Long-Term Relationship

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Long-Term Relationship
Principles of Federal Acquisition

Assess how the different approaches to contract financing can impact the company.

Contracting Officers provide financing only to the extent needed for prompt and efficient performance, considering the availability of private financing and the impact of predelivery expenditures and product lead times on working capital. There are varieties of available methods: (1) progress payments, (2) advance payments, (3) performance-based payments, (4) commercial items purchase financing, and (5) other methods, such as private financing and Government loans guarantee. To minimize risk to the Government, the regulations also provide that when a contractor requests financing, the Contracting Officer should consider the financing methods in the following order of preference: (a) private financing without Government guarantees, (b) “customary” contract financing, (c) loan guarantees, (d) “unusual” contract financing, and (e) advance payments. Progress Payments: The Government will make progress payments to the contractor when requested as work progresses, but not more frequently than monthly, in amounts of $2,5000 or more approved by the Contractor Officer. (Arnavas, 2003) Advance Payments: are advances of money by the Government to a prime contractor before, in anticipation of, and for the purpose of complete performance under one or more contracts. They are expected to be liquidated from payments due to the contractor incident to performance of the contracts. Since they are not measured by performance, they differ from partial, progress, or other payments based on the performance or partial performance of a contract. Advance payments may be made to prime contractors for the purpose of making advances to subcontractors. (FAR 32.102(a) Performance-Based Payments: are the preferred Government…...

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