Friday, August 24, 2018

Proposed Changes to Progress Payment Rate

Significant changes are coming to progress payment contract financing for DoD Contracts.

Currently, FAR 52.232-16 sets customary progress payment rates of 80 percent and 85 percent for large and small businesses, respectively. DFARS (DoD FAR Supplement) 252.232-7004 gives small businesses an added boost to 90 percent.

A proposed change just published, leaves the customary rate for small businesses intact but reduces the 80 percent rate to 50 percent but provides incentives for contractors to increase the rate to 90 percent. These incentives are designed to increase the effectiveness and efficiency in five "domains"

  1. On time or accelerated contract deliveries
  2. Contractor quality
  3. Contractor business systems
  4. Increasing contract opportunities for small buisnesses
  5. Receipt of timely quality proposals (i.e. good estimating systems)

So how does DoD propose to incentivize these goals? By adding percentages to the base rate as follows:

  • 10% for meeting the contract delivery dates for contract end items and contract data requirements lists or performance milestone schedules
  • 10% for not having open level III or IV corrective action requests (corrective action requests are sent to contractors when an item or process is in nonconformity and a remedy is required. These are usually associated with quality assurance activities)
  • 10% when all applicable business systems are acceptable and have no significant deficiencies.
  • 7.5% when at least 95 percent of the time during the preceding Government fiscal year, when responding to solicitations that required submission of certified cost or pricing data, met the due date in the request for proposal and complied with the Proposal Adequacy Checklist
  • 5% for meeting small business subcontracting goals during the preceding Government fiscal y ear.
  • 2.5% for providing subcontracting opportunities for the AbilityOne program.

You can read more about this proposed change including how to participate in public meetings on the subject here.

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