FAR 14.408-3—Prompt payment discounts.
Plain-English Summary
FAR 14.408-3 addresses how prompt payment discounts are handled in sealed bidding. It covers two main subjects: first, that prompt payment discounts are not to be used as a factor in evaluating bids; and second, that any discount a bidder offers still becomes part of the award and may be taken by the payment center if the government pays within the stated discount period. The section also recognizes an alternative approach, allowing bidders to offer discounts on individual invoices instead of tying the discount to the bid itself. Finally, it points readers to FAR 32.111(b)(1) and the contract clause at 52.232-8, which govern discounts for prompt payment in the contract. In practice, this means contracting officers must separate bid evaluation from payment terms, while contractors must understand that discount language can affect actual payment even though it does not affect bid ranking.
Key Rules
Do not evaluate discounts
Prompt payment discounts must not be considered when evaluating bids. The bid comparison is based on the evaluated price rules for sealed bidding, not on whether a bidder offers a cash discount for early payment.
Discounts still bind the award
Although not used in evaluation, any discount offered becomes part of the resulting contract award. If the government pays within the stated discount period, the payment center is expected to take the discount.
Invoice-level discounts allowed
Bidders may choose to offer discounts on individual invoices instead of including the discount with the bid. This gives bidders flexibility in how they structure prompt payment incentives.
Clause cross-reference applies
This section works together with FAR 32.111(b)(1), which prescribes use of the contract clause at 52.232-8, Discounts for Prompt Payment. That clause governs the contractual treatment of prompt payment discounts after award.
Responsibilities
Contracting Officer
Must ensure prompt payment discounts are not used in bid evaluation, but are properly reflected in the award and contract terms when offered. The contracting officer must also ensure the correct prompt payment discount clause is included when required.
Payment Center
Must take the offered discount when payment is made within the discount period specified by the bidder or contractor, consistent with the contract terms and applicable payment procedures.
Bidder/Contractor
May offer a prompt payment discount in the bid or on individual invoices, and should state the discount period clearly. The contractor should understand that the discount is not an evaluation factor but can reduce the amount actually paid if the government pays on time.
Agency/Acquisition Staff
Must apply the sealed bidding rules consistently and coordinate solicitation and contract language with the prompt payment discount requirements in FAR Part 32 and the applicable clause at 52.232-8.
Practical Implications
A bidder cannot win or lose a sealed bid competition based on a prompt payment discount, so contracting staff should avoid treating discount terms as part of price evaluation.
Even though discounts are not evaluated, they are still enforceable contract terms once included in the award, so unclear discount language can create payment disputes.
Contractors should be precise about the discount percentage, the time period, and whether the offer applies to the bid generally or to individual invoices.
Payment offices need to track the discount window carefully; if payment is late, the government may lose the discount opportunity.
Contracting officers should make sure the solicitation and contract clauses align so the discount is handled correctly after award.
Official Regulatory Text
(a) Prompt payment discounts shall not be considered in the evaluation of bids. However, any discount offered will form a part of the award, and will be taken by the payment center if payment is made within the discount period specified by the bidder. As an alternative to indicating a discount in conjunction with the offer, bidders may prefer to offer discounts on individual invoices. (b) See 32.111 (b)(1), which prescribes the contract clause at 52.232-8 , Discounts for Prompt Payment.