FAR 32.006-1—General.
Plain-English Summary
FAR 32.006-1 explains when the Government may reduce or suspend contract financing payments because of suspected fraud in a contractor’s request for advance payments, partial payments, or progress payments. It identifies which agencies can use the authority under the two statutes cited in the rule, and it makes clear that the authority applies to the Department of Defense, NASA, and other agencies subject to Division C of subtitle I of title 41, but not to the U.S. Coast Guard under the cited DoD statute. The section also limits the authority to cases where the agency head determines there is substantial evidence of fraud, excludes commercial interim payments and performance-based payments from this specific remedy, and restricts delegation of the agency head’s responsibilities below Level IV of the Executive Schedule. In addition, it states that payment reduction or suspension is an extra Government remedy, not the only one, so agencies may still pursue other contractual, administrative, civil, or criminal actions. Finally, it allows the agency head to act on a single contract or on multiple affected contracts when the fraud impacts more than one award. In practice, this section is about protecting public funds while preserving agency flexibility to respond quickly and proportionately to suspected financing fraud.
Key Rules
Authority depends on statute
The payment-reduction and suspension authority comes from two different statutes, and each applies to different agencies. DoD and NASA may use the authority under 10 U.S.C. 3806(j), while agencies subject to Division C of subtitle I of title 41 may use the authority under 41 U.S.C. 4506.
Coast Guard excluded from DoD statute
The statute implemented by this section is not available to the United States Coast Guard under 10 U.S.C. 3806(j). That means the Coast Guard cannot rely on that specific statutory authority, even though other agencies may be covered under the separate Title 41 authority.
Fraud-based action requires substantial evidence
The agency head may reduce or suspend further payments only when there is substantial evidence that the contractor’s request for advance, partial, or progress payments is based on fraud. This is a serious threshold and is not meant for mere suspicion or routine payment disputes.
No application to certain payment types
This authority does not apply to commercial interim payments under FAR subpart 32.2 or performance-based payments under FAR subpart 32.10. Agencies must use other remedies if suspected fraud involves those payment methods.
Limited delegation of authority
The agency head may not delegate these responsibilities below Level IV of the Executive Schedule. This ensures that decisions to reduce or suspend payments for fraud are made at a senior level.
Additional remedy, not exclusive remedy
Reducing or suspending payments under these statutes is in addition to other Government rights, remedies, and procedures. Agencies may still pursue termination, claims, suspension/debarment, False Claims Act actions, referrals to investigators, or other available remedies.
May apply to one or many contracts
The agency head may make determinations and decisions for an individual contract or for any group of contracts affected by the fraud. This allows the Government to respond broadly when the same fraudulent conduct affects multiple awards.
Responsibilities
Agency Head
Determine whether substantial evidence shows that a contractor’s request for advance, partial, or progress payments is based on fraud; decide whether to reduce or suspend further payments; ensure the authority is exercised only within the statutory limits; and make determinations for one contract or a group of affected contracts as appropriate.
Contracting Officer
Implement the agency head’s decision, coordinate payment reduction or suspension actions, and ensure the contract file reflects the basis, scope, and duration of the action. The contracting officer must also recognize that this authority does not apply to commercial interim payments or performance-based payments.
Agency Legal/Investigative Officials
Support the agency head and contracting officer by developing the factual record, assessing whether the evidence rises to the level of substantial evidence of fraud, and coordinating any parallel civil, criminal, or administrative actions.
Contractor
Submit truthful and accurate requests for advance, partial, and progress payments; respond to allegations or inquiries; and understand that suspected fraud in payment requests can lead to immediate reduction or suspension of future financing payments and other remedies.
Agency Leadership/Delegated Officials at or Above Level IV
Exercise the authority only if properly positioned within the delegation limits established by the statute and FAR. They must ensure the decision is made at the required senior level and not delegated below Level IV of the Executive Schedule.
Practical Implications
This section gives agencies a fast financial control when fraud is suspected in financing requests, so contractors should expect payments to stop or shrink quickly if the Government has strong evidence of fraud.
The key trigger is substantial evidence, not a final fraud finding, so agencies may act before a court case or formal administrative decision is complete.
Contractors should not assume all payment types are covered; commercial interim payments and performance-based payments are outside this specific authority, which can change the available remedy and the agency’s process.
Because the authority can be applied to a group of contracts, a single fraudulent scheme can affect multiple awards, task orders, or related contracts at once.
A common pitfall is treating this as the only Government response; in reality, it can be used alongside other remedies, so payment suspension may be only the first step in a broader enforcement action.
Official Regulatory Text
(a) Under 10 U.S.C. 3806(j) , the statutory authority implemented by this section is available to the Department of Defense and the National Aeronautics and Space Administration; this statutory authority is not available to the United States Coast Guard. Under 41 U.S.C. 4506 , this statutory authority is available to all agencies subject to Division C of subtitle I of title 41. (b) 10 U.S.C. 3806(c) and 41 U.S.C. 4506 provide for a reduction or suspension of further payments to a contractor when the agency head determines there is substantial evidence that the contractor's request for advance, partial, or progress payments is based on fraud. This authority does not apply to commercial interim payments under subpart 32.2 , or performance-based payments under subpart 32.10 . (c) The agency head may not delegate his or her responsibilities under these statutes below Level IV of the Executive Schedule. (d) Authority to reduce or suspend payments under these statutes is in addition to other Government rights, remedies, and procedures. (e) In accordance with these statutes, agency head determinations and decisions under this section may be made for an individual contract or any group of contracts affected by the fraud.