FAR and DFARS › FAR Part 32
FAR Part 32: Contract Financing
The codified text (eCFR, as of 2026-10-02). Under the Revolutionary FAR Overhaul ↗, agencies follow class deviations with new text for many parts while the formal rules go through the Federal Register: check the solicitation and your contract's clauses, which rule.
In plain English
FAR Part 32 covers contract financing and payment policies for Government contracts, including advance payments, progress payments, performance-based payments, and commercial financing. It matters because it determines when and how contractors can receive payments before completing work, which affects cash flow and performance.
Key rules
- Contract financing is generally not provided for purchases made under simplified acquisition procedures (Part 13) unless agency regulations permit it. (32.003)
- When a contract financing clause is included at the inception of a contract, there is no separate consideration for the financing clause. (32.005)
- Contract financing methods are intended to be self-liquidating through contract performance and should only be used for financing contractor work. (32.105)
- The contracting officer must consider an order of preference when a contractor requests contract financing, unless an exception is in the Government's best interest. (32.106)
- A contractor's need for contract financing is not a deterrent to award if the contractor meets the standards for a responsible prospective contractor. (32.107)
- For commercial product or service purchases, the contractor is responsible for providing all resources needed for performance, and financing is not customary. (32.202-1)
- The Government must obtain adequate security for Government financing, and the contracting officer must specify the type of security in the solicitation. (32.202-4)
- Agencies other than DoD shall provide accelerated payments to small business contractors, with a goal of 15 days after receipt of a proper invoice. (32.009-1)
Who does what
Contracting officers
- Consider the criteria in Part 32 before providing contract financing.
- Specify the type of security required for Government financing in the solicitation.
- Insert the clause at 52.232-40, Providing Accelerated Payments to Small Business Subcontractors, in all solicitations and contracts.
Contractors
- Provide all resources needed for performance of the contract, as financing is not customary for commercial purchases.
- Notify the contracting officer of any duplicate payment or overpayment.
Agencies
- Establish appropriate procedures to implement the policies and procedures of this part.
- Provide accelerated payments to small business contractors, with a goal of 15 days after receipt of a proper invoice.
In practice
- If you are a small business, you may be entitled to accelerated payments, which can improve your cash flow.
- For commercial contracts, do not expect contract financing unless specifically authorized; you must fund performance yourself.
- When requesting contract financing, be aware that the contracting officer will follow an order of preference and may require security.
Common pitfalls
- Assuming contract financing is available for simplified acquisition purchases under Part 13; it is generally not allowed unless agency regulations permit.
- Failing to provide adequate security for Government financing when required; this can delay or prevent financing approval.
- Not notifying the contracting officer of an overpayment; this can lead to complications and potential liability.
Written by AI from this part's codified text (2026-10-04); cited sections are checked against the part. A guide, not legal advice: the regulation text, the solicitation and your contract rule.
Rule changes for FAR Part 32
- Federal Acquisition Regulation: Inflation Adjustment of Acquisition-Related Thresholds ↗ · final rule 2025-08-27 · effective 2025-10-01
- Federal Acquisition Regulation; Technical Amendments ↗ · final rule 2025-08-07 · effective 2025-08-07
- Federal Acquisition Regulation: Inflation Adjustment of Acquisition-Related Thresholds ↗ · proposed 2024-11-29 · comments due 2025-01-28
Subparts and sections
- 32.000 Scope of part.
- 32.001 Definitions.
- 32.002 Applicability of subparts.
- 32.003 Simplified acquisition procedures financing.
- 32.004 Contract performance in foreign countries.
- 32.005 Consideration for contract financing.
- 32.006 Reduction or suspension of contract payments upon finding of fraud.
- 32.006-1 General.
- 32.006-2 Definition.
- 32.006-3 Responsibilities.
- 32.006-4 Procedures.
- 32.006-5 Reporting.
- 32.007 Contract financing payments.
- 32.008 Notification of overpayment.
- 32.009 Providing accelerated payments to small business contractors and to prime contractors that subcontract with a small business concern.
- 32.009-1 General.
- 32.009-2 Contract clause.
Subpart 32.1: Financing for Other Than a Commercial Purchase
- 32.100 Scope of subpart.
- 32.101 Authority.
- 32.102 Description of contract financing methods.
- 32.103 Progress payments under construction contracts.
- 32.104 Providing contract financing.
- 32.105 Uses of contract financing.
- 32.106 Order of preference.
- 32.107 Need for contract financing not a deterrent.
- 32.108 Financial consultation.
- 32.109 Termination financing.
- 32.110 Payment of subcontractors under cost-reimbursement prime contracts.
- 32.111 Contract clauses for noncommercial purchases.
- 32.112 Nonpayment of subcontractors under contracts other than for commercial products and commercial services.
- 32.112-1 Subcontractor assertions of nonpayment.
- 32.112-2 Subcontractor requests for information.
- 32.113 Customary contract financing.
- 32.114 Unusual contract financing.
Subpart 32.2: Commercial Product and Commercial Service Purchase Financing
- 32.200 Scope of subpart.
- 32.201 Statutory authority.
- 32.202 General.
- 32.202-1 Policy.
- 32.202-2 Types of payments for commercial product and commercial service purchases.
- 32.202-3 Conducting market research about financing terms.
- 32.202-4 Security for Government financing.
- 32.203 Determining contract financing terms.
- 32.204 Procedures for contracting officer-specified commercial contract financing.
- 32.205 Procedures for offeror-proposed commercial contract financing.
- 32.206 Solicitation provisions and contract clauses.
- 32.207 Administration and payment of commercial financing payments.
Subpart 32.3: Loan Guarantees for Defense Production
- 32.300 Scope of subpart.
- 32.301 Definitions.
- 32.302 Authority.
- 32.303 General.
- 32.304 Procedures.
- 32.304-1 Application for guarantee.
- 32.304-2 Certificate of eligibility.
- 32.304-3 Asset formula.
- 32.304-4 Guarantee amount and maturity.
- 32.304-5 Assignment of claims under contracts.
- 32.304-6 Other collateral security.
- 32.304-7 Contract surety bonds and loan guarantees.
- 32.304-8 Other borrowing.
- 32.305 Loan guarantees for terminated contracts.
- 32.306 Loan guarantees for subcontracts.
Subpart 32.4: Advance Payments for Other Than Commercial Acquisitions
- 32.400 Scope of subpart.
- 32.401 Statutory authority.
- 32.402 General.
- 32.403 Applicability.
- 32.404 Exclusions.
- 32.405 Applying Pub. L. 85-804 to advance payments under sealed bid contracts.
- 32.406 Letters of credit.
- 32.407 Interest.
- 32.408 Application for advance payments.
- 32.409 Contracting officer action.
- 32.409-1 Recommendation for approval.
- 32.409-2 Recommendation for disapproval.
- 32.409-3 Security, supervision, and covenants.
- 32.410 Findings, determination, and authorization.
- 32.411 Agreement for special account at a financial institution.
- 32.412 Contract clause.
Subpart 32.5: Progress Payments Based on Costs
- 32.500 Scope of subpart.
- 32.501 General.
- 32.501-1 Customary progress payment rates.
- 32.501-2 Unusual progress payments.
- 32.501-3 Contract price.
- 32.501-4 [Reserved]
- 32.501-5 Other protective terms.
- 32.502 Preaward matters.
- 32.502-1 Use of customary progress payments.
- 32.502-2 Contract finance office clearance.
- 32.502-3 Solicitation provisions.
- 32.502-4 Contract clauses.
- 32.503 Postaward matters.
- 32.503-1 [Reserved]
- 32.503-2 Supervision of progress payments.
- 32.503-3 Initiation of progress payments and review of accounting system.
- 32.503-4 Approval of progress payment requests.
- 32.503-5 Administration of progress payments.
- 32.503-6 Suspension or reduction of payments.
- 32.503-7 [Reserved]
- 32.503-8 Liquidation rates—ordinary method.
- 32.503-9 Liquidation rates—alternate method.
- 32.503-10 Establishing alternate liquidation rates.
- 32.503-11 Adjustments for price reduction.
- 32.503-12 Maximum unliquidated amount.
- 32.503-13 [Reserved]
- 32.503-14 Protection of Government title.
- 32.503-15 Application of Government title terms.
- 32.503-16 Risk of loss.
- 32.504 Subcontracts under prime contracts providing progress payments.
Subpart 32.6: Contract Debts
- 32.600 Scope of subpart.
- 32.601 General.
- 32.602 Responsibilities.
- 32.603 Debt determination.
- 32.604 Demand for payment.
- 32.605 Final decisions.
- 32.606 Debt collection.
- 32.607 Installment payments and deferment of collection.
- 32.607-1 Installment payments.
- 32.607-2 Deferment of collection.
