FAR 32.1103—Applicability.
Plain-English Summary
FAR 32.1103 explains the basic rule that the Government must make contract payments by electronic funds transfer (EFT) and then lists the limited exceptions when another payment method may be used. It covers situations where the payment office loses EFT capability, where payment is made outside the United States and Puerto Rico, where payment is in a non-U.S. currency, where classified or security-sensitive contracts make EFT impractical or risky, and where deployed or emergency operations make EFT unavailable or inconsistent with mission needs. It also addresses low-frequency payment situations, urgent and compelling needs, sole-source situations where delay would seriously injure the Government, and any additional exceptions authorized by Treasury regulations at 31 CFR part 208. In practice, this section matters because it sets the default payment method for most federal contracts, but it also gives contracting and payment officials a narrow, documented path to use other methods when EFT is not feasible or would undermine mission, security, or operational requirements. Contractors should expect EFT unless one of these exceptions applies, and agencies must be able to justify and document any departure from EFT.
Key Rules
EFT is the default
The Government must provide all contract payments through EFT unless one of the listed exceptions applies. This makes EFT the normal payment method for federal contracts and places the burden on the Government to identify a valid exception before using another method.
Payment office loses EFT capability
If the office making payment under a contract that requires EFT loses the ability to release payment by EFT, it may use the alternate payment process authorized by the applicable contract clause and Treasury rules until EFT capability is restored. This is a temporary operational exception, not a permanent waiver.
Foreign and non-U.S. currency payments
EFT is not required when payment is to be received by or on behalf of the contractor outside the United States and Puerto Rico, or when the contract is paid in a currency other than U.S. dollars, subject to the cross-reference to 32.1106(b). These exceptions recognize that international payment conditions may require different methods.
Classified and security-sensitive contracts
If EFT could compromise classified information or national security, or if secure EFT arrangements would be impractical because of security considerations, the Government may use another payment method. The exception is tied to actual security risk or impracticality, not mere convenience.
Deployed and emergency operations
A deployed contracting officer in military operations, or any contracting officer in emergency operations such as natural disasters or national/civil emergencies, may use a non-EFT method if EFT is not known to be possible or if EFT would not support the operation’s objectives. This exception is mission-driven and depends on operational conditions.
One-payment-per-year exception
If the agency does not expect to make more than one payment to the same recipient within a one-year period, EFT is not required. This exception is aimed at infrequent, isolated payments where setting up EFT may not be practical.
Urgent and compelling need
When the agency’s need for supplies or services is so unusual and compelling that the Government would be seriously injured unless payment is made by another method, EFT may be bypassed. The exception is narrow and should be used only when delay or EFT setup would harm the Government.
Only-source urgency
If there is only one source for the supplies or services and the Government would be seriously injured unless payment is made by a method other than EFT, another payment method may be used. This exception applies only when the sole-source situation creates a serious injury risk tied to payment method.
Treasury-authorized exceptions
Any other exception authorized by Treasury regulations at 31 CFR part 208 also applies. This means FAR 32.1103 must be read together with Treasury payment rules, which may add or refine permissible non-EFT circumstances.
Responsibilities
Contracting Officer
Determine whether an EFT exception applies before authorizing or relying on a non-EFT payment method. For deployed, emergency, urgent, or sole-source situations, ensure the factual basis supports the exception and that the contract file reflects the reason for using an alternate method.
Payment Office
Make contract payments by EFT whenever required and maintain the ability to do so. If EFT capability is lost, use the temporary alternate payment process allowed by the applicable clause and Treasury regulations until EFT can resume.
Agency
Establish payment procedures that default to EFT, train personnel on the limited exceptions, and ensure compliance with Treasury regulations at 31 CFR part 208. The agency should also coordinate with payment and contracting offices so exceptions are used consistently and only when justified.
Contractor
Provide accurate EFT information and be prepared to receive payment by EFT unless a valid exception applies. If the contractor is outside the United States or is involved in a special payment situation, it should work with the contracting office to confirm the proper payment method and any required documentation.
Treasury
Issue regulations under 31 CFR part 208 that govern federal payment methods and identify any additional authorized exceptions. Treasury rules control the broader payment framework that FAR 32.1103 incorporates by reference.
Practical Implications
EFT should be treated as the standard assumption in contract administration, so contractors should have banking information ready and contracting officers should not default to paper checks without a valid reason.
Most exceptions are narrow and fact-specific; the biggest compliance risk is using a non-EFT method for convenience, speed, or habit rather than because the facts fit one of the listed categories.
When an exception is used, the file should clearly show why EFT was unavailable, impractical, or inconsistent with mission or security needs, especially for emergency, urgent, or sole-source cases.
International, classified, and contingency/emergency contracts often require early coordination among the contracting office, payment office, and security or operational personnel to avoid payment delays.
Because this section cross-references Treasury regulations and specific contract clauses, users should verify both the FAR text and the applicable clause/regulatory guidance before selecting a payment method.
Official Regulatory Text
The Government shall provide all contract payments through EFT except if- (a) The office making payment under a contract that requires payment by EFT, loses the ability to release payment by EFT. To the extent authorized by 31 CFR Part 208 , the payment office shall make necessary payments pursuant to paragraph (a)(2) of the clause at either 52.232-33 or 52.232-34 until such time as it can make EFT payments; (b) The payment is to be received by or on behalf of the contractor outside the United States and Puerto Rico (but see 32.1106 (b)); (c) A contract is paid in other than United States currency (but see 32.1106 (b)); (d) Payment by EFT under a classified contract could compromise the safeguarding of classified information or national security, or arrangements for appropriate EFT payments would be impractical due to security considerations; (e) A contract is awarded by a deployed contracting officer in the course of military operations, including, but not limited to, contingency operations as defined in 2.101 , or a contract is awarded by any contracting officer in the conduct of emergency operations, such as responses to natural disasters or national or civil emergencies, if- (1) EFT is not known to be possible; or (2) EFT payment would not support the objectives of the operation; (f) The agency does not expect to make more than one payment to the same recipient within a one-year period; (g) An agency’s need for supplies and services is of such unusual and compelling urgency that the Government would be seriously injured unless payment is made by a method other than EFT; (h) There is only one source for supplies and services and the Government would be seriously injured unless payment is made by a method other than EFT; or (i) Otherwise authorized by Department of the Treasury Regulations at 31 CFR Part 208 .