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FAR and DFARS › FAR Part 32: Contract Financing

FAR 32.005 Consideration for 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

This section explains that when contract financing is included at the start of a contract, the contractor should not receive separate consideration for it, because the benefit of that financing is expected to show up either in a lower price or in terms more favorable to the Government. If financing is added or changed after award, the contractor must provide adequate new consideration, and the contract generally cannot include separate charges like interest for financing.

Applies to: Contracts that include contract financing clauses

What it requires

  • Provide adequate new consideration for changes to, or the addition of, contract financing after award
  • Do not include separate charges such as interest for contract financing, except as provided in subpart 32.4

Key terms: contract financing · consideration · new consideration · interest · working capital

Written by AI from this section's text. A guide, not legal advice: the text below rules.

The text

(a) Requirement. When a contract financing clause is included at the inception of a contract, there shall be no separate consideration for the contract financing clause. The value of the contract financing to the contractor is expected to be reflected in either

(1) A bid or negotiated price that will be lower than such price would have been in the absence of the contract financing, or

(2) Contract terms and conditions, other than price, that are more beneficial to the Government than they would have been in the absence of the contract financing. Adequate new consideration is required for changes to, or the addition of, contract financing after award.

(b) Amount of new consideration. The contractor may provide new consideration by monetary or nonmonetary means, provided the value is adequate. The fair and reasonable consideration should approximate the amount by which the price would have been less had the contract financing terms been contained in the initial contract. In the absence of definite information on this point, the contracting officer should apply the following criteria in evaluating whether the proposed new consideration is adequate:

(1) The value to the contractor of the anticipated amount and duration of the contract financing at the imputed financial costs of the equivalent working capital.

(2) The estimated profit rate to be earned through contract performance.

(c) Interest. Except as provided in subpart 32.4, Advance Payments for Other Than Commercial Acquisitions, the contract shall not provide for any other type of specific charges, such as interest, for contract financing.

← 32.004 Contract performance in foreign countries. · 32.006 Reduction or suspension of contract payments upon finding of fraud. →

Rule changes for FAR Part 32

Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.

FAR 32.005 Consideration for contract financing · SpendQuery