FAR 32.113—Customary contract financing.
Plain-English Summary
FAR 32.113 tells agencies and offerors which types of contract financing are considered "customary" and therefore may be proposed when the solicitation allows them. It covers financing for shipbuilding and ship repair, construction and architect-engineer services under FAR part 36, sealed-bid contracts under FAR part 14, negotiated contracts under FAR part 15, sole-source acquisitions using part 15 procedures, advance payments, guaranteed loans, and combinations of those methods. The section exists to make financing expectations clear at the solicitation stage so offerors know what they may include in their proposals and contracting officers know what financing structures are permissible for the acquisition. In practice, it is a roadmap for selecting and advertising financing methods, but it does not itself authorize financing in every case; the financing must still comply with the applicable FAR subpart and any agency-specific regulations. It also highlights an important limitation: for competitive negotiation and sole-source acquisitions using part 15 procedures, the contract may use either progress payments based on costs or performance-based payments, but not both. For shipbuilding and ship repair, the availability of percentage- or stage-of-completion progress payments depends on agency regulations. Overall, this section helps prevent mismatches between the solicitation, the acquisition method, and the financing arrangement.
Key Rules
Solicitation must state financing
The solicitation must identify the customary contract financing offerors are allowed to propose. This gives all offerors the same financing framework and prevents surprise financing terms later in the acquisition.
Shipbuilding financing depends on agency rules
For shipbuilding, ship conversion, alteration, or repair, progress payments based on percentage or stage of completion are customary only when agency regulations specifically allow them. The FAR does not make this method universally available on its own.
Construction and A-E services allowed
Contracts for construction or architect-engineer services acquired under FAR part 36 may use customary contract financing. The section recognizes these as standard candidates for financing under the applicable subparts and agency rules.
Sealed bids use cost progress payments
For supplies or services awarded under sealed bidding in FAR part 14, customary financing is progress payments based on costs under subpart 32.5. Other financing methods are not listed here as customary for sealed-bid awards.
Negotiated awards choose one method
For supplies or services awarded under competitive negotiation in FAR part 15, the customary options are either progress payments based on costs under subpart 32.5 or performance-based payments under subpart 32.10, but not both. The solicitation and resulting contract must stay with one of those two approaches.
Sole-source part 15 awards follow same limit
For sole-source acquisitions defined in FAR 2.101 and using part 15 procedures, the same choice applies: either progress payments based on costs or performance-based payments, but not both. This keeps sole-source financing aligned with negotiated procurement rules.
Advance payments are customary
Advance payments under subpart 32.4 are identified as a customary financing method for supplies or services. They remain subject to the requirements and approvals in that subpart and any agency regulations.
Guaranteed loans are customary
Guaranteed loans under subpart 32.3 are also listed as customary financing for supplies or services. Their use depends on compliance with the loan-guarantee rules and agency implementation requirements.
Combinations are allowed with limits
The FAR allows appropriate combinations of advance payments, guaranteed loans, and either performance-based payments or progress payments, but not both performance-based payments and progress payments together. Each component must be used consistently with its own subpart.
Responsibilities
Contracting Officer
State in the solicitation which customary financing methods offerors may propose, ensure the selected method matches the acquisition type and FAR subpart, and avoid combining progress payments and performance-based payments in the same contract where prohibited.
Offeror/Contractor
Review the solicitation financing terms, propose only the financing methods permitted for that acquisition, and structure any requested financing in compliance with the applicable FAR subpart and agency regulations.
Agency
Issue and apply agency regulations that authorize or limit certain financing methods, especially for shipbuilding and related work, and ensure internal policies align with FAR part 32 and the acquisition method being used.
Program/Acquisition Team
Coordinate early to determine whether financing is appropriate, confirm the acquisition method and contract type support the intended financing approach, and ensure the solicitation and evaluation approach reflect the chosen financing structure.
Practical Implications
This section matters early, at the solicitation stage, because financing terms must be clear before proposals are submitted. If the solicitation is silent or inconsistent, offerors may misunderstand what financing they can propose and the agency may have to amend the solicitation.
A common pitfall is mixing progress payments and performance-based payments in the same negotiated or sole-source part 15 contract. FAR 32.113 allows only one of those two methods, so contracting officers must choose carefully.
For shipbuilding and ship repair, agencies cannot assume percentage- or stage-of-completion progress payments are available unless agency regulations specifically permit them. Contractors should check both the FAR and the agency supplement before relying on that method.
The section is a cross-reference rule, not a complete financing authority. Users still need to follow the detailed requirements in subparts 32.3, 32.4, 32.5, and 32.10, plus any agency-specific rules and approval requirements.
Contractors should watch for the acquisition method used in the solicitation, because the available financing options differ between sealed bidding, negotiated procurement, and sole-source part 15 procedures. Choosing the wrong financing approach can make a proposal noncompliant or less competitive.
Official Regulatory Text
The solicitation must specify the customary contract financing offerors may propose. The following are customary contract financing when provided in accordance with this part and agency regulations: (a) Financing of shipbuilding, or ship conversion, alteration, or repair, when agency regulations provide for progress payments based on a percentage or stage of completion. (b) Financing of construction or architect-engineer services purchased under the authority of part 36 . (c) Financing of contracts for supplies or services awarded under the sealed bid method of procurement in accordance with part 14 through progress payments based on costs in accordance with subpart 32.5 . (d) Financing of contracts for supplies or services awarded under the competitive negotiation method of procurement in accordance with part 15 , through either progress payments based on costs in accordance with subpart 32.5 , or performