proper invoice was received by the designated billing 
office.
    (ii) A receiving report or other Government documentation 
authorizing payment was processed and there was no disagreement over 
quantity, quality, Contractor compliance with any contract term or 
condition, or requested progress payment amount.
    (iii) In the case of a final invoice for any balance of funds 
due the Contractor for work or services performed, the amount was 
not subject to further contract settlement actions between the 
Government and the Contractor.
    (4) Computing penalty amount. The interest penalty shall be at 
the rate established by the Secretary of the Treasury under section 
12 of the Contract Disputes Act of 1978 (41 U.S.C. 611) that is in 
effect on the day after the due date, except where the interest 
penalty is prescribed by other governmental authority (e.g., 
tariffs). This rate is referred to as the ``Renegotiation Board 
Interest Rate,'' and it is published in the Federal Register 
semiannually on or about January 1 and July 1. The interest penalty 
shall accrue daily on the invoice payment amount approved by the 
Government and be compounded in 30-day increments inclusive from the 
first day after the due date through the payment date. That is, 
interest accrued at the end of any 30-day period will be added to 
the approved invoice payment amount and be subject to interest 
penalties if not paid in the succeeding 30-day period. If the 
designated billing office failed to notify the Contractor of a 
defective invoice within the periods prescribed in subparagraph 
(a)(2) of this clause, the due date on the corrected invoice will be 
adjusted by subtracting from such date the number of days taken 
beyond the prescribed notification of defects period. Any interest 
penalty owed the Contractor will be based on this adjusted due date. 
Adjustments will be made by the designated payment office for errors 
in calculating interest penalties.
    (i) For the sole purpose of computing an interest penalty that 
might be due the Contractor for payments described in subdivision 
(a)(1)(ii) of this clause, Government acceptance or approval shall 
be deemed to have occurred constructively on the 7th day after the 
Contractor has completed the work or services in accordance with the 
terms and conditions of the contract. In the event that actual 
acceptance or approval occurs within the constructive acceptance or 
approval period, the determination of an interest penalty shall be 
based on the actual date of acceptance or approval. Constructive 
acceptance or constructive approval requirements do not apply if 
there is a disagreement over quantity, quality, or Contractor 
compliance with a contract provision. These requirements also do not 
compel Government officials to accept work or services, approve 
Contractor estimates, perform contract administration functions, or 
make payment prior to fulfilling their responsibilities.
    (ii) The following periods of time will not be included in the 
determination of an interest penalty:
    (A) The period taken to notify the Contractor of defects in 
invoices submitted to the Government, but this may not exceed 7 
days.
    (B) The period between the defects notice and resubmission of 
the corrected invoice by the Contractor.
    (C) The period between the date of an attempted electronic funds 
transfer and the date the Contractor furnishes correct electronic 
funds transfer data; provided, the Government notifies the 
Contractor of the defective data within 7 days after the Government 
receives notice that the transfer could not be completed because of 
defective data.
    (iii) Interest penalties will not continue to accrue after the 
filing of a claim for such penalties under the clause at 52.233-1, 
Disputes, or for more than 1 year. Interest penalties of less than 
$1 need not be paid.
    (iv) Interest penalties are not required on payment delays due 
to disagreement between the Government and Contractor over the 
payment amount or other issues involving contract compliance, or on 
amounts temporarily withheld or retained in accordance with the 
terms of the contract. Claims involving disputes, and any interest 
that may be payable, will be resolved in accordance with the clause 
at 52.233-1, Disputes.
    (5) Prompt payment discounts. An interest penalty shall also be 
paid automatically by the designated payment office, without request 
from the Contractor, if a discount for prompt payment is taken 
improperly. The interest penalty will be calculated on the amount of 
discount taken for the period beginning with the first day after the 
end of the discount period through the date when the Contractor is 
paid.
