FAR 32.108—Financial consultation.
Plain-English Summary
FAR 32.108 addresses financial consultation in contract financing decisions. It requires each contracting office to have access to, and actually use, contract financing personnel who are competent to evaluate credit and financial problems. The section specifically covers two decision areas: determining the financial capability of an offeror or contractor to perform a contract, and deciding what form of contract financing is appropriate in a particular case. In practice, this means the contracting officer should not make these judgments in isolation when financial risk, creditworthiness, cash flow, or financing structure are in question. The purpose is to improve sound business judgment, reduce financing-related performance risk, and ensure that financing arrangements are tailored to the contractor’s circumstances and the Government’s interests. For contractors, this section signals that financial capability and financing terms may be reviewed by specialized personnel, not just the contracting officer. For contracting offices, it reinforces the need for internal expertise or ready access to expertise before making financing decisions.
Key Rules
Use financing expertise
Each contracting office should have available and use contract financing personnel who are competent to evaluate credit and financial problems. The rule is about having real access to qualified expertise, not merely nominal support.
Consult on financial capability
When there is a question about whether an offeror or contractor is financially capable of performing, the contracting officer should consult the appropriate contract financing office. This helps ensure the decision is based on informed financial analysis rather than guesswork.
Consult on financing form
When deciding what form of contract financing is appropriate, the contracting officer should seek input from the contract financing office. The choice of financing method should be matched to the specific case and risk profile.
Applies to unresolved questions
The consultation requirement is triggered when questions arise concerning financial capability or financing structure. It is a decision-support rule for situations where financial judgment is needed.
Advisory but expected
The section uses 'should,' which is generally advisory rather than mandatory, but it sets a strong expectation that contracting officers will consult financial specialists in relevant cases. Ignoring that expertise can lead to poor financing decisions and avoidable performance risk.
Responsibilities
Contracting Office
Maintain access to contract financing personnel who are competent to evaluate credit and financial problems, and ensure that those services are available for use when needed.
Contracting Officer
Consult the appropriate contract financing office when questions arise about an offeror’s or contractor’s financial capability or about the proper form of contract financing.
Contract Financing Personnel / Contract Financing Office
Provide informed evaluation of credit and financial issues and advise on the suitability of financing arrangements for the specific procurement.
Offeror or Contractor
Be prepared to have financial capability and financing needs reviewed as part of the procurement or contract administration process, and provide financial information when requested.
Practical Implications
Contracting officers should involve financing specialists early when a contractor’s cash flow, leverage, credit history, or working capital raises concerns.
A common pitfall is treating financing as a routine administrative matter instead of a risk decision that can affect performance, pricing, and default exposure.
Another pitfall is failing to consult specialists before selecting a financing method, which can result in terms that are too restrictive, too generous, or poorly matched to the contract.
Contractors should expect that financial statements, credit data, and other financial indicators may be reviewed by personnel with specialized expertise.
Because the rule is framed as a strong recommendation, offices should still document the basis for their financing decisions and any consultation obtained, especially in higher-risk cases.
Official Regulatory Text
Each contracting office should have available and use the services of contract financing personnel competent to evaluate credit and financial problems. In resolving any questions concerning- (a) The financial capability of an offeror or contractor to perform a contract, or (b) What form of contract financing is appropriate in a given case, the contracting officer should consult the appropriate contract financing office.