- 32.608 Interest.
- 32.608-1 Interest charges.
- 32.608-2 Interest credits.
- 32.609 Delays in receipt of notices or demands.
- 32.610 Compromising debts.
- 32.611 Contract clause.
Subpart 32.7: Contract Funding
- 32.700 Scope of subpart.
- 32.701 [Reserved]
- 32.702 Policy.
- 32.703 Contract funding requirements.
- 32.703-1 General.
- 32.703-2 Contracts conditioned upon availability of funds.
- 32.703-3 Contracts crossing fiscal years.
- 32.704 Limitation of cost or funds.
- 32.705 Unenforceability of unauthorized obligations.
- 32.706 Contract clauses.
- 32.706-1 Clauses for contracting in advance of funds.
- 32.706-2 Clauses for limitation of cost or funds.
- 32.706-3 Clause for unenforceability of unauthorized obligations.
Subpart 32.8: Assignment of Claims
Subpart 32.9: Prompt Payment
Subpart 32.10: Performance-Based Payments
- 32.1000 Scope of subpart.
- 32.1001 Policy.
- 32.1002 Bases for performance-based payments.
- 32.1003 Criteria for use.
- 32.1004 Procedures.
- 32.1005 Solicitation provision and contract clause.
- 32.1006 [Reserved]
- 32.1007 Administration and payment of performance-based payments.
- 32.1008 Suspension or reduction of performance-based payments.
- 32.1009 Title.
- 32.1010 Risk of loss.
Subpart 32.11: Electronic Funds Transfer
- 32.1100 Scope of subpart.
- 32.1101 Statutory requirements.
- 32.1102 Definitions.
- 32.1103 Applicability.
- 32.1104 Protection of EFT information.
- 32.1105 Assignment of claims.
- 32.1106 EFT mechanisms.
- 32.1107 Payment information.
- 32.1108 Payment by Governmentwide commercial purchase card.
- 32.1109 EFT information submitted by offerors.
- 32.1110 Solicitation provision and contract clauses.
← Part 31: Contract Cost Principles and ProceduresPart 33: Protests, Disputes, and Appeals →
All FAR parts
- Part 1 Federal Acquisition Regulations System
- Part 2 Definitions of Words and Terms
- Part 3 Improper Business Practices and Personal Conflicts of Interest
- Part 4 Administrative and Information Matters
- Part 5 Publicizing Contract Actions
- Part 6 Competition Requirements
- Part 7 Acquisition Planning
- Part 8 Required Sources of Supplies and Services
- Part 9 Contractor Qualifications
- Part 10 Market Research
- Part 11 Describing Agency Needs
- Part 12 Acquisition of Commercial Products and Commercial Services
- Part 13 Simplified Acquisition Procedures
- Part 14 Sealed Bidding
- Part 15 Contracting by Negotiation
- Part 16 Types of Contracts
- Part 17 Special Contracting Methods
- Part 18 Emergency Acquisitions
- Part 19 Small Business Programs
- Part 22 Application of Labor Laws to Government Acquisitions
- Part 23 Environment, Sustainable Acquisition, and Material Safety
- Part 24 Protection of Privacy and Freedom of Information
- Part 25 Foreign Acquisition
- Part 26 Other Socioeconomic Programs
- Part 27 Patents, Data, and Copyrights
- Part 28 Bonds and Insurance
- Part 29 Taxes
- Part 30 Cost Accounting Standards Administration
- Part 31 Contract Cost Principles and Procedures
- Part 32 Contract Financing
- Part 33 Protests, Disputes, and Appeals
- Part 34 Major System Acquisition
- Part 35 Research and Development Contracting
- Part 36 Construction and Architect-engineer Contracts
- Part 37 Service Contracting
- Part 38 Federal Supply Schedule Contracting
- Part 39 Acquisition of Information Technology
- Part 40 Information Security and Supply Chain Security
- Part 41 Acquisition of Utility Services
- Part 42 Contract Administration and Audit Services
- Part 43 Contract Modifications
- Part 44 Subcontracting Policies and Procedures
- Part 45 Government Property
- Part 46 Quality Assurance
- Part 47 Transportation
- Part 48 Value Engineering
- Part 49 Termination of Contracts
- Part 50 Extraordinary Contractual Actions and the Safety Act
- Part 51 Use of Government Sources by Contractors
- Part 52 Solicitation Provisions and Contract Clauses
- Part 53 Forms
Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗.