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FAR and DFARS › FAR Part 32: Contract Financing › Subpart 32.5

FAR 32.502-4 Contract clauses.

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 tells contracting officers which progress payment clause to put in solicitations and contracts, and when to use alternates or substitute different rates. It matters to contractors because the clause and rate in their contract determine how progress payments based on costs are handled.

Applies to: Contracting officers preparing solicitations and contracts that provide for progress payments based on costs

What it requires

  • Insert the clause at 52.232-16, Progress Payments, in solicitations that may result in contracts providing for progress payments based on costs and in fixed-price contracts under which the Government will provide progress payments based on costs.
  • If the contractor is a small business concern, use the clause with its Alternate I.
  • If the contract is a letter contract, use the clause with its Alternate II.
  • If the contractor is not a small business concern and progress payments are authorized under an indefinite-delivery contract, basic ordering agreement, or their equivalent, use the clause with its Alternate III.

Key terms: progress payments based on costs · small business concern · letter contract · Alternate I · customary rate

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

The text

(a)(1) Insert the clause at 52.232-16, Progress Payments, in—

(i) Solicitations that may result in contracts providing for progress payments based on costs; and

(ii) Fixed-price contracts under which the Government will provide progress payments based on costs.

(2) If advance agency approval has been given in accordance with 32.501-1, the contracting officer may substitute a different customary rate for other than small business concerns for the progress payment and liquidation rate indicated.

(3) If an unusual progress payment rate is approved for the prime contractor (see 32.501-2), substitute the approved rate for the customary rate in paragraphs (a)(1), (a)(6), and (b) of the clause.

(4) If the liquidation rate is changed from the customary progress payment rate (see 32.503-8 and 32.503-9), substitute the new rate for the rate in paragraphs (a)(1), (a)(6), and (b) of the clause.

(5) If an unusual progress payment rate is approved for a subcontract (see 32.504(c) and 32.501-2), modify paragraph (j)(6) of the clause to specify the new rate, the name of the subcontractor, and that the new rate shall be used for that subcontractor in lieu of the customary rate.

(b) If the contractor is a small business concern, use the clause with its Alternate I.

(c) If the contract is a letter contract, use the clause with its Alternate II.

(d) If the contractor is not a small business concern, and progress payments are authorized under an indefinite-delivery contract, basic ordering agreement, or their equivalent, use the clause with its Alternate III.

(e) If the nature of the contract necessitates separate progress payment rates for portions of work that are clearly severable and accounting segregation would be maintained (e.g., annual production requirements), describe the application of separate progress payment rates in a supplementary special provision within the contract. The contractor must submit separate progress payment requests and subsequent invoices for the severable portions of work in order to maintain accounting integrity.

Sections it refers to

  • 52.232-16 Progress Payments.
  • 32.501-1 Customary progress payment rates.
  • 32.501-2 Unusual progress payments.
  • 32.503-8 Liquidation rates—ordinary method.
  • 32.503-9 Liquidation rates—alternate method.
  • 32.504 Subcontracts under prime contracts providing progress payments.

Sections that refer to it

← 32.502-3 Solicitation provisions. · 32.503 Postaward matters. →

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 32.502-4 Contract clauses · SpendQuery