[Federal Register Volume 66, Number 243 (Tuesday, December 18, 2001)]
[Rules and Regulations]
[Pages 65353-65367]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-30540]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 32, and 52

[FAC 2001-02; FAR Case 1999-023; Item III]
RIN 9000-AI89


Federal Acquisition Regulation; Prompt Payment and the Recovery 
of Overpayment

AGENCIES: Department of Defense (DoD), General ServicesAdministration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) have agreed on a final rule

[[Page 65354]]

amending the Federal Acquisition Regulation (FAR) to reflect changes to 
the Office of Management and Budget (OMB) prompt payment requirements, 
to simplify and clarify the prompt payment coverage currently in the 
FAR, to require the contractor to notify the contracting officer if the 
contractor becomes aware of an overpayment, and to write all new and 
revised text using plain language.

DATES: Effective Date: February 19, 2002.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS 
Building, Washington, DC, 20405, (202) 501-4755, for information 
pertaining to status or publication schedules. For clarification of 
content, contact Mr. Jeremy Olson at (202) 501-3221. Please cite FAC 
2001-02, FAR case 1999-023.

SUPPLEMENTARY INFORMATION:

A. Background

    DoD, GSA, and NASA published a proposed rule in the Federal 
Register at 65 FR 52244 on August 28, 2000. The proposed rule--
     Conformed the prompt payment coverage to OMB regulations. 
The rule revises the FAR to conform the prompt payment coverage with an 
OMB final rule published in the Federal Register at 65 FR 52580 on 
September 29, 1999.
     Implemented a General Accounting Office (GAO) 
recommendation. In July 1999, the GAO published a report (GAO/NSIAD-99-
131) entitled Greater Attention Needed to Identify and Recover 
Overpayments. After examining the process for identifying and 
collecting overpayments, GAO concluded in their report that ``Under 
current law, there is no requirement for contractors who have been 
overpaid to notify the Government of overpayments or to return 
overpayments prior to the Government issuing a demand letter'' (i.e., 
formal notification to the contractor to pay money owed to the 
Government). One of the recommendations of the report was that DoD 
require contractors to promptly notify the Government of overpayments 
made to them. Accordingly, the FAR rule adds a paragraph to the prompt 
payment clauses that requires the contractor to notify the contracting 
officer if the contractor becomes aware of an overpayment.
     Wrote all new and revised text using plain language.
    Eleven respondents submitted public comments to the proposed rule. 
One of the respondents recommended that the requirement to notify the 
contracting officer of a duplicate payment or overpayment not be 
limited to just invoice payments, and expand the coverage to include 
financing payments (e.g., progress payments based on cost). The 
Councils agree with this comment and have opened a new FAR case 
(reference FAR case 2001-005), to consider adding the requirement to 
notify the contracting officer of a duplicate payment or overpayment to 
the financing payment clauses (e.g., FAR 52.216-7, Allowable Cost and 
Payment; 52.216-13, Allowable Cost and Payment-Facilities; 52.232-7, 
Payments under Time-and-Material and Labor-Hour Contracts; and 52.232-
16, Progress Payments).
    The Councils considered all comments when developing the final 
rule, which differs from the proposed rule by--
     Requiring that the contractor include an invoice number on 
the invoice, to be consistent with the OMB regulations at 5 CFR 
1316.9(b);
     Clarifying that, when a proper invoice is rejected in 
error, the payment office will use the original date the invoice was 
received for the purposes of computing any interest penalties that may 
be due the contractor; and
     Making several editorial changes.
    This is not a significant regulatory action, and therefore, was not 
subject to review under Section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

    The Department of Defense, the General Services Administration, and 
the National Aeronautics and Space Administration certify that this 
final rule will not 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. since the changes are primarily 
editorial in nature. For example, FAR 32.905(b) adds the stipulation 
that a proper invoice must include the taxpayer identification number 
(TIN) and electronic funds transfer (EFT) banking information, if 
required by agency procedures. This is not new policy as the current 
FAR authorizes agencies to collect TIN (FAR 4.203) and EFT banking 
information (FAR 32.1109) in any manner they choose, such as requiring 
it to be provided on each invoice.

C. Paperwork Reduction Act

    The Paperwork Reduction Act (Pub. L. 104-13) applies because this 
final rule contains information collection requirements. The final rule 
requires contractors to notify the contracting officer if the 
contractor becomes aware that the Government has overpaid on an invoice 
payment. The FAR Secretariat submitted a request for approval of a 
revised information collection, and the collection was approved by the 
Office of Management and Budget under OMB Control Number 9000-0070.

List of Subjects in 48 CFR Parts 2, 32, and 52

    Government procurement.

    Dated: December 15, 2001.
Al Matera,
Director, Acquisition Policy Division.

    Therefore, DoD, GSA, and NASA amend 48 CFR parts 2, 32, and 52 as 
set forth below:
    1. The authority citation for 48 CFR parts 2, 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 2--DEFINITIONS OF WORDS AND TERMS

    2. Amend section 2.101 by revising the definition ``Proper 
invoice''; and adding, in alphabetical order, the definition 
``Receiving report'' to read as follows:


2.101  Definitions.

* * * * *
    Proper invoice means an invoice that meets the minimum standards 
specified in 32.905(b).
* * * * *
    Receiving report means written evidence that indicates Government 
acceptance of supplies delivered or services performed (see subpart 
46.6). Receiving reports must meet the requirements of 32.905(c).
* * * * *

PART 15--CONTRACTING BY NEGOTIATION


15.407  [AMENDED]

    3. Amend 15.407-1(b)(7)(i) by removing ``32.902'' and adding 
``32.001'' in its place.

PART 32--CONTRACT FINANCING

    4. Amend section 32.001 by adding, in alphabetical order, the 
definitions ``Contract financing payment'', ``Designated billing 
office'', ``Designated payment office'', and ``Invoice payment'' to 
read as follows:


32.001  Definitions.

* * * * *
    Contract financing payment means an authorized Government 
disbursement of

[[Page 65355]]

monies to a contractor prior to acceptance of supplies or services by 
the Government.
    (1) Contract financing payments include--
    (i) Advance payments;
    (ii) Performance-based payments;
    (iii) Commercial advance and interim payments;
    (iv) Progress payments based on cost under the clause at 52.232-16, 
Progress Payments;
    (v) Progress payments based on a percentage or stage of completion 
(see 32.102(e)), except those 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; and
    (vi) Interim payments under a cost reimbursement contract, except 
for a cost reimbursement contract for services when Alternate I of the 
clause at 52.232-25, Prompt Payment, is used.
    (2) Contract financing payments do not include--
    (i) Invoice payments;
    (ii) Payments for partial deliveries; or
    (iii) Lease and rental payments.
* * * * *
    Designated billing office means the office or person (governmental 
or nongovernmental) designated in the contract where the contractor 
first submits invoices and contract financing requests. The contract 
might designate different offices to receive invoices and contract 
financing requests. The designated billing office might be--
    (1) The Government disbursing office;
    (2) The contract administration office;
    (3) The office accepting the supplies delivered or services 
performed by the contractor;
    (4) The contract audit office; or
    (5) A nongovernmental agent.
    Designated payment office means the office designated in the 
contract to make invoice payments or contract financing payments. 
Normally, this will be the Government disbursing office.
* * * * *
    Invoice payment means a Government disbursement of monies to a 
contractor under a contract or other authorization for supplies or 
services accepted by the Government.
    (1) Invoice payments include--
    (i) Payments for partial deliveries that have been accepted by the 
Government;
    (ii) Final cost or fee payments where amounts owed have been 
settled between the Government and the contractor;
    (iii) For purposes of subpart 32.9 only, all payments made under 
the clause at 52.232-5, Payments Under Fixed-Price Construction 
Contracts, and the clause at 52.232-10, Payments Under Fixed-Price 
Architect-Engineer Contracts; and
    (iv) Interim payments under a cost-reimbursement contract for 
services when Alternate I of the clause at 52.232-25, Prompt Payment, 
is used.
    (2) Invoice payments do not include contract financing payments.
* * * * *

