FAR 32.1106—EFT mechanisms.
Plain-English Summary
FAR 32.1106 explains when the Government may use electronic funds transfer (EFT) mechanisms for contract payments and when it should not. It distinguishes between domestic EFT payments in the United States banking system using U.S. currency, and nondomestic payments made outside the United States and Puerto Rico or in currencies other than U.S. dollars. The section specifically addresses the EFT clauses at 52.232-33 and 52.232-34, the approved domestic mechanisms (U.S. Automated Clearing House and Fedwire Transfer System), and the possibility of agency-approved alternative EFT methods. It also states the general rule that payments outside the United States/Puerto Rico or in non-U.S. currency are to be made by means other than EFT, unless the agency head authorizes EFT and the required conditions are met. In practice, this section matters because it controls how contractors are paid, what banking information and payment systems are acceptable, and when agencies must use non-EFT methods due to foreign banking, currency, or infrastructure limitations.
Key Rules
Domestic EFT is limited
The EFT clauses at 52.232-33 and 52.232-34 are intended for use with the domestic U.S. banking system and U.S. currency. By default, they contemplate only the specified EFT mechanisms: U.S. Automated Clearing House (ACH) and Fedwire Transfer System.
Agency may approve other domestic EFT
The head of an agency may authorize another EFT mechanism for domestic payments, but only with the concurrence of the office or agency responsible for making payments. This means alternative domestic payment systems are possible, but they are not automatic.
Foreign or non-dollar payments default to non-EFT
For payments received by or on behalf of the contractor outside the United States and Puerto Rico, or for contracts paid in currencies other than U.S. dollars, the Government shall provide payment by other than EFT. The default rule is therefore paper or other non-EFT payment methods unless an exception is approved.
Foreign EFT requires specific approval
The head of an agency may authorize EFT for nondomestic payments only with concurrence from the payment office or agency. Approval is conditioned on the foreign country’s political, financial, and communications infrastructure supporting EFT, or on the ability to safely make payments in a non-U.S. currency.
Infrastructure and safety are the key tests
Before authorizing EFT in a foreign setting or for non-U.S. currency, the agency must determine that the local environment can support secure and reliable electronic payment. The rule focuses on practical feasibility and payment safety, not just administrative convenience.
Responsibilities
Contracting Officer
Apply the correct payment mechanism based on whether the contract is domestic or nondomestic and whether payment will be in U.S. dollars or another currency. Ensure the contract uses the appropriate EFT clause or non-EFT approach consistent with agency authorization and payment-office concurrence.
Head of Agency
Authorize use of alternative domestic EFT mechanisms or approve EFT for foreign/non-dollar payments when the regulatory conditions are met. Ensure the required concurrence from the office or agency responsible for making payments is obtained.
Office or Agency Responsible for Making Payments
Concur in any agency-head decision to use an alternative domestic EFT mechanism or to authorize EFT for nondomestic or non-U.S.-currency payments. Assess whether the payment method is operationally feasible and secure.
Contractor
Provide banking and payment information needed for the approved payment method and be prepared to receive payment through the mechanism authorized by the contract. For foreign or non-dollar arrangements, coordinate with the Government on acceptable payment channels and any limitations in the local banking environment.
Practical Implications
Contracting officers should not assume EFT is always the default; foreign locations and non-U.S. currencies trigger a different rule and may require non-EFT payment methods.
If an agency wants to use a payment system other than ACH or Fedwire domestically, it needs formal authorization and payment-office concurrence; informal local practice is not enough.
For overseas contracts, the key question is whether the local banking and communications environment can reliably support EFT and whether the payment can be made safely in the applicable currency.
A common pitfall is mixing up the place of payment with the place of performance; the rule turns on where payment is received by or on behalf of the contractor and on the currency used.
Contract files should document the basis for any exception or approval, because the regulation ties alternative payment methods to agency-head authorization and operational findings.
Official Regulatory Text
(a) Domestic EFT mechanisms. The EFT clauses at 52.232-33 and 52.232-34 are designed for use with the domestic United States banking system, using United States currency, and only the specified mechanisms (U.S. Automated Clearing House, and Fedwire Transfer System) of EFT. However, the head of an agency may authorize the use of any other EFT mechanism for domestic EFT with the concurrence of the office or agency responsible for making payments. (b) Nondomestic EFT mechanisms and other than United States currency. The Government shall provide payment by other than EFT for payments received by or on behalf of the contractor outside the United States and Puerto Rico or for contracts paid in other than United States currency. However, the head of an agency may authorize appropriate use of EFT with the concurrence of the office or agency responsible for making payments if- (1) The political, financial, and communications infrastructure in a foreign country supports payment by EFT; or (2) Payments of other than United States currency may be made safely.