    (6) Additional interest penalty. (i) If this contract was 
awarded on or after October 1, 1989, a penalty amount, calculated in 
accordance with (a)(6)(iii) of this clause shall be paid in addition 
to the interest penalty amount if the Contractor--
    (A) Is owed an interest penalty;
    (B) Is not paid the interest penalty within 10 days after the 
date the invoice amount is paid; and
    (C) Makes a written demand to the designated payment office for 
additional penalty payment, in accordance with (a)(6)(ii) of this 
clause, postmarked not later than 40 days after the invoice amount 
is paid.
    (ii) (A) Contractors shall support written demands for 
additional penalty payments with the following data. No additional 
data shall be required. Contractors shall--
    (1) Specifically assert that late payment interest is due under 
a specific invoice and request payment of all overdue late payment 
interest penalty and such additional penalty as may be required;
    (2) Attach a copy of the invoice on which the unpaid late 
payment interest was due; and
    (3) State that payment of the principal has been received, 
including the date of receipt.
    (B) Demands must be postmarked on or before the 40th day after 
payment was made, except that--
    (1) If the postmark is illegible or nonexistent, the demand must 
have been received and annotated with the date of receipt by the 
designated billing office on or before the 40th day after payment 
was made, or
    (2) If the postmark is illegible or nonexistent and the 
designated billing office fails to make the required annotation, the 
demand's validity will be determined by the date the Contractor has 
placed on the demand; provided, such date is no later than the 40th 
day after payment was made.
    (iii)(A) The additional penalty shall be equal to 100 percent of 
any original late payment interest penalty that is due on or after 
January 22, 1990, except--
    (1) For additional penalties due on or before January 22, 1992, 
such penalties shall not exceed $2,500.
    (2) After January 22, 1992, the additional penalty shall not 
exceed $5,000.
    (3) The additional penalty shall never be less than $25.
    (B) If the interest penalty ceases to accrue in accordance with 
the limits stated in subdivision (a)(4)(iii) of this clause, the 
amount of the additional penalty shall be calculated on the amount 
of interest penalty that would have accrued in the absence of these 
limits, subject to the overall limits on the additional penalty 
specified above.
    (C) For determining the maximum and minimum additional 
penalties, the test shall be the interest penalty due on each 
separate payment made for each separate contract. The maximum and 
minimum additional penalty shall not be based upon individual 
invoices unless the invoices are paid separately. Where payments are 
consolidated for disbursing purposes, the maximum and minimum 
additional penalty determination shall be made separately for each 
contract therein.
    (D) The additional penalty does not apply to payments regulated 
by other Government regulations (for example, payments under utility 
contracts subject to tariffs and regulation).
    (b) Contract financing payments--(1) Due dates for progress 
payments. If this contract provides for contract financing, requests 
for payment shall be submitted to the designated billing office as 
specified in this contract or as directed by the Contracting 
Officer. Contract financing payments shall be made on the (insert 
day as prescribed by agency head; if not prescribed, insert 30th 
day) day after receipt of a proper contract financing request by the 
designated billing office. In the event that an audit or other 
review of a specific financing request is required to ensure 
compliance with the terms and conditions of the contract, the 
designated payment office is not compelled to make payment by the 
due date specified.
    (2) Due dates for other contract financing. For advance 
payments, loans, or other arrangements that do not involve recurrent 
submissions of contract financing requests, payment shall be made in 
accordance with the corresponding contract terms or as directed by 
the Contracting Officer.
    (3) Interest penalty not applicable. Contract financing payments 
shall not be assessed an interest penalty for payment delays.
    (c) Subcontract clauses requirements. The Contractor shall 
include in each subcontract for property or services (including a 
material supplier) for the purpose of performing this contract the 
following:
    (1) Prompt payment for subcontractors. A payment clause which 
obligates the Contractor to pay the subcontractor for satisfactory 
performance under its subcontract not later than 7 days from receipt 
of payment out of such amounts as are paid to the Contractor under 
this contract.
    (2) Interest for subcontractors. An interest penalty clause 
which obligates the Contractor to pay to the subcontractor an 
interest penalty for each payment not made in accordance with the 
payment clause--
    (i) For the period beginning on the day after the required 
payment date and ending on the date on which payment of the amount 
due is made; and
    (ii) Computed at the rate of interest established by the 
Secretary of the Treasury, and published in the Federal Register, 
for interest payments under section 12 of the Contract Disputes Act 
of 1978 (41 U.S.C. 611) in effect at the time the Contractor accrues 
the obligation to pay an interest penalty.
    (3) Subcontractor clauses flowdown. A clause requiring each 
subcontractor to include a payment clause and an interest penalty 
clause conforming to the standards set forth in subparagraphs (c)(1) 
and (c)(2) of this clause in each of its subcontracts, and to 
require each of its subcontractors to include such clauses in their 
subcontracts with each lower-tier subcontractor or supplier.
    (d) Subcontract clauses interpretation. The clauses required by 
paragraph (c) of this clause shall not be construed to impair the 
right of the Contractor or a subcontractor at any tier to negotiate, 
and to include in their subcontract, provisions which--
    (1) Retainage permitted. Permit the Contractor or a 
subcontractor to retain (without cause) a specified percentage of 
each progress payment otherwise due to a subcontractor for 
satisfactory performance under the subcontract without incurring any 
obligation to pay a late payment interest penalty, in accordance 
with terms and conditions agreed to by the parties to the 
subcontract, giving such recognition as the parties deem appropriate 
to the ability of a subcontractor to furnish a performance bond and 
a payment bond;
    (2) Withholding permitted. Permit the Contractor or 
subcontractor to make a determination that part or all of the 
subcontractor's request for payment may be withheld in accordance 
with the subcontract agreement; and
    (3) Withholding requirements. Permit such withholding without 
incurring any obligation to pay a late payment penalty if--
    (i) A notice conforming to the standards of paragraph (g) of 
this clause has been previously furnished to the subcontractor; and
    (ii) A copy of any notice issued by a Contractor pursuant to 
subdivision (d)(3)(i) of this clause has been furnished to the 
Contracting Officer.
    (e) Subcontractor withholding procedures. If a Contractor, after 
making a request for payment to the Government but before making a 
payment to a subcontractor for the subcontractor's performance 
covered by the payment request, discovers that all or a portion of 
the payment otherwise due such subcontractor is subject to 
withholding from the subcontractor in accordance with the 
subcontract agreement, the Contractor shall--
    (1) Subcontractor notice. Furnish to the subcontractor a notice 
conforming to the standards of paragraph (g) of this clause as soon 
as practicable upon ascertaining the cause giving rise to a 
withholding, but prior to the due date for subcontractor payment;
    (2) Contracting Officer notice. Furnish to the Contracting 
Officer, as soon as practicable, a copy of the notice furnished to 
the subcontractor pursuant to subparagraph (e)(1) of this clause;
    (3) Subcontractor progress payment reduction. Reduce the 
subcontractor's progress payment by an amount not to exceed the 
amount specified in the notice of withholding furnished under 
subparagraph (e)(1) of this clause;
    (4) Subsequent subcontractor payment. Pay the subcontractor as 
soon as practicable after the correction of the identified 
subcontract performance deficiency, and--
    (i) Make such payment within--
    (A) Seven days after correction of the identified subcontract 
performance deficiency (unless the funds therefor must be recovered 
from the Government because of a reduction under subdivision 
(e)(5)(i) of this clause); or
    (B) Seven days after the Contractor recovers such funds from the 
Government; or
    (ii) Incur an obligation to pay a late payment interest penalty 
computed at the rate of interest established by the Secretary of the 
Treasury, and published in the Federal Register, for interest 
payments under section 12 of the Contract Disputes Act of 1978 (41 
U.S.C. 611) in effect at the time the Contractor accrues the 
obligation to pay an interest penalty;
    (5) Notice to Contracting Officer. Notify the Contracting 
Officer upon--
    (i) Reduction of the amount of any subsequent certified 
application for payment; or
    (ii) Payment to the subcontractor of any withheld amounts of a 
progress payment, specifying--
    (A) The amounts withheld under subparagraph (e)(1) of this 
clause; and
    (B) The dates that such withholding began and ended.
    (6) Interest to Government. Be obligated to pay to the 
Government an amount equal to interest on the withheld payments 
(computed in the manner provided in 31 U.S.C. 3903(c)(1), from the 
8th day after receipt of the withheld amounts from the Government 
until--
    (i) The day the identified subcontractor performance deficiency 
is corrected; or
    (ii) The date that any subsequent payment is reduced under 
subdivision (e)(5)(i) of this clause.
    (f) Third party deficiency reports--(1) Withholding from 
subcontractor. If a Contractor, after making payment to a first-tier 
subcontractor, receives from a supplier or subcontractor of the 
first-tier subcontractor (hereafter referred to as a ``second-tier 
subcontractor'') a written notice in accordance with section 2 of 
the Act of August 24, 1935 (40 U.S.C. 270b, Miller Act), asserting a 
deficiency in such first-tier subcontractor's performance under the 
contract for which the Contractor may be ultimately liable, and the 
Contractor determines that all or a portion of future payments 
otherwise due such first-tier subcontractor is subject to 
withholding in accordance with the subcontract agreement, the 
Contractor may, without incurring an obligation to pay an interest 
penalty under subparagraph (e)(6) of this clause--
    (i) Furnish to the first-tier subcontractor a notice conforming 
to the standards of paragraph (g) of this clause as soon as 
practicable upon making such determination; and
    (ii) Withhold from the first-tier subcontractor's next available 
progress payment or payments an amount not to exceed the amount 
specified in the notice of withholding furnished under subdivision 
(f)(1)(i) of this clause.
    (2) Subsequent payment or interest charge. As soon as 
practicable, but not later than 7 days after receipt of satisfactory 
written notification that the identified subcontract performance 
deficiency has been corrected, the Contractor shall--
    (i) Pay the amount withheld under subdivision (f)(1)(ii) of this 
clause to such first-tier subcontractor, or
    (ii) Incur an obligation to pay a late payment interest penalty 
to such first-tier subcontractor computed at the rate of interest 
established by the Secretary of the Treasury, and published in the 
Federal Register, for interest payments under section 12 of the 
Contracts Disputes Act of 1978 (41 U.S.C. 611) in effect at the time 
the Contractor accrues the obligation to pay an interest penalty.
    (g) Written notice of subcontractor withholding. A written 
notice of any withholding shall be issued to a subcontractor (with a 
copy to the Contracting Officer of any such notice issued by the 
Contractor), specifying--
    (1) The amount to be withheld;
    (2) The specific causes for the withholding under the terms of 
the subcontract; and
    (3) The remedial actions to be taken by the subcontractor in 
order to receive payment of the amounts withheld.
    (h) Subcontractor payment entitlement. The Contractor may not 
request payment from the Government of any amount withheld or 
retained in accordance with paragraph (d) of this clause until such 
time as the Contractor has determined and certified to the 
Contracting Officer that the subcontractor is entitled to the 
payment of such amount.
    (i) Prime-subcontractor disputes. A dispute between the 
Contractor and subcontractor relating to the amount or entitlement 
of a subcontractor to a payment or a late payment interest penalty 
under a clause included in the subcontract pursuant to paragraph (c) 
of this clause does not constitute a dispute to which the United 
States is a party. The United States may not be interpleaded in any 
judicial or administrative proceeding involving such a dispute.
    (j) Preservation of prime-subcontractor rights. Except as 
provided in paragraph (i) of this clause, this clause shall not 
limit or impair any contractual, administrative, or judicial 
remedies otherwise available to the Contractor or a subcontractor in 
the event of a dispute involving late payment or nonpayment by the 
Contractor or deficient subcontract performance or nonperformance by 
a subcontractor.
    (k) Non-recourse for prime contractor interest penalty. The 
Contractor's obligation to pay an interest penalty to a 
subcontractor pursuant to the clauses included in a subcontract 
under paragraph (c) of this clause shall not be construed to be an 
obligation of the United States for such interest penalty. A cost 
reimbursement claim may not include any amount for reimbursement of 
such interest penalty.

(End of clause)

    15. Section 52.232-28 is revised to read as follows:


52.232-28  Electronic Funds Transfer Payment Methods.

    As prescribed in 32.908(d), insert the following clause:

Electronic Funds Transfer Payment Methods (Date)

    Payments under this contract will be made by the Government 
either by check or electronic funds transfer (through the Treasury 
Fedline Payment System (FEDLINE) or the Automated Clearing House 
(ACH), at the option of the Government. No later than 14 days before 
an invoice or contract financing request is submitted, the 
Contractor shall designate a financial institution for receipt of 
electronic funds transfer payments, and shall submit this 
designation to the Contracting Officer or other Government official, 
as directed.
    (a) FEDLINE information. For payment through FEDLINE, the 
Contractor shall provide the following information:
    (1) Name, address, and telegraphic abbreviation of the financial 
institution receiving payment.
    (2) The American Bankers Association 9-digit identifying number 
for wire transfer of the financing institution receiving payment if 
the institution has access to the Federal Reserve Communications 
System.
    (3) Payee's account number at the financial institution where 
funds are to be transferred.
    (4) If the financial institution does not have access to the 
Federal Reserve Communications System, name, address, and 
telegraphic abbreviation of the correspondent financial institution 
through which the financial institution receiving payment obtains 
wire transfer activity. Provide the telegraphic abbreviation and 
American Bankers Association identifying number for the 
correspondent institution.
    (b) ACH information. For payment through ACH, the Contractor 
shall provide the following information:
    (1) Routing transit number of the financial institution 
receiving payment (same as American Bankers Association identifying 
number used for FEDLINE).
    (2) Number of account to which funds are to be deposited.
    (3) Type of depositor account (``C'' for checking, ``S'' for 
savings).
    (4) If the Contractor is a new enrollee to the ACH system, a 
``Payment Information Form,'' SF 3881, must be completed before 
payment can be processed.
    (c) Change of institution. In the event the Contractor, during 
the performance of this contract, elects to designate a different 
financial institution for the receipt of any payment made using 
electronic funds transfer procedures, notification of such change 
and the required information specified above must be received by the 
appropriate Government official 30 days prior to the date such 
change is to become effective.
    (d) Contractor documents. The documents furnishing the 
information required in this clause must be dated and contain 
signature, title, and telephone number of the contractor official 
authorized to provide it, as well as the Contractor's name and 
contract number.
    (e) Delay of payment. Contractor failure to properly designate a 
financial institution or to provide appropriate payee bank account 
information may delay payments of amounts otherwise properly due.
    (f) Prompt payment. (1) Payments made by electronic funds 
transfer shall be specified (see 32.902 definition of specified 
payment date) for settlement at a Federal Reserve Bank by the 
established due date.
    (2) When payment by electronic funds transfer cannot be made 
because the Contractor furnished incorrect or incomplete data, no 
interest penalty is due for the period between the date of the 
attempted transfer and the date on which the Contractor furnishes 
correct data; provided, the Government notifies the Contractor 
within 7 days after the Government receives notice that the transfer 
could not be completed because of defective data.

(End of clause)

[FR Doc. 94-10802 Filed 5-5-94; 8:45 am]
BILLING CODE 6820-34-M