# MP5332 Contract Financing

#### Mandatory Procedures

MP5332
Contract Financing

#### [Revised July 14, 2011]

MP5332 Introduction

This document provides mandatory procedures for certain contract financing actions.

MP5332.1 Non-Commercial Item Purchase Financing

(1) Since unusual contract financing arrangements may significantly impact the pricing of a contract, the contracting officer shall submit any unusual financing requests by a contractor to the MAJCOM Contracting Staff for consultation.

(2) If the MAJCOM Contracting Staff determines an approval is required by higher authority, it shall submit a memorandum outlining the pertinent facts together with a recommendation on the action to be taken through SAF/AQC, safaqc.workflow@pentagon.af.mil, to SAF/FMPS no later than 30 days before the needed effective date of the proposed financing arrangement.

(3) Since the financial health of a firm significantly impacts the ability of the contractor to perform, the contracting officer shall promptly report known adverse developments affecting a contractor or subcontractor to the contract administration office, other interested Government parties, and their MAJCOM Contracting Staff.

(4) If there is an adverse development affecting a contractor receiving a bank loan guaranteed by the Air Force, progress payments, or advance payments, the contracting office shall report the adverse development, its expected impact upon continued satisfactory performance under the contract, remedial actions taken to date (if any), and any recommendations for further action through the MAJCOM Contracting Staff to SAF/AQC, safaqc.workflow@pentagon.af.mil.

MP5332.2 Commercial Item Purchase Financing

(1) The contracting officer shall submit all commercial interim payment requests and commercial advance payment requests to the MAJCOM Director of Contracting. These requests, in turn, shall be forwarded through SAF/AQC, safaqc.workflow@pentagon.af.mil, to SAF/FMPS for review and approval.

MP5332.3 Loan Guarantees For Defense Production

(1) When the contracting officer receives an application with supporting data for a guaranteed loan from the Federal Reserve Bank, the contracting officer shall request the cognizant Defense Contract Management Agency (DCMA) office and Defense Contract Audit Agency (DCAA) to analyze the contractor’s financial condition. The request shall include, as a minimum, an examination of the contractor’s balance sheet and operating statement.

(2) The contracting officer shall give special attention to the classification and evaluation of accounts to ensure that they are in accordance with generally accepted accounting principles with emphasis on accounts receivable, inventories, and deferred charges.

(3) When applying for a loan guarantee, the contractor must apply to the cognizant Federal Reserve Bank to determine if it is eligible to receive a loan guarantee. Although the burden is on the contractor to apply for a certificate of eligibility, it may also be requested by the Assistant for Accounting and Banking, Office of the Assistant Secretary of the Air Force (Financial Management and Comptroller), SAF/FMPS.

(4) Requests for certificates of eligibility shall be submitted to SAF/AQC, safaqc.workflow@pentagon.af.mil, for evaluation of all supporting data. SAF/AQC shall provide appropriate comments to the requester of the certificate.

MP5332.4 Advance Payments

(1) Except for educational and non-profit organizations, the contracting officer shall submit each advance payment request involving only a single contract to the MAJCOM Director of Contracting. This request, in turn, shall be forwarded through SAF/AQC, safaqc.workflow@pentagon.af.mil, to SAF/FMPS for review and approval.

(2) For educational and non-profit organizations, the contracting office shall forward the advance payment request to the Director of Contracts, Air Force Office of Scientific Research (AFOSR/PK), 801 North Randolph Street, Room 732, Arlington, VA 22203-1977.
(a) AFOSR/PK is the office responsible for the administration of contracts and grants issued by the Air Force Office of Scientific Research, which sponsors and supports basic research by educational and research institutions. Thus, all requests for advance payments requested by educational and research institutions are processed by AFOSR/PK.

(b) If possible, a single disbursing office shall disburse funds for all Air Force contracts in an advance payment pool.

(c) New contracts awarded to educational and research institutions having an advance payment pool agreement shall also be included in the existing pool agreement.

(i) A prior clearance must be obtained from AFOSR/PK before including contracts in an advance payment pool agreement.

(ii) A request for clearance must identify the originating office, the name of institution, the contracting officer, the adjustment of funding by supplemental agreement/amendment, the incremental funding, the duration and end-date of contract, the type of services/supplies to be delivered, the type of contract, the contract number, and the accounting and finance office shown in the advance payment pool agreement.

(d) Educational and research institutions desiring an advance payment pool agreement shall submit their request to the contracting officer. The documentation supplied by the institution to justify an advance payment pool agreement should include the following:

(i) Letter of request accompanied by the amount proposed for the advance payment pool limitation;

(ii) Schedule of contracts to be covered by the agreement, with the following information for each contract:

(A) Contract number;
(B) Contract price;
(C) Period of performance;
(D) Government buying office;
(E) Designated Government contract administration office; and
(F) Designated Government payment office;

(iii) Cash flow statement that illustrates cash expenditure requirement on a contract-by-contract basis for the ensuing 12 months, using the following columnar headings:

(A) Column A - Contract Number;
(B) Column B - Contract Expense Incurred To Date;
(C) Column C - Estimated Contract Expense To Be Incurred;

(D) Columns D through O – 12-Month Contract Expense Forecast

(iv) Any other information that would demonstrate the need for an advance payment pool agreement.

