FAR 32.006-4—Procedures.
Plain-English Summary
FAR 32.006-4 lays out the procedure an agency must follow when there is substantial evidence that a contractor’s request for advance, partial, or progress payments is based on fraud. It covers the role of the remedy coordination official, the requirement to prepare a written report and recommendation, the agency head’s duty to make an independent determination, the factors the agency head must consider before reducing or suspending payments, and the contractor’s right to receive written notice and an opportunity to respond. It also addresses coordination when multiple agencies are affected, the requirement to keep written justification in the file, and the mandatory 180-day review of any reduction or suspension action. In practice, this section is a safeguard against paying fraudulent claims while also protecting contractors from arbitrary payment interruptions. It creates a structured decision process that balances fraud risk, ongoing investigations, the Government’s anticipated loss, the contractor’s financial condition, and mission needs. For contracting personnel, it is a procedural roadmap for documenting, notifying, deciding, and re-evaluating payment actions tied to suspected fraud.
Key Rules
Substantial evidence triggers review
If the remedy coordination official finds substantial evidence that a payment request is based on fraud, the official must recommend that the agency head reduce or suspend further payments. The recommendation must be supported by a written report setting out the findings behind each recommendation.
Agency head makes the decision
The agency head must independently determine whether substantial evidence exists that the payment request is based on fraud. The recommendation from the remedy coordination official is important, but it does not replace the agency head’s decision-making responsibility.
Reduction or suspension must be proportional
If the agency head finds substantial evidence, the agency head may reduce or suspend further payments, but the action must be reasonably commensurate with the anticipated loss to the Government from the fraud. The agency cannot impose a broader payment restriction than the expected harm justifies.
Mandatory factors must be considered
Before deciding, the agency head must consider whether notice could compromise an ongoing investigation, the anticipated Government loss, the contractor’s financial condition and ability to keep performing, the contractor’s essentiality to national defense or agency business, and all documentation on the alleged fraud, including the contractor’s response.
Contractor notice and response required
Before reducing or suspending payments, the agency head must notify the contractor in writing of the proposed action and the reasons for it, with enough specificity for the contractor to gather and present evidence. The contractor must also be given a reasonable opportunity to submit information in response.
Lead agency coordination may be needed
When more than one agency has contracts affected by the fraud, the agencies should consider designating one agency as the lead agency to make the determination and decision. This helps avoid inconsistent actions and duplicative processes.
Written justification must be retained
The agency must keep in its files the written justification for both the agency head’s decision and the recommendation received in connection with that decision. This documentation supports accountability, review, and later audit or litigation needs.
180-day follow-up review
No later than 180 calendar days after the reduction or suspension action, the remedy coordination official must review the agency head’s determination and send a recommendation on whether the reduction or suspension should continue. This ensures the action is not left in place without reassessment.
Responsibilities
Remedy Coordination Official
Identify cases where there is substantial evidence of fraud in a contractor’s payment request; recommend reduction or suspension of further payments; prepare and submit a written report supporting the recommendation; and, within 180 calendar days after the action, review the agency head’s determination and recommend whether the action should continue.
Agency Head
Independently determine whether substantial evidence exists that the payment request is based on fraud; decide whether to reduce or suspend further payments; consider the required factors before acting; ensure the contractor receives written notice and a chance to respond; and retain the written justification for the decision.
Investigating Officers
Provide recommendations when disclosure of fraud allegations to the contractor may compromise an ongoing investigation. Their input helps the agency head assess whether notice should be limited or timed carefully.
Contractor
Review the written notice of proposed action; collect and present evidence addressing the stated reasons; and submit information within the reasonable time provided before the agency head makes a final decision.
Agencies with affected contracts
Coordinate with each other when the same fraud affects multiple contracts across agencies and consider designating one agency as the lead agency to make the determination and decision.
Practical Implications
This section creates a formal due-process-style workflow before payment reductions or suspensions, so agencies should not act informally or solely on suspicion.
The notice to the contractor must be specific enough to allow a meaningful response; vague allegations or boilerplate notices are a common compliance risk.
The agency head must weigh business and mission impacts, not just fraud allegations, so a well-documented balancing analysis is essential.
If multiple agencies are involved, lack of coordination can lead to inconsistent payment actions, duplicated notices, or conflicting decisions.
The 180-day review requirement means payment restrictions are not “set and forget”; agencies must calendar follow-up and reassess whether the action remains justified.
Official Regulatory Text
(a) In any case in which an agency’s remedy coordination official finds substantial evidence that a contractor’s request for advance, partial, or progress payments under a contract awarded by that agency is based on fraud, the remedy coordination official shall recommend that the agency head reduce or suspend further payments to the contractor. The remedy coordination official shall submit to the agency head a written report setting forth the remedy coordination official’s findings that support each recommendation. (b) Upon receiving a recommendation from the remedy coordination official under paragraph (a) of this subsection, the agency head shall determine whether substantial evidence exists that the request for payment under a contract is based on fraud. (c) If the agency head determines that substantial evidence exists, the agency head may reduce or suspend further payments to the contractor under the affected contract(s). Such reduction or suspension shall be reasonably commensurate with the anticipated loss to the Government resulting from the fraud. (d) In determining whether to reduce or suspend further payment(s), as a minimum, the agency head shall consider- (1) A recommendation from investigating officers that disclosure of the allegations of fraud to the contractor may compromise an ongoing investigation; (2) The anticipated loss to the Government as a result of the fraud; (3) The contractor’s overall financial condition and ability to continue performance if payments are reduced or suspended; (4) The contractor’s essentiality to the national defense, or to the execution of the agency’s official business; and (5) Assessment of all documentation concerning the alleged fraud, including documentation submitted by the contractor in its response to the notice required by paragraph (e) of this subsection. (e) Before making a decision to reduce or suspend further payments, the agency head shall, in accordance with agency procedures- (1) Notify the contractor in writing of the action proposed by the remedy coordination official and the reasons therefor (such notice must be sufficiently specific to permit the contractor to collect and present evidence addressing the aforesaid reasons); and (2) Provide the contractor an opportunity to submit information within a reasonable time, in response to the action proposed by the remedy coordination official. (f) When more than one agency has contracts affected by the fraud, the agencies shall consider designating one agency as the lead agency for making the determination and decision. (g) The agency shall retain in its files the written justification for each- (1) Decision of the agency head whether to reduce or suspend further payments; and (2) Recommendation received by an agency head in connection with such decision. (h) Not later than 180 calendar days after the date of the reduction or suspension action, the remedy coordination official shall- (1) Review the agency head’s determination on which the reduction or suspension decision is based; and (2) Transmit a recommendation to the agency head as to whether the reduction or suspension should continue.