FAR 32.001—Definitions.
Plain-English Summary
FAR 32.001 is the definitions section for FAR Part 32, so it establishes the vocabulary used to administer federal contract financing and payment. It defines and distinguishes commercial interim payments, contract actions, contract financing payments, customary contract financing, delivery payments, designated billing office, designated payment office, due date, invoice payments, liquidate, and unusual contract financing. These definitions matter because they determine which payment rules apply, whether Prompt Payment Act interest penalties can apply, how financing is repaid, where invoices and financing requests must be sent, and what approvals are needed before a contracting officer can use a financing method. In practice, the section draws a bright line between payments made before acceptance of supplies or services and payments made after acceptance, and it also separates routine financing from financing that requires higher-level review. Contractors need these definitions to know when they can request financing and how they will be paid; contracting officers and payment offices need them to set up contracts correctly and avoid payment errors, improper interest charges, or unauthorized financing arrangements.
Key Rules
Commercial interim payments
A commercial interim payment is a contract financing payment made after some work has been performed, but it is neither a commercial advance payment nor a delivery payment. For prompt payment purposes, it is treated as contract financing and is not subject to Prompt Payment Act interest penalties under subpart 32.9.
Contract action scope
A contract action is any action resulting in a contract, including actions for additional supplies or services outside the existing contract scope. It does not include in-scope modifications, such as changes issued under the Changes clause, or funding and other administrative changes.
Contract financing payment definition
Contract financing payments are authorized Government disbursements made before acceptance of supplies or services. The definition includes advance payments, performance-based payments, commercial advance and interim payments, progress payments based on cost, certain progress payments based on percentage or stage of completion, and interim payments under cost-reimbursement contracts, with stated exceptions.
What is excluded from financing
Contract financing payments do not include invoice payments, payments for partial deliveries, or lease and rental payments. This distinction is critical because different payment timing, documentation, and interest rules apply to invoice payments versus financing payments.
Customary versus unusual financing
Customary contract financing is financing the agency has determined is available for routine use by contracting officers, usually without higher-level review. Unusual contract financing is still lawful, but it is not routine and requires specific reviews or approvals before use.
Delivery payments and invoice payments
Delivery payments are payments for accepted supplies or services, including accepted partial deliveries, and they are invoice payments for prompt payment purposes. Invoice payments also include final cost or fee payments once amounts owed are settled, plus certain construction and architect-engineer payments for subpart 32.9 purposes.
Billing and payment offices
The designated billing office is where the contractor first submits invoices and contract financing requests, and the designated payment office is where payments are made. The contract may assign different offices for billing and payment, and the payment office is normally the Government disbursing office.
Due date and liquidation
The due date is the date payment should be made. Liquidation means reducing later payments for accepted items or services to recover financing payments previously made to the contractor.
Responsibilities
Contracting Officer
Identify the correct payment and financing structure in the contract, distinguish between financing payments and invoice/delivery payments, and ensure the contract names the proper designated billing office and designated payment office. The contracting officer must also determine whether financing is customary or unusual and obtain any required higher-level reviews or approvals before using unusual financing.
Contractor
Submit invoices and contract financing requests to the designated billing office, understand whether requested payments are financing payments or invoice payments, and comply with repayment or liquidation terms when financing payments are later recouped from delivery payments. The contractor must also recognize that financing payments are made before acceptance and are treated differently from payments for accepted work.
Agency
Determine which contract financing arrangements are customary for routine use and which are unusual and require additional approval. The agency must also establish internal controls and delegations so contracting officers know what financing methods they may use without higher-level review.
Designated Billing Office
Receive the contractor’s first submission of invoices and contract financing requests, route them appropriately, and ensure the submission goes to the correct office if the contract designates separate billing and payment locations.
Designated Payment Office
Make invoice payments and contract financing payments in accordance with the contract terms and applicable payment rules, including using the correct due date and applying liquidation when required.
Government Disbursing Office
Serve as the normal designated payment office unless the contract specifies otherwise, and process payments in accordance with the contract and applicable payment regulations.
Practical Implications
This section is foundational for payment administration: if a payment is misclassified as financing instead of an invoice payment, or vice versa, the Government may apply the wrong due date, interest rules, and liquidation treatment.
