# 32.104 Providing contract financing.

1. (a) Prudent contract financing can be a useful working tool in Government acquisition by expediting the performance of essential contracts. Contracting officers must consider the criteria in this part in determining whether to include contract financing in solicitations and contracts. Resolve reasonable doubts by including contract financing in the solicitation. The contracting officer must-

   1. (1) Provide Government financing only to the extent actually needed for prompt and efficient performance, considering the availability of private financing and the probable impact on working capital of the predelivery expenditures and production lead-times associated with the contract, or groups of contracts or orders (e.g., issued under indefinite-delivery contracts, basic ordering agreements, or their equivalent);

   2. (2) Administer contract financing so as to aid, not impede, the acquisition;

   3. (3) Avoid any undue risk of monetary loss to the Government through the financing;

   4. (4) Include the form of contract financing deemed to be in the Government’s best interest in the solicitation (see 32.106 and 32.113); and

   5. (5) Monitor the contractor’s use of the contract financing provided and the contractor’s financial status.

2. (b) If the contractor is a small business concern, the contracting officer must give special attention to meeting the contractor’s contract financing need. However, a contractor’s receipt of a certificate of competency from the Small Business Administration has no bearing on the contractor’s need for or entitlement to contract financing.

3. (c) Subject to specific agency regulations and paragraph (d) of this section, the contracting officer-

   1. (1) May provide customary contract financing in accordance with 32.113; and

   2. (2) Must not provide unusual contract financing except as authorized in 32.114.

4. (d) Unless otherwise authorized by agency procedures, the contracting officer may provide contract financing in the form of performance-based payments (see subpart 32.10) or customary progress payments (see subpart 32.5) if the following conditions are met:

   1. (1) The contractor-

      1. (i) Will not be able to bill for the first delivery of products for a substantial time after work must begin (normally 4 months or more for small business concerns, and 6 months or more for others), and will make expenditures for contract performance during the predelivery period that have a significant impact on the contractor’s working capital; or

      2. (ii) Demonstrates actual financial need or the unavailability of private financing.

   2. (2) If the contractor is not a small business concern-

      1. (i) For an individual contract, the contract price is $2.5 million or more; or

      2. (ii) For an indefinite-delivery contract, a basic ordering agreement or a similar ordering instrument, the contracting officer expects the aggregate value of orders or contracts that individually exceed the simplified acquisition threshold to have a total value of $2.5 million or more. The contracting officer must limit financing to those orders or contracts that exceed the simplified acquisition threshold.

   3. (3) If the contractor is a small business concern-

      1. (i) For an individual contract, the contract price exceeds the simplified acquisition threshold; or

      2. (ii) For an indefinite-delivery contract, a basic ordering agreement or a similar ordering instrument, the contracting officer expects the aggregate value of orders or contracts to exceed the simplified acquisition threshold.