(e) The contracting officer shall review the institution’s request and supporting documentation and forward the request to AFOSR/PK. AFOSR/PK reviews the justification for completeness and compliance with the FAR. When satisfied that the requirements have been met, AFOSR/PK forwards the request and other related documentation through SAF/AQC, safaqc.workflow@pentagon.af.mil, to SAF/FMPS. The following is a list of actions that may be performed by the Contract Administration Office or the Air Force Accounting and Finance Office:

(A) Receive advance payment requests from the institution;
(B) Ensure requests are properly supported and justified;
(C) Approve advance payment requests;
(D) Ensure pool funds are used for intended purposes;
(E) Obtain repayment of unliquidated advance payments in excess of requirements or advance payment pool limit, when advised of such excess by the approving office;
(F) Administer default and insurance provisions; and
(G) Periodically determine status of all contracts covered by the advance payment pool agreement.

(f) The Air Force accounting and finance office is responsible for the disbursing functions of the advance payment pool agreement. Specific duties include --

(A) Advancing funds to the institution;
(B) Ensuring that funds advanced do not exceed the advance payment pool limitation or the combined unpaid price of covered pool contracts;
(C) Maintaining accounting control over funds advanced, amounts liquidated, and unliquidated balances; and
(D) Receiving invoices from the institution and making payments against individual contracts.

(g) SAF/FMPS will evaluate the request to determine if the advance payment pool agreement is justified. Assistance may be solicited from other sources such as contracting officers, auditors, disbursing officers, and, if necessary, field visits to the institution. When approved, SAF/FMPS findings, determinations, and authorizations for advance payments and the advance payment pool agreement are forwarded to AFOSR/PK. Upon receipt of the signed D&F, AFOSR/PK takes necessary actions to award the advance payment pool agreement and incorporate it into affected contracts. AFOSR/PK will ensure that the clause at DFARS 252.232-7000, Advance Payment Pool, is included in each contract covered by the agreement.

(h) The contracting officer shall amend affected contracts, as appropriate, in order to incorporate the advance payment pool agreement.

MP5332.501-2 Unusual Progress Payments

(1) Unusual progress payments require the approval of the Director of Defense Procurement, Office of the Under Secretary Defense (Acquisition, Technology and Logistics (OUSD(AT&L) DP).

(2) Except for AFMC, the contracting officer shall submit contractor requests for unusual progress payments to the MAJCOM Contracting Staff.

(3) The MAJCOM Chief of Contracting recommends to SAF/AQC whether the request for unusual progress payments should be approved. All requests for unusual progress payments, whether recommended for approval or disapproval, shall be promptly forwarded through SAF/AQC, safaqc.workflow@pentagon.af.mil, to SAF/FMPS with all pertinent data supporting the recommended action.

(4) AFMC requests and recommendations shall be submitted through SAF/AQC, safaqc.workflow@pentagon.af.mil, to SAF/FMPS in accordance with AFMC procedures.

(5) When estimated increases totaling $20 million or more have been made under a contract, the contracting officer shall notify SAF/FMPS.

(6) In obtaining approval by SAF/FMPS of unusual progress payments, follow the procedures for obtaining approval of advance payment pool for educational and research institutions.

(7) When seeking approval to provide progress payments to contractors of the type described in FAR 32.502-2 (c), the contracting officer shall submit the necessary information directly to SAF/FMPS.

MP5332.6 Contract Debts

(1) Contracting officers shall retain a copy of all contract debt documentation in the contract file and shall keep the contract file open until the debt is collected and/or written-off.

(2) When the contracting officer issues a demand for payment against a contract that is paid by one DFAS office and accounted for by another DFAS office (i.e., the “cognizant” DFAS Field Site), the contracting officer shall provide a copy of the demand to both offices.

(3) Whenever a contracting officer renders a final decision that results in a contractor being contractually indebted to the Government, the contracting officer shall issue a demand letter to the contractor. Simultaneously, a copy of the final decision and demand for payment letter shall be forwarded to the contract administration office and the cognizant DFAS Field Site. (Note: It is imperative that contracting officers issue demand letters as soon as a contract debt is realized and not delay this action based on actions being taken or actions planned by the contractor to provide additional information or to appeal the contracting officer’s decision.) Contracting officers shall confirm the identity of the cognizant DFAS Field Site with the local Air Force Financial Management personnel prior to forwarding debt documentation for collection by the cognizant DFAS Field Site.

(4) Contracting officers shall request the cognizant DFAS Field Site to confirm receipt of the demand letter and the posting of the debt to the accounts receivable records. Subsequently, contracting officers shall track the debt until collection and/or write-off by following-up every 90 to 180 days with the cognizant DFAS Field Site.

(5) When a request for deferment of a contract debt is received from a contractor, the recipient office, except for those under AFMC, shall forward the request for deferment to the Chief of Contracting at the MAJCOM. The MAJCOM Contracting Staff shall submit, on a priority basis, an evaluation of the contractor’s request with the necessary reporting information and recommendation through SAF/AQC, safaqc.workflow@pentagon.af.mil, to SAF/FMPS. AFMC actions shall be submitted directly to SAF/FMPS in accordance with AFMC procedures. (Failure to have all of the required documentation that supports the deferment package should not delay the processing of the request to SAF/FMPS.)

(6) For payments made as a consequence of a contract debt arising from a default termination, advise contractors to make payments by check made payable to the “Treasury of the United States” and mailed to the Defense Finance and Accounting Service, DFAS-BKRD/CC, P.O. Box 955515, St. Louis, MO 63195-5515.

(7) Ascertaining and collecting delinquent contract debts is the responsibility of the DoD Debt Management Office (DFAS-BKRD) at DFAS-CO.