Contractors should pay close attention to the contract’s billing and payment designations because sending an invoice or financing request to the wrong office can delay payment and create disputes over timeliness.
Contracting officers must be careful when using financing methods outside routine practice, because unusual contract financing may be proper but still requires the right approvals; using it without authority can create compliance problems.
The distinction between accepted work and work not yet accepted is central. Financing payments occur before acceptance, while delivery/invoice payments occur after acceptance, so acceptance status drives the payment regime.
Liquidation is often overlooked in practice: contractors receiving financing payments should expect later deductions from delivery payments, and both parties should understand how those deductions will be calculated and documented.
Official Regulatory Text
As used in this part— Commercial interim payment means any payment that is not a commercial advance payment or a delivery payment. These payments are contract financing payments for prompt payment purposes ( i.e ., not subject to the interest penalty provisions of the Prompt Payment Act in accordance with subpart 32.9 ). A commercial interim payment is given to the contractor after some work has been done, whereas a commercial advance payment is given to the contractor when no work has been done. Contract action means an action resulting in a contract, as defined in subpart 2.1 , including actions for additional supplies or services outside the existing contract scope, but not including actions that are within the scope and under the terms of the existing contract, such as contract modifications issued pursuant to the Changes clause, or funding and other administrative changes. Contract financing payment means an authorized Government disbursement of monies to a contractor prior to acceptance of supplies or services by the Government. (1) Contract financing payments include- (i) Advance payments; (ii) Performance-based payments; (iii) Commercial advance and interim payments; (iv) Progress payments based on cost under the clause at 52.232-16 , Progress Payments; (v) Progress payments based on a percentage or stage of completion (see 32.102 (e)), except those made under the clause at 52.232-5 , Payments Under Fixed-Price Construction Contracts, or the clause at 52.232-10 , Payments Under Fixed-Price Architect-Engineer Contracts; and (vi) Interim payments under a cost reimbursement contract, except for a cost reimbursement contract for services when Alternate I of the clause at 52.232-25 , Prompt Payment, is used. (2) Contract financing payments do not include- (i) Invoice payments; (ii) Payments for partial deliveries; or (iii) Lease and rental payments. Customary contract financing means that financing deemed by an agency to be available for routine use by contracting officers. Most customary contract financing arrangements should be usable by contracting officers without specific reviews or approvals by higher management. Delivery payment means a payment for accepted supplies or services, including payments for accepted partial deliveries. Commercial financing payments are liquidated by deduction from these payments. Delivery payments are invoice payments for prompt payment purposes. Designated billing office means the office or person (governmental or nongovernmental) designated in the contract where the contractor first submits invoices and contract financing requests. The contract might designate different offices to receive invoices and contract financing requests. The designated billing office might be- (1) The Government disbursing office; (2) The contract administration office; (3) The office accepting the supplies delivered or services performed by the contractor; (4) The contract audit office; or (5) A nongovernmental agent. Designated payment office means the office designated in the contract to make invoice payments or contract financing payments. Normally, this will be the Government disbursing office. Due date means the date on which payment should be made. Invoice payment means a Government disbursement of monies to a contractor under a contract or other authorization for supplies or services accepted by the Government. (1) Invoice payments include- (i) Payments for partial deliveries that have been accepted by the Government; (ii) Final cost or fee payments where amounts owed have been settled between the Government and the contractor; (iii) For purposes of subpart 32.9 only, all payments made under the clause at 52.232-5 , Payments Under Fixed-Price Construction Contracts, and the clause at 52.232-10 , Payments Under Fixed-Price Architect-Engineer Contracts; and (iv) Interim payments under a cost-reimbursement contract for services when Alternate I of the clause at 52.232-25 , Prompt Payment, is used (2) Invoice payments do not include contract financing payments. Liquidate means to decrease a payment for an accepted supply item or service under a contract for the purpose of recouping financing payments previously paid to the contractor. Unusual contract financing means any financing not deemed customary contract financing by the agency. Unusual contract financing is financing that is legal and proper under applicable laws, but that the agency has not authorized contracting officers to use without specific reviews or approvals by higher management.