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

FAR 32.503-2 Supervision of progress payments.

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 how the Government supervises progress payments made to a contractor. The level of supervision depends on the contractor's experience, performance, reliability, management quality, financial strength, and accounting controls, and must be enough to protect Government interests. The administering office must stay informed about the contractor's overall operations and financial condition, especially when the contractor is weak or struggling.

Applies to: Government administering offices and contractors receiving progress payments

What it requires

  • The administering office must keep itself informed of the contractor's overall operations and financial condition.
  • For contractors with doubtful financial condition, doubtful management capacity, weak accounting controls, or substantial performance difficulties, full information on contract progress and the contractor's other operations and financial condition should be obtained and analyzed frequently.
  • So far as practicable, all cost problems likely to create future disagreements should be identified and resolved at the inception of the contract.

Key terms: progress payments · prepayment review · periodic review · administering office · indirect costs

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

The text

(a) The extent of progress payments supervision, by prepayment review or periodic review, should vary inversely with the contractor's experience, performance record, reliability, quality of management, and financial strength, and with the adequacy of the contractor's accounting system and controls. Supervision shall be of a kind and degree sufficient to provide timely knowledge of the need for, and timely opportunity for, any actions necessary to protect Government interests.

(b) The administering office must keep itself informed of the contractor's overall operations and financial condition, since difficulties encountered and losses suffered in operations outside the particular progress payment contract may affect adversely the performance of that contract and the liquidation of the progress payments.

(c) For contracts with contractors (1) whose financial condition is doubtful or not strong in relation to progress payments outstanding or to be outstanding, (2) with management of doubtful capacity, (3) whose accounting controls are found by experience to be weak, or (4) experiencing substantial difficulties in performance, full information on progress under the contract involved (including the status of subcontracts) and on the contractor's other operations and overall financial condition should be obtained and analyzed frequently, with a view to protecting the Government's interests better and taking such action as may be proper to make contract performance more certain.

(d) So far as practicable, all cost problems, particularly those involving indirect costs, that are likely to create disagreements in future administration of the contract should be identified and resolved at the inception of the contract (see 31.109).

Sections it refers to

← 32.503-1 [Reserved] · 32.503-3 Initiation of progress payments and review of accounting system. →

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 32.503-2 Supervision of progress payments · SpendQuery