    5. Add section 32.007 to read as follows:


32.007  Contract financing payments.

    (a)(1) Unless otherwise prescribed in agency policies and 
procedures or otherwise specified in paragraph (b) of this section, the 
due date for making contract financing payments by the designated 
payment office is the 30th day after the designated billing office 
receives a proper contract financing request.
    (2) If 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 specified due date.
    (3) Agency heads may prescribe shorter periods for payment based on 
contract pricing or administrative considerations. For example, a 
shorter period may be justified by an agency if the nature and extent 
of contract financing arrangements are integrated with agency contract 
pricing policies.
    (4) Agency heads must not prescribe a period shorter than 7 days or 
longer than 30 days.
    (b) For advance payments, loans, or other arrangements that do not 
involve recurrent submission of contract financing requests, the 
designated payment office will make payment in accordance with the 
applicable contract financing terms or as directed by the contracting 
officer.
    (c) A proper contract financing request must comply with the terms 
and conditions specified by the contract. The contractor must correct 
any defects in requests submitted in the manner specified in the 
contract or as directed by the contracting officer.
    (d) The designated billing office and designated payment office 
must annotate each contract financing request with the date their 
respective offices received the request.
    (e) The Government will not pay an interest penalty to the 
contractor as a result of delayed contract financing payments.

    6. Amend section 32.102 by revising paragraph (d) to read as 
follows:


32.102  Description of contract financing methods.

* * * * *
    (d) Payments for accepted supplies and services that are only a 
part of the contract requirements (i.e., partial deliveries) are 
authorized under 41 U.S.C. 255 and 10 U.S.C. 2307. In accordance with 5 
CFR 1315.4(k), agencies must pay for partial delivery of supplies or 
partial performance of services unless specifically prohibited by the 
contract. Although payments for partial deliveries generally are 
treated as a method of payment and not as a method of contract 
financing, using partial delivery payments can assist contractors to 
participate in contracts without, or with minimal, contract financing. 
When appropriate, contract statements of work and pricing arrangements 
must permit acceptance and payment for discrete portions of the work, 
as soon as accepted (see 32.906(c)).
* * * * *

    7. Amend Subpart 32.9 by--
    a. Revising sections 32.900, 32.901, and 32.902;
    b. Removing section 32.903;
    c. Redesignating sections 32.904, 32.905, and 32.906 as sections 
32.903, 32.904, and 32.905, respectively, and revising;
    d. Adding section 32.906;
    e. Revising sections 32.907, 32.908, and 32.909; and
    f. Removing sections 32.907-1 and 32.907-2.
    The revised and added text reads as follows:

Sec.
Subpart 32.9--Prompt Payment
32.900   Scope of subpart.
32.901   Applicability.
32.902   Definitions.
32.903   Responsibilities.
32.904   Determining payment due dates.
32.905   Payment documentation and process.
32.906   Making payments.
32.907   Interest penalties.
32.908   Contract clauses.
32.909   Contractor inquiries.


32.900  Scope of subpart.

    This subpart prescribes policies, procedures, and clauses for 
implementing Office of Management and Budget (OMB) prompt payment 
regulations at 5 CFR part 1315.


32.901  Applicability.

    (a) This subpart applies to invoice payments on all contracts, 
except contracts with payment terms and late payment penalties 
established by other governmental authority (e.g., tariffs).

[[Page 65356]]

    (b) This subpart does not apply to contract financing payments (see 
definition at 32.001).


32.902  Definitions.

    As used in this subpart--
    Discount for prompt payment means an invoice payment reduction 
offered by the contractor for payment prior to the due date.
    Mixed invoice means an invoice that contains items with different 
payment due dates.
    Payment date means the date on which a check for payment is dated 
or, for an electronic funds transfer (EFT), the settlement date.
    Settlement date, as it applies to electronic funds transfer, means 
the date on which an electronic funds transfer payment is credited to 
the contractor's financial institution.


32.903  Responsibilities.

    (a) Agency heads--
    (1) Must establish the policies and procedures necessary to 
implement this subpart;
    (2) May prescribe additional standards for establishing invoice 
payment due dates (see 32.904) necessary to support agency programs and 
foster prompt payment to contractors;
    (3) May adopt different payment procedures in order to accommodate 
unique circumstances, provided that such procedures are consistent with 
the policies in this subpart;
    (4) Must inform contractors of points of contact within their 
cognizant payment offices to enable contractors to obtain status of 
invoices; and
    (5) May authorize the use of the accelerated payment methods 
specified at 5 CFR 1315.5.
    (b) When drafting solicitations and contracts, contracting officers 
must identify for each contract line item number, subline item number, 
or exhibit line item number--
    (1) The applicable Prompt Payment clauses that apply to each item 
when the solicitation or contract contains items that will be subject 
to different payment terms; and
    (2) The applicable Prompt Payment food category (e.g., which item 
numbers are meat or meat food products, which are perishable 
agricultural commodities), when the solicitation or contract contains 
multiple payment terms for various classes of foods and edible 
products.


32.904  Determining payment due dates.

    (a) General. Agency procedures must ensure that, when specifying 
due dates, contracting officers give full consideration to the time 
reasonably required by Government officials to fulfill their 
administrative responsibilities under the contract.
    (b) Payment due dates. Except as prescribed in paragraphs (c) 
through (f) of this section, or as authorized in 32.908(a)(2) or 
(c)(2), the due date for making an invoice payment is as follows:
    (1) The later of the following two events:
    (i) The 30th day after the designated billing office receives a 
proper invoice from the contractor (except as provided in paragraph 
(b)(3) of this section).
    (ii) The 30th day after Government acceptance of supplies delivered 
or services performed.
    (A) For a final invoice, when the payment amount is subject to 
contract settlement actions, acceptance is deemed to occur on the 
effective date of the contract settlement.
    (B) For the sole purpose of computing an interest penalty that 
might be due the contractor--
    (1) Government acceptance is deemed to occur constructively on the 
7th day after the contractor delivers supplies or performs 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;
    (2) If actual acceptance occurs within the constructive acceptance 
period, the Government must base the determination of an interest 
penalty on the actual date of acceptance;
    (3) The constructive acceptance requirement does not compel 
Government officials to accept supplies or services, perform contract 
administration functions, or make payment prior to fulfilling their 
responsibilities; and
    (4) Except for a contract for the purchase of a commercial item, 
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 contracting officer must document in the contract file 
the justification for extending the constructive acceptance period 
beyond 7 days. Extended acceptance periods must not be a routine agency 
practice and must be used only when necessary to permit proper 
Government inspection and testing of the supplies delivered or services 
performed.
    (2) If the contract does not require submission of an invoice for 
payment (e.g., periodic lease payments), the contracting officer must 
specify the due date in the contract.
    (3) 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 is the 30th day after the date of the contractor's 
invoice, provided the designated billing office receives a proper 
invoice and there is no disagreement over quantity, quality, or 
contractor compliance with contract requirements.
    (c) Architect-engineer contracts. (1) The due date for making 
payments on contracts that contain the clause at 52.232-10, Payments 
Under Fixed-Price Architect-Engineer Contracts, is as follows:
    (i) The due date for work or services completed by the contractor 
is the later of the following two events:
    (A) The 30th day after the designated billing office receives a 
proper invoice from the contractor.
    (B) The 30th day after Government acceptance of the work or 
services completed by the contractor.
    (1) For a final invoice, when the payment amount is subject to 
contract settlement actions (e.g., release of claims), acceptance is 
deemed to occur on the effective date of the settlement.
    (2) For the sole purpose of computing an interest penalty that 
might be due the contractor, Government acceptance is deemed to occur 
constructively on the 7th day after the contractor completes the work 
or services in accordance with the terms and conditions of the contract 
(see also paragraph (c)(2) of this section). If actual acceptance 
occurs within the constructive acceptance period, the Government must 
base the determination of an interest penalty on the actual date of 
acceptance.
    (ii) The due date for progress payments is 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--
    (A) Government approval is deemed to occur constructively on the 
7th day after the designated billing office receives the contractor 
estimates (see also paragraph (c)(2) of this section).
    (B) If actual approval occurs within the constructive approval 
period, the Government must base the determination of an interest 
penalty on the actual date of approval.
    (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

[[Page 65357]]

date is the 30th day after the date of the contractor's invoice or 
payment request, provided the designated billing office receives a 
proper invoice or payment request and there is no disagreement over 
quantity, quality, or contractor compliance with contract requirements.
    (2) The constructive acceptance and constructive approval 
requirements described in paragraphs (c)(1)(i) and (ii) 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. The contracting 
officer must document in the contract file the justification for 
extending the constructive acceptance or approval period beyond 7 days.
    (d) Construction contracts. (1) The due date for making payments on 
construction contracts is as follows:
    (i) 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, 
is 14 days after the designated billing office receives a proper 
payment request.
    (A) 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 is the 14th day after the date of the contractor's 
payment request, provided the designated billing office receives a 
proper payment request and there is no disagreement over quantity, 
quality, or contractor compliance with contract requirements.
    (B) 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 contracting officer must document in the contract file 
the justification for extending the due date beyond 14 days.
    (C) The contracting officer must 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.
    (ii) 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, will be as specified in the 
contract or, if not specified, 30 days after approval by the 
contracting officer for release to the contractor. The contracting 
officer must base the release of retained amounts on the contracting 
officer's determination that satisfactory progress has been made.
    (iii) 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) is as 
follows:
    (A) The later of the following two events:
    (1) The 30th day after the designated billing office receives a 
proper invoice from the contractor.
    (2) The 30th day after Government acceptance of the work or 
services completed by the contractor. For a final invoice, when the 
payment amount is subject to contract settlement actions (e.g., release 
of contractor claims), acceptance is deemed to occur on the effective 
date of the contract settlement.
    (B) 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 is the 30th day after the date of the contractor's 
invoice, provided the designated billing office receives a proper 
invoice and there is no disagreement over quantity, quality, or 
contractor compliance with contract requirements.
    (2) For the sole purpose of computing an interest penalty that 
might be due the contractor for payments described in paragraph 
(d)(1)(iii) of this section--
    (i) Government acceptance or approval is deemed to occur 
constructively on the 7th day after the contractor completes the work 
or services in accordance with the terms and conditions of the 
contract, unless there is a disagreement over quantity, quality, 
contractor compliance with a contract requirement, or the requested 
amount;
    (ii) If actual acceptance occurs within the constructive acceptance 
period, the Government must base the determination of an interest 
penalty on the actual date of acceptance;
    (iii) The constructive acceptance requirement does not compel 
Government officials to accept work or services, approve contractor 
estimates, perform contract administration functions, or make payment 
prior to fulfilling their responsibilities; and
    (iv) 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. The 
contracting officer must document in the contract file the 
justification for extending the constructive acceptance or approval 
beyond 7 days.
    (3) Construction contracts contain special provisions concerning 
contractor payments to subcontractors, along with special contractor 
certification requirements. The Office of Management and Budget has 
determined that these certifications must not be construed as final 
acceptance of the subcontractor's performance. The certification in 
52.232-5(c) implements this determination; however, certificates are 
still acceptable if the contractor deletes paragraph (c)(4) of 52.232-5 
from the certificate.
    (4)(i) Paragraph (d) of the clause at 52.232-5, Payments under 
Fixed-Price Construction Contracts, and paragraph (e)(6) of the clause 
at 52.232-27, Prompt Payment for Construction Contracts, provide for 
the contractor to pay interest on unearned amounts in certain 
circumstances. The Government must recover this interest from 
subsequent payments to the contractor. Therefore, contracting officers 
normally must make no demand for payment. Contracting officers must--
    (A) Compute the amount in accordance with the clause;
    (B) Provide the contractor with a final decision; and
    (C) Notify the payment office of the amount to be withheld.
    (ii) The payment office is responsible for making the deduction of 
interest. Amounts collected in accordance with these provisions revert 
to the United States Treasury.
    (e) Cost-reimbursement contracts for services. For purposes of 
computing late payment interest penalties that may apply, the due date 
for making interim payments on cost-reimbursement contracts for 
services is 30 days after the date of receipt of a proper invoice.
    (f) Food and specified items.

[[Page 65358]]



------------------------------------------------------------------------
                                               Payment must be made as
        If the items delivered are:           close as possible to, but
                                                   not later than:
------------------------------------------------------------------------
(1) Meat or meat food products. As defined   7th day after product
 in section 2(a)(3) of the Packers and        delivery.
 Stockyard Act of 1921 (7 U.S.C. 182(3)),
 and 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.
(2) Fresh or frozen fish. As defined in      7th day after product
 section 204(3) of the Fish and Seafood       delivery.
 Promotion Act of 1986 (16 U.S.C. 4003(3)).
(3) Perishable agricultural commodities. As  10th day after product
 defined in section 1(4) of the Perishable    delivery, unless another
 Agricultural Commodities Act of 1930 (7      date is specified in the
 U.S.C. 499a(4)).                             contract.
(4) Dairy products. As defined in section    10th day after a proper
 111(e) of the Dairy Production               invoice has been received.
 Stabilization Act of 1983 (7 U.S.C.
 4502(e)), edible fats or oils, and food
 products prepared from edible fats or
 oils. 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. If questions arise regarding the
 proper classification of a specific
 product, the contracting officer must
 follow prevailing industry practices 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
 contractor making the representation.
------------------------------------------------------------------------

    (g) Multiple payment due dates. Contracting officers may encourage, 
but not require, contractors to submit separate invoices for products 
with different payment due dates under the same contract or order. When 
an invoice contains items with different payment due dates (i.e., a 
mixed invoice), the payment office will, subject to agency policy--
    (1) Pay the entire invoice on the earliest due date; or
    (2) Split invoice payments, making payments by the applicable due 
dates.


32.905  Payment documentation and process.

    (a) General. Payment will be based on receipt of a proper invoice 
and satisfactory contract performance.
    (b) Content of invoices. (1) A proper invoice must include the 
following items (except for interim payments on cost reimbursement 
contracts for services):
    (i) Name and address of the contractor.
    (ii) Invoice date and invoice number. (Contractors should date 
invoices as close as possible to the date of mailing or transmission.)
    (iii) Contract number or 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, discount for prompt payment 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 notify in the event of a defective invoice.
    (viii) Taxpayer Identification Number (TIN). The contractor must 
include its TIN on the invoice only if required by agency procedures. 
(See 4.9 TIN requirements.)
    (ix) Electronic funds transfer (EFT) banking information.
    (A) The contractor must include EFT banking information on the 
invoice only if required by agency procedures.
    (B) If EFT banking information is not required to be on the 
invoice, in order for the invoice to be a proper invoice, the 
contractor must have submitted correct EFT banking information in 
accordance with the applicable solicitation provision (e.g., 52.232-38, 
Submission of Electronic Funds Transfer Information with Offer), 
contract clause (e.g., 52.232-33, Payment by Electronic Funds 
Transfer--Central Contractor Registration, or 52.232-34, Payment by 
Electronic Funds Transfer--Other Than Central Contractor Registration), 
or applicable agency procedures.
    (C) EFT banking information is not required if the Government 
waived the requirement to pay by EFT.
    (x) Any other information or documentation required by the contract 
(e.g., evidence of shipment).
    (2) An interim payment request under a cost-reimbursement contract 
for services constitutes a proper invoice for purposes of this 
subsection if it includes all of the information required by the 
contract.
    (3) If the invoice does not comply with these requirements, the 
designated billing office must return it within 7 days after receipt (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), with the reasons why it is not a proper invoice. If such notice 
is not timely, then the designated billing office must adjust the due 
date for the purpose of determining an interest penalty, if any.
    (c) Authorization to pay. All invoice payments, with the exception 
of interim payments on cost-reimbursement contracts for services, must 
be supported by a receiving report or other Government documentation 
authorizing payment (e.g., Government certified voucher). 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 this section. Acceptance should be completed as 
expeditiously as possible. The receiving report or other Government 
documentation authorizing payment must, 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 or services 
performed, if applicable.
    (4) Date supplies delivered or services performed.
    (5) Date that the designated Government official--
    (i) Accepted the supplies or services; or
    (ii) Approved the progress payment request, if the request is being 
made under the clause at 52.232-5, Payments Under Fixed-Price 
Construction Contracts, or the clause at 52.232-10,

[[Page 65359]]

Payments Under Fixed-Price Architect-Engineer Contracts.
    (6) Signature, printed name, title, mailing address, and telephone 
number of the designated Government official responsible for acceptance 
or approval functions.
    (d) Billing office. The designated billing office must immediately 
annotate each invoice with the actual date it receives the invoice.
    (e) Payment office. The designated payment office will annotate 
each invoice and receiving report with the actual date it receives the 
invoice.


32.906  Making payments.

    (a) General. The Government will not make invoice payments earlier 
than 7 days prior to the due dates specified in the contract unless the 
agency head determines--
    (1) To make earlier payment on a case-by-case basis; or
    (2) That the use of accelerated payment methods are necessary (see 
32.903(a)(5)).
    (b) Payment office. The designated payment office--
    (1) Will mail checks on the same day they are dated;
    (2) For payments made by EFT, will specify a date on or before the 
established due date for settlement of the payment at a Federal Reserve 
Bank;
    (3) When the due date falls on a Saturday, Sunday, or legal holiday 
when Government offices are closed, may make payment on the following 
working day without incurring a late payment interest penalty.
    (4) When it is determined that the designated billing office 
erroneously rejected a proper invoice and upon resubmission of the 
invoice, will enter in the payment system the original date the invoice 
was received by the designated billing office for the purpose of 
calculating the correct payment due date and any interest penalties 
that may be due.
    (c) Partial deliveries. (1) Contracting officers must, 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 clause at 
52.232-1, Payments, provides that 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.
    (d) Contractor identifier. Each payment or remittance advice will 
use the contractor invoice number in addition to any Government or 
contract information in describing any payment made.
    (e) Discounts. When a discount for prompt payment is taken, the 
designated payment office will make payment to the contractor as close 
as possible to, but not later than, the end of the discount period. The 
discount period is specified by the contractor and is calculated from 
the date of the contractor's proper 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 Government offices are closed, the designated payment 
office may make payment on the following working day and take a 
discount. Payment terms are specified in the clause at 52.232-8, 
Discounts for Prompt Payment.


32.907  Interest penalties.

    (a) Late payment. The designated payment office will pay an 
interest penalty automatically, without request from the contractor, 
when all of the following conditions, if applicable, have been met:
    (1) The designated billing office received a proper invoice.
    (2) The Government processed a receiving report or other Government 
documentation authorizing payment, and there was no disagreement over 
quantity, quality, or contractor compliance with any contract 
requirement.
    (3) In the case of a final invoice, the payment amount is not 
subject to further contract settlement actions between the Government 
and the contractor.
    (4) The designated payment office paid the contractor after the due 
date.
    (5) In the case of interim payments on cost-reimbursement contracts 
for services, when payment is made more than 30 days after the 
designated billing office receives a proper invoice.
    (b) Improperly taken discount. The designated payment office will 
pay an interest penalty automatically, without request from the 
contractor, if the Government takes a discount for prompt payment 
improperly. The interest penalty is 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.
    (c) Failure to pay interest. (1) The designated payment office will 
pay a penalty amount, in addition to the interest penalty amount, only 
if--
    (i) The Government owes an interest penalty of $1 or more;
    (ii) The designated payment office does not pay the interest 
penalty within 10 days after the date the invoice amount is paid; and
    (iii) The contractor makes a written demand to the designated 
payment office for additional penalty payment in accordance with 
paragraph (c)(2) of this section, postmarked not later than 40 days 
after the date the invoice amount is paid.
    (2)(i) Contractors must support written demands for additional 
penalty payments with the following data. The Government must not 
request additional data. Contractors must--
    (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 is due; and
    (C) State that payment of the principal has been received, 
including the date of receipt.
    (ii) If there is no postmark or the postmark is illegible--
    (A) The designated payment office that receives the demand will 
annotate it with the date of receipt, provided the demand is received 
on or before the 40th day after payment was made; or
    (B) If the designated payment office fails to make the required 
annotation, the Government will determine the demand's validity based 
on the date the contractor has placed on the demand; provided such date 
is no later than the 40th day after payment was made.
    (d) Disagreements. (1) The payment office will not pay interest 
penalties if payment delays are due to disagreement between the 
Government and contractor concerning--
    (i) The payment amount;
    (ii) Contract compliance; or
    (iii) Amounts temporarily withheld or retained in accordance with 
the terms of the contract.
    (2) The Government and the contractor must resolve claims involving 
disputes, and any interest that may be payable in accordance with the 
Disputes clause.
    (e) Computation of interest penalties. The Government will compute 
interest penalties in accordance with OMB prompt payment regulations at 
5 CFR part 1315. These regulations are available via the Internet at 
http://www.fms.treas.gov/prompt/.

[[Page 65360]]

    (f) Unavailability of funds. The temporary unavailability of funds 
to make a timely payment does not relieve an agency from the obligation 
to pay interest penalties.


32.908  Contract clauses.

    (a) Insert the clause at 52.232-26, Prompt Payment for Fixed-Price 
Architect-Engineer Contracts, in solicitations and contracts that 
contain the clause at 52.232-10, Payments Under Fixed-Price Architect-
Engineer Contracts.
    (1) As authorized in 32.904(c)(2), the contracting officer may 
modify the date in paragraph (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 practicable 
opportunity to inspect and test the supplies furnished or evaluate the 
services performed.
    (2) As provided in 32.903, agency policies and procedures may 
authorize amendment of paragraphs (a)(1)(i) and (ii) of the clause to 
insert a period shorter than 30 days (but not less than 7 days) for 
making contract invoice payments.
    (b) Insert the clause at 52.232-27, Prompt Payment for Construction 
Contracts, in all solicitations and contracts for construction (see 
part 36).
    (1) As authorized in 32.904(d)(1)(i)(B), the contracting officer 
may modify the date in paragraph (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.
    (2) As authorized in 32.904(d)(2)(iv), the contracting officer may 
modify the date in paragraph (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) Insert the clause at 52.232-25, Prompt Payment, in all other 
solicitations and contracts, except when the clause at 52.212-4, 
Contract Terms and Conditions--Commercial Items, applies, or when 
payment terms and late payment penalties are established by other 
governmental authority (e.g., tariffs).
    (1) As authorized in 32.904(b)(1)(ii)(B)(4), the contracting 
officer may modify the date in paragraph (a)(5)(i) of the 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 to evaluate the services performed, 
except in the case of a contract for the purchase of a commercial item, 
including a brand-name commercial item for authorized resale (e.g., 
commissary items).
    (2) As provided in 32.903, agency policies and procedures may 
authorize amendment of paragraphs (a)(1)(i) and (ii) of the clause to 
insert a period shorter than 30 days (but not less than 7 days) for 
making contract invoice payments.
    (3) If the contract is a cost-reimbursement contract for services, 
use the clause with its Alternate I.


32.909  Contractor inquiries.

    (a) Direct questions involving--
    (1) Delinquent payments to the designated billing office or 
designated payment office; and
    (2) Disagreements in payment amount or timing to the contracting 
officer for resolution. The contracting officer must coordinate within 
appropriate contracting channels and seek the advice of other offices 
as necessary to resolve disagreements.
    (b) Small business concerns may contact the agency's local small 
business specialist or representative from the Office of Small and 
Disadvantaged Business Utilization to obtain additional assistance 
related to payment issues, late payment interest penalties, and 
information on the Prompt Payment Act.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    8. Amend section 52.212-4 by--
    a. Revising the date of the clause;
    b. Revising paragraph (g) (and removing the undesignated paragraph 
that follows) of the clause; and
    c. Revising the second sentence of paragraph (i) of the clause to 
read as follows:


52.212-4  Contract terms and conditions--commercial items.

* * * * *

Contract Terms and Conditions--Commercial Items (Feb 2002)

* * * * *
    (g) Invoice. (1) The Contractor shall submit an original invoice 
and three copies (or electronic invoice, if authorized) to the 
address designated in the contract to receive invoices. An invoice 
must include--
    (i) Name and address of the Contractor;
    (ii) Invoice date and number;
    (iii) Contract number, contract line item number and, if 
applicable, the order number;
    (iv) Description, quantity, unit of measure, unit price and 
extended price of the items delivered;
    (v) Shipping number and date of shipment, including the bill of 
lading number and weight of shipment if shipped on Government bill 
of lading;
    (vi) Terms of any discount for prompt payment offered;
    (vii) Name and address of official to whom payment is to be 
sent;
    (viii) Name, title, and phone number of person to notify in 
event of defective invoice; and
    (ix) Taxpayer Identification Number (TIN). The Contractor shall 
include its TIN on the invoice only if required elsewhere in this 
contract.
    (x) Electronic funds transfer (EFT) banking information.
    (A) The Contractor shall include EFT banking information on the 
invoice only if required elsewhere in this contract.
    (B) If EFT banking information is not required to be on the 
invoice, in order for the invoice to be a proper invoice, the 
Contractor shall have submitted correct EFT banking information in 
accordance with the applicable solicitation provision, contract 
clause (e.g., 52.232-33, Payment by Electronic Funds Transfer--
Central Contractor Registration, or 52.232-34, Payment by Electronic 
Funds Transfer--Other Than Central Contractor Registration), or 
applicable agency procedures.
    (C) EFT banking information is not required if the Government 
waived the requirement to pay by EFT.
    (2) Invoices will be handled in accordance with the Prompt 
Payment Act (31 U.S.C. 3903) and Office of Management and Budget 
(OMB) prompt payment regulations at 5 CFR part 1315.
* * * * *
    (i) Payment. * * * The Government will make payment in 
accordance with the Prompt Payment Act (31 U.S.C. 3903) and OMB 
prompt payment regulations at 5 CFR part 1315. * * *
* * * * *
(End of clause)

52.213-4  [Amended]

    9. In section 52.213-4, amend the clause heading by removing ``(May 
2001)'' and adding ``(Feb 2002)'' in its place; and in paragraph 
(a)(2)(ii) by removing ``(May 1997)'' and in paragraph (a)(2)(iv) by 
removing ``(June 1997)'' and adding ``(FEB 2002)'' in their places, 
respectively.

    10. Amend section 52.216-7 by revising the date of the clause and 
paragraph (a) to read as follows:


52.216-7  Allowable Cost and Payment.

* * * * *

Allowable Cost and Payment (Feb 2002)

    (a) Invoicing. (1) The Government will make payments to the 
Contractor when requested as work progresses, but (except for small 
business concerns) not more often than

[[Page 65361]]

once every 2 weeks, in amounts determined to be allowable by the 
Contracting Officer in accordance with Federal Acquisition 
Regulation (FAR) subpart 31.2 in effect on the date of this contract 
and the terms of this contract. The Contractor may submit to an 
authorized representative of the Contracting Officer, in such form 
and reasonable detail as the representative may require, an invoice 
or voucher supported by a statement of the claimed allowable cost 
for performing this contract.
    (2) Contract financing payments are not subject to the interest 
penalty provisions of the Prompt Payment Act. Interim payments made 
prior to the final payment under the contract are contract financing 
payments, except interim payments if this contract contains 
Alternate I to the clause at 52.232-25.
    (3) The designated payment office will make interim payments for 
contract financing on the ________[Contracting Officer insert day as 
prescribed by agency head; if not prescribed, insert ``30th''] day 
after the designated billing office receives a proper payment 
request.
    In the event that the Government requires an audit or other 
review of a specific payment request to ensure compliance with the 
terms and conditions of the contract, the designated payment office 
is not compelled to make payment by the specified due date.
* * * * *
(End of clause)


    11. Amend section 52.216-13 by revising the date of the clause and 
paragraph (b) to read as follows:


52.216-13  Allowable Cost and Payment--Facilities.

* * * * *

Allowable Cost and Payment--Facilities (Feb 2002)

* * * * *
    (b) Invoicing. (1) The Government will make payments to the 
Contractor when requested once each month. The Contractor may submit 
to an authorized representative of the Contracting Officer, in such 
form and reasonable detail as the representative may require, an 
invoice or voucher supported by a statement of the claimed allowable 
cost for the performance of this contract.
    (2) Contract financing payments are not subject to the interest 
penalty provisions of the Prompt Payment Act. Interim payments made 
prior to the final payment under the contract are contract financing 
payments, except interim payments if this contract contains 
Alternate I to the clause at 52.232-25.
    (3) The designated payment office will make interim payments for 
contract financing on the ________[Contracting Officer insert day as 
prescribed by agency head; if not prescribed, insert ``30th''] day 
after the designated billing office receives a proper payment 
request. In the event that the Government requires an audit or other 
review of a specific payment request to ensure compliance with the 
terms and conditions of the contract, the designated payment office 
is not compelled to make payment by the specified due date.
* * * * *
(End of clause)


    12. Amend section 52.232-7 by revising the date of the clause; by 
adding paragraph (h); and by revising Alternate II to read as follows:


52.232-7  Payments under time-and-materials and labor-hour contracts.

* * * * *

Payments Under Time-and-Materials and Labor-Hour Contracts (Feb 2002)

* * * * *
    (h) Interim payments. (1) Interim payments made prior to the 
final payment under the contract are contract financing payments. 
Contract financing payments are not subject to the interest penalty 
provisions of the Prompt Payment Act.
    (2) The designated payment office will make interim payments for 
contract financing on the ________[Contracting Officer insert day as 
prescribed by agency head; if not prescribed, insert ``30th''] day 
after the designated billing office receives a proper payment 
request. In the event that the Government requires an audit or other 
review of a specific payment request to ensure compliance with the 
terms and conditions of the contract, the designated payment office 
is not compelled to make payment by the specified due date.

(End of clause)
* * * * *
    Alternate II (Feb 2002). If a labor-hour contract is 
contemplated, and if no specific reimbursement for materials 
furnished is intended, the Contracting Officer may add the following 
paragraph (i) to the basic clause:
    (i) The terms of this clause that govern reimbursement for 
materials furnished are considered to have been deleted.

    13. Amend section 52.232-8 by revising the date of the clause and 
the last sentence of paragraph (a) to read as follows:


52.232-8  Discounts for prompt payment.

* * * * *

Discounts for Prompt Payment (Feb 2002)

    (a) * * * As an alternative to offering a discount for prompt 
payment in conjunction with the offer, offerors awarded contracts may 
include discounts for prompt payment on individual invoices.
* * * * *
    14. Amend section 52.232-16 by revising the date of the clause; by 
adding paragraph (l) to the end of the clause; by revising Alternate 
II; and by revising the introductory text of Alternate III and 
redesignating Alternate III paragraph (l) as (m). The added and revised 
text reads as follows:


52.232-16  Progress payments.

* * * * *

Progress Payments (Feb 2002)

* * * * *
    (l) Due date. The designated payment office will make progress 
payments on the ________ [Contracting Officer insert date as 
prescribed by agency head; if not prescribed, insert ``30th''] day 
after the designated billing office receives a proper progress 
payment request. In the event that the Government requires an audit 
or other review of a specific progress payment request to ensure 
compliance with the terms and conditions of the contract, the 
designated payment office is not compelled to make payment by the 
specified due date. Progress payments are considered contract 
financing and are not subject to the interest penalty provisions of 
the Prompt Payment Act.

(End of clause)
* * * * *
    Alternate II (Feb 2002). If the contract is a letter contract, 
add paragraphs (m) and (n). The amount specified in paragraph (n) 
must not exceed 80 percent applied to the maximum liability of the 
Government under the letter contract. Separate limits may be 
specified for separate parts of the work.
    (m) Progress payments made under this letter contract shall, 
unless previously liquidated under paragraph (b) of this clause, be 
liquidated under the following procedures:
    (1) If this letter contract is superseded by a definitive 
contract, unliquidated progress payments made under this letter 
contract shall be liquidated by deducting the amount from the first 
progress or other payments made under the definitive contract.
    (2) If this letter contract is not superseded by a definitive 
contract calling for the furnishing of all or part of the articles 
or services covered under the letter contract, unliquidated progress 
payments made under the letter contract shall be liquidated by 
deduction from the amount payable under the Termination clause.
    (3) If this letter contract is partly terminated and partly 
superseded by a contract, the Government will allocate the 
unliquidated progress payments to the terminated and unterminated 
portions as the Government deems equitable, and will liquidate each 
portion under the relevant procedure in paragraphs (m)(1) and (m)(2) 
of this clause.
    (4) If the method of liquidating progress payments provided in 
this clause does not result in full liquidation, the Contractor 
shall immediately pay the unliquidated balance to the Government on 
demand.
    (n) The amount of unliquidated progress payments shall not 
exceed ________ [Contracting Officer specify dollar amount].
    Alternate III (Feb 2002). As prescribed in 35.502-4(d), add the 
following paragraph (m) to the basic clause. If Alternate II is also 
being used, redesignate the following paragraph as paragraph (o):


    15. Revise sections 52.232-25, 52.232-26, and 52.232-27 to read as 
follows:

[[Page 65362]]

52.232-25  Prompt payment.

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

Prompt Payment (Feb 2002)

    Notwithstanding any other payment clause in this contract, the 
Government will make invoice payments under the terms and conditions 
specified in this clause. The Government considers payment as being 
made on the day a check is dated or the date of an electronic funds 
transfer (EFT). Definitions of pertinent terms are set forth in 
sections 2.101, 32.001, and 32.902 of the Federal Acquisition 
Regulation. 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 
paragraphs (a)(2) and (c) of this clause, the due date for making 
invoice payments by the designated payment office is the later of 
the following two events:
    (A) The 30th day after the designated billing office receives 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. For a final invoice, when the 
payment amount is subject to contract settlement actions, acceptance 
is deemed to occur 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 is the 30th day after the date of the 
Contractor's invoice, provided the designated billing office 
receives a proper invoice 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)), 
and as further defined in Pub. L. 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(4)), 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 
regarding 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 Contractor 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 
paragraphs (a)(3)(i) through (a)(3)(x) of this clause. If the 
invoice does not comply with these requirements, the designated 
billing office will return it within 7 days after receipt (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), with the reasons 
why it is not a proper invoice. The Government will take into 
account untimely notification when computing any interest penalty 
owed the Contractor.
    (i) Name and address of the Contractor.
    (ii) Invoice date and invoice number. (The Contractor should 
date invoices as close as possible to the date of the mailing or 
transmission.)
    (iii) Contract number or 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, discount for prompt payment 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 notify in the event of a defective invoice.
    (viii) Taxpayer Identification Number (TIN). The Contractor 
shall include its TIN on the invoice only if required elsewhere in 
this contract.
    (ix) Electronic funds transfer (EFT) banking information.
    (A) The Contractor shall include EFT banking information on the 
invoice only if required elsewhere in this contract.
    (B) If EFT banking information is not required to be on the 
invoice, in order for the invoice to be a proper invoice, the 
Contractor shall have submitted correct EFT banking information in 
accordance with the applicable solicitation provision (e.g., 52.232-
38, Submission of Electronic Funds Transfer Information with Offer), 
contract clause (e.g., 52.232-33, Payment by Electronic Funds 
Transfer--Central Contractor Registration, or 52.232-34, Payment by 
Electronic Funds Transfer--Other Than Central Contractor 
Registration), or applicable agency procedures.
    (C) EFT banking information is not required if the Government 
waived the requirement to pay by EFT.
    (x) Any other information or documentation required by the 
contract (e.g., evidence of shipment).
    (4) Interest penalty. The designated payment office will pay an 
interest penalty automatically, without request from the Contractor, 
if payment is not made by the due date and the conditions listed in 
paragraphs (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, the designated payment office may make payment on 
the following working day without incurring a late payment interest 
penalty.
    (i) The designated billing office received a proper invoice.
    (ii) The Government processed a receiving report or other 
Government documentation authorizing payment, 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 Government will compute the 
interest penalty in accordance with the Office of Management and 
Budget prompt payment regulations at 5 CFR part 1315.
    (i) For the sole purpose of computing an interest penalty that 
might be due the Contractor, Government acceptance is deemed to 
occur constructively on the 7th day (unless otherwise specified in 
this contract) after the Contractor delivers the supplies or 
performs 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. If actual 
acceptance occurs within the constructive acceptance period, the 
Government will base the determination of an interest penalty 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 prompt payment regulations at 5 CFR 1315.10(c) do not 
require the Government to pay interest penalties if payment delays 
are due to disagreement between the Government and the Contractor 
over the payment amount or other issues involving contract 
compliance, or on

[[Page 65363]]

amounts temporarily withheld or retained in accordance with the 
terms of the contract. The Government and the Contractor shall 
resolve claims involving disputes and any interest that may be 
payable in accordance with the clause at FAR 52.233-1, Disputes.
    (6) Discounts for prompt payment. The designated payment office 
will pay an interest penalty automatically, without request from the 
Contractor, if the Government takes a discount for prompt payment 
improperly. The Government will calculate the interest penalty in 
accordance with the prompt payment regulations at 5 CFR part 1315.
    (7) Additional interest penalty. (i) The designated payment 
office will pay a penalty amount, calculated in accordance with the 
prompt payment regulations at 5 CFR part 1315 in addition to the 
interest penalty amount only if--
    (A) The Government owes an interest penalty of $1 or more;
    (B) The designated payment office does not pay the interest 
penalty within 10 days after the date the invoice amount is paid; 
and
    (C) The Contractor makes a written demand to the designated 
payment office for additional penalty payment, in accordance with 
paragraph (a)(7)(ii) of this clause, postmarked not later than 40 
days after the invoice amount is paid.
    (ii)(A) The Contractor shall support written demands for 
additional penalty payments with the following data. The Government 
will not request any additional data. The Contractor 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 is due; and
    (3) State that payment of the principal has been received, 
including the date of receipt.
    (B) If there is no postmark or the postmark is illegible--
    (1) The designated payment office that receives the demand will 
annotate it with the date of receipt, provided the demand is 
received on or before the 40th day after payment was made; or
    (2) If the designated payment office fails to make the required 
annotation, the Government will determine the demand's validity 
based on the date the Contractor has placed on the demand, provided 
such date is no later than the 40th day after payment was made.
    (iii) The additional penalty does not apply to payments 
regulated by other Government regulations (e.g., payments under 
utility contracts subject to tariffs and regulation).
    (b) Contract financing payment. If this contract provides for 
contract financing, the Government will make contract financing 
payments in accordance with the applicable contract financing 
clause.
    (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.
    (d) Overpayments. If the Contractor becomes aware of a duplicate 
payment or that the Government has otherwise overpaid on an invoice 
payment, the Contractor shall immediately notify the Contracting 
Officer and request instructions for disposition of the overpayment.

(End of clause)
    Alternate I (Feb 2002). As prescribed in 32.908(c)(3), add the 
following paragraph (e) to the basic clause:
    (e) Invoices for interim payments. For interim payments under 
this cost-reimbursement contract for services--
    (1) Paragraphs (a)(2), (a)(3), (a)(4)(ii), (a)(4)(iii), and 
(a)(5)(i) do not apply;
    (2) For purposes of computing late payment interest penalties 
that may apply, the due date for payment is the 30th day after the 
designated billing office receives a proper invoice; and
    (3) The contractor shall submit invoices for interim payments in 
accordance with paragraph (a) of FAR 52.216-7, Allowable Cost and 
Payment. If the invoice does not comply with contract requirements, 
it will be returned within 7 days after the date the designated 
billing office received the invoice.


52.232-26  Prompt payment for fixed-price architect-engineer contracts.

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

Prompt Payment for Fixed-Price Architect-Engineer Contracts (FEB 2002)

    Notwithstanding any other payment terms in this contract, the 
Government will make invoice payments under the terms and conditions 
specified in this clause. The Government considers payment 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 sections 
2.101, 32.001, and 32.902 of the Federal Acquisition Regulation. 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 is--
    (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 receives a 
proper invoice from the Contractor (except as provided in paragraph 
(a)(1)(iii) of this clause).
    (B) The 30th day after Government acceptance of the work or 
services completed by the Contractor. For a final invoice, when the 
payment amount is subject to contract settlement actions (e.g., 
release of claims), acceptance is deemed to occur on the effective 
date of the settlement.
    (ii) The due date for progress payments is 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 is the 30th day after the date 
of the Contractor's invoice or payment request, provided the 
designated billing office receives a proper invoice or payment 
request 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 
paragraphs (a)(2)(i) through (a)(2)(x) of this clause. If the 
invoice does not comply with these requirements, the designated 
billing office will return it within 7 days after receipt, with the 
reasons why it is not a proper invoice. When computing any interest 
penalty owed the Contractor, the Government will take into account 
if the Government notifies the Contractor of an improper invoice in 
an untimely manner.
    (i) Name and address of the Contractor.
    (ii) Invoice date and invoice number. (The Contractor should 
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., discount for prompt 
payment 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 notify in the event of a defective invoice.
    (viii) Taxpayer Identification Number (TIN). The Contractor 
shall include its TIN on the invoice only if required elsewhere in 
this contract.
    (ix) Electronic funds transfer (EFT) banking information.
    (A) The Contractor shall include EFT banking information on the 
invoice only if required elsewhere in this contract.
    (B) If EFT banking information is not required to be on the 
invoice, in order for the invoice to be a proper invoice, the 
Contractor shall have submitted correct EFT banking information in 
accordance with the applicable solicitation provision (e.g., 52.232-
38, Submission of Electronic Funds Transfer Information with Offer), 
contract clause (e.g., 52.232-33, Payment by Electronic Funds 
Transfer--Central Contractor Registration, or 52.232-34,Payment by 
Electronic Funds Transfer--Other Than Central Contractor 
Registration), or applicable agency procedures.
    (C) EFT banking information is not required if the Government 
waived the requirement to pay by EFT.
    (x) Any other information or documentation required by the 
contract.
    (3) Interest penalty. The designated payment office will pay an 
interest penalty automatically, without request from the Contractor, 
if payment is not made by the due date and the conditions listed in 
paragraphs (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, the designated payment office may make payment on 
the following working day without incurring a late payment interest 
penalty.

[[Page 65364]]

    (i) The designated billing office received a proper invoice.
    (ii) The Government processed a receiving report or other 
Government documentation authorizing payment 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 Government will compute the 
interest penalty in accordance with the Office of Management and 
Budget prompt payment regulations at 5 CFR part 1315.
    (i) For the sole purpose of computing an interest penalty that 
might be due the Contractor, Government acceptance or approval is 
deemed to occur constructively as shown in paragraphs (a)(4)(i)(A) 
and (B) of this clause. If actual acceptance or approval occurs 
within the constructive acceptance or approval period, the 
Government will base the determination of an interest penalty 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 is deemed to occur constructively on the 7th day after 
the Contractor completes the work or services in accordance with the 
terms and conditions of the contract.
    (B) For progress payments, Government approval is deemed to 
occur on the 7th day after the designated billing office receives 
the Contractor estimates.
    (ii) The prompt payment regulations at 5 CFR 1315.10(c) do not 
require the Government to pay interest penalties if payment delays 
are due to disagreement between the Government and the 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. The Government and the 
Contractor shall resolve claims involving disputes, and any interest 
that may be payable in accordance with the clause at FAR 52.233-1, 
Disputes.
    (5) Discounts for prompt payment. The designated payment office 
will pay an interest penalty automatically, without request from the 
Contractor, if the Government takes a discount for prompt payment 
improperly. The Government will calculate the interest penalty in 
accordance with 5 CFR part 1315.
    (6) Additional interest penalty. (i) The designated payment 
office will pay a penalty amount, calculated in accordance with the 
prompt payment regulations at 5 CFR part 1315, in addition to the 
interest penalty amount only if--
    (A) The Government owes an interest penalty of $1 or more;
    (B) The designated payment office does not pay the interest 
penalty within 10 days after the date the invoice amount is paid; 
and
    (C) The contractor makes a written demand to the designated 
payment office for additional penalty payment, in accordance with 
paragraph (a)(6)(ii) of this clause, postmarked not later than 40 
days after the date the invoice amount is paid.
    (ii)(A) The Contractor shall support written demands for 
additional penalty payments with the following data. The Government 
will not request any additional data. The Contractor 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 is due; and
    (3) State that payment of the principal has been received, 
including the date of receipt.
    (B) If there is no postmark or the postmark is illegible--
    (1) The designated payment office that receives the demand will 
annotate it with the date of receipt, provided the demand is 
received on or before the 40th day after payment was made; or
    (2) If the designated payment office fails to make the required 
annotation, the Government will determine the demand's validity 
based on the date the Contractor has placed on the demand, provided 
such date is no later than the 40th day after payment was made.
    (iii) The additional penalty does not apply to payments 
regulated by other Government regulations (e.g., payments under 
utility contracts subject to tariffs and regulation).
    (b) Contract financing payments. If this contract provides for 
contract financing, the Government will make contract financing 
payments in accordance with the applicable contract financing 
clause.
    (c) Overpayments. If the Contractor becomes aware of a duplicate 
payment or that the Government has otherwise overpaid on an invoice 
payment, the Contractor shall immediately notify the Contracting 
Officer and request instructions for disposition of the overpayment.

(End of clause)


52.232-27  Prompt payment for construction contracts.

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

Prompt Payment for Construction Contracts (Feb 2002)

    Notwithstanding any other payment terms in this contract, the 
Government will make invoice payments under the terms and conditions 
specified in this clause. The Government considers payment 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 sections 
2.101, 32.001, and 32.902 of the Federal Acquisition Regulation. 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 
that 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 is 14 days after the 
designated billing office receives a proper payment request. 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 is the 14th day after the date of the Contractor's payment 
request, provided the designated billing office receives a proper 
payment request 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, is as specified 
in the contract or, if not specified, 30 days after approval by the 
Contracting Officer for release to the Contractor.
    (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 is the later of the 
following two events:
    (1) The 30th day after the designated billing office receives a 
proper invoice from the Contractor.
    (2) The 30th day after Government acceptance of the work or 
services completed by the Contractor. For a final invoice when the 
payment amount is subject to contract settlement actions (e.g., 
release of claims), acceptance is deemed to occur on the effective 
date of the contract settlement.
    (B) 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 is the 30th day after the date of the 
Contractor's invoice, provided the designated billing office 
receives a proper invoice 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 
paragraphs (a)(2)(i) through (a)(2)(xi) of this clause. If the 
invoice does not comply with these requirements, the designated 
billing office must return it within 7 days after receipt, with the 
reasons why it is not a proper invoice. When computing any interest 
penalty owed the Contractor, the Government will take into account 
if the

[[Page 65365]]

Government notifies the Contractor of an improper invoice in an 
untimely manner.
    (i) Name and address of the Contractor.
    (ii) Invoice date and invoice number. (The Contractor should 
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., discount for prompt 
payment 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 notify in the event of a defective invoice.
    (viii) For payments described in paragraph (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) Taxpayer Identification Number (TIN). The Contractor shall 
include its TIN on the invoice only if required elsewhere in this 
contract.
    (x) Electronic funds transfer (EFT) banking information.
    (A) The Contractor shall include EFT banking information on the 
invoice only if required elsewhere in this contract.
    (B) If EFT banking information is not required to be on the 
invoice, in order for the invoice to be a proper invoice, the 
Contractor shall have submitted correct EFT banking information in 
accordance with the applicable solicitation provision (e.g., 52.232-
38, Submission of Electronic Funds Transfer Information with Offer), 
contract clause (e.g., 52.232-33, Payment by Electronic Funds 
Transfer--Central Contractor Registration, or 52.232-34, Payment by 
Electronic Funds Transfer--Other Than Central Contractor 
Registration), or applicable agency procedures.
    (C) EFT banking information is not required if the Government 
waived the requirement to pay by EFT.
    (xi) Any other information or documentation required by the 
contract.
    (3) Interest penalty. The designated payment office will pay an 
interest penalty automatically, without request from the Contractor, 
if payment is not made by the due date and the conditions listed in 
paragraphs (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, the designated payment office may make payment on 
the following working day without incurring a late payment interest 
penalty.
    (i) The designated billing office received a proper invoice.
    (ii) The Government processed a receiving report or other 
Government documentation authorizing payment 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 Government will compute the 
interest penalty in accordance with the Office of Management and 
Budget prompt payment regulations at 5 CFR part 1315.
    (i) For the sole purpose of computing an interest penalty that 
might be due the Contractor for payments described in paragraph 
(a)(1)(ii) of this clause, Government acceptance or approval is 
deemed to occur constructively on the 7th day after the Contractor 
has completed the work or services in accordance with the terms and 
conditions of the contract. If actual acceptance or approval occurs 
within the constructive acceptance or approval period, the 
Government will base the determination of an interest penalty 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 prompt payment regulations at 5 CFR 1315.10(c) do not 
require the Government to pay interest penalties if payment delays 
are due to disagreement between the Government and the 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. The Government and the 
Contractor shall resolve claims involving disputes, and any interest 
that may be payable in accordance with the clause at FAR 52.233-1, 
Disputes.
    (5) Discounts for prompt payment. The designated payment office 
will pay an interest penalty automatically, without request from the 
Contractor, if the Government takes a discount for prompt payment 
improperly. The Government will calculate the interest penalty in 
accordance with the prompt payment regulations at 5 CFR part 1315.
    (6) Additional interest penalty. (i) The designated payment 
office will pay a penalty amount, calculated in accordance with the 
prompt payment regulations at 5 CFR part 1315 in addition to the 
interest penalty amount only if--
    (A) The Government owes an interest penalty of $1 or more;
    (B) The designated payment office does not pay the interest 
penalty within 10 days after the date the invoice amount is paid; 
and
    (C) The Contractor makes a written demand to the designated 
payment office for additional penalty payment, in accordance with 
paragraph (a)(6)(ii) of this clause, postmarked not later than 40 
days after the date the invoice amount is paid.
    (ii)(A) The Contractor shall support written demands for 
additional penalty payments with the following data. The Government 
will not request any additional data. The Contractor 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) If there is no postmark or the postmark is illegible--
    (1) The designated payment office that receives the demand will 
annotate it with the date of receipt provided the demand is received 
on or before the 40th day after payment was made; or
    (2) If the designated payment office fails to make the required 
annotation, the Government will determine the demand's validity 
based on the date the Contractor has placed on the demand, provided 
such date is no later than the 40th day after payment was made.
    (b) Contract financing payments. If this contract provides for 
contract financing, the Government will make contract financing 
payments in accordance with the applicable contract financing 
clause.
    (c) Subcontract clause 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 that 
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 that 
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 clause flowdown. A clause requiring each 
subcontractor tou
    (i) Include a payment clause and an interest penalty clause 
conforming to the standards set forth in paragraphs (c)(1) and 
(c)(2) of this clause in each of its subcontracts; and
    (ii) Require each of its subcontractors to include such clauses 
in their subcontracts with each lower-tier subcontractor or 
supplier.
    (d) Subcontract clause 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 that--

[[Page 65366]]

    (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 previously has been furnished to the subcontractor; and
    (ii) The Contractor furnishes to the Contracting Officer a copy 
of any notice issued by a Contractor pursuant to paragraph (d)(3)(i) 
of this clause.
    (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, then 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 paragraph (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 
paragraph (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 paragraph 
(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 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;
    (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 paragraph (e)(1) of this clause; 
and
    (B) The dates that such withholding began and ended; and
    (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 
paragraph (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 paragraph (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 paragraph 
(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 paragraph (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 DisputesAct 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. The Contractor 
shall issue a written notice of any withholding to a subcontractor 
(with a copy furnished to the Contracting Officer), 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 Government 
is a party. The Government 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 Government for such interest penalty. A cost-
reimbursement claim may not include any amount for reimbursement of 
such interest penalty.
    (l) Overpayments. If the Contractor becomes aware of a duplicate 
payment or that the Government has otherwise overpaid on an invoice 
payment, the Contractor shall immediately notify the Contracting 
Officer and request instructions for disposition of the overpayment.

(End of clause)

    16. Amend section 52.232-29 by revising the date of the clause; by 
redesignating paragraph (g) as paragraph (h); by adding a new paragraph 
(g); and by revising the newly designated paragraph (h) to read as 
follows:


52.232-29  Terms for financing of purchases of commercial items.

* * * * *

Terms for Financing of Purchases of Commercial Items (Feb 2002)

* * * * *
    (g) Dates for payment. A payment under this clause is a contract 
financing payment

[[Page 65367]]

and not subject to the interest penalty provisions of the Prompt 
Payment Act. The designated payment office will pay approved payment 
requests within 30 days of submittal of a proper request for 
payment.
    (h) Conflict between terms of offeror and clause. In the event 
of any conflict between the terms proposed by the offeror in 
response to an invitation to propose financing terms (52.232-31) and 
the terms in this clause, the terms of this clause shall govern.

(End of clause)

    17. Amend section 52.232-32 by revising the date of the clause and 
paragraph (c)(2) to read as follows:


52.232-32  Performance-based payments.

* * * * *

Performance-Based Payments (Feb 2002)

* * * * *
    (c) * * *
    (2) A payment under this performance-based payment clause is a 
contract financing payment under the Prompt Payment clause of this 
contract and not subject to the interest penalty provisions of the 
Prompt Payment Act. The designated payment office will pay approved 
requests on the ________ [Contracting Officer insert day as 
prescribed by agency head; if not prescribed, insert ``30th''] day 
after receipt of the request for performance-based payment. However, 
the designated payment office is not required to provide payment if 
the Contracting Officer requires substantiation as provided in 
paragraph (c)(1) of this clause, or inquires into the status of an 
event or performance criterion, or into any of the conditions listed 
in paragraph (e) of this clause, or into the Contractor 
certification. The payment period will not begin until the 
Contracting Officer approves the request.
* * * * *

[FR Doc. 01-30540 Filed 12-17-01; 8:45 am]
BILLING CODE 6820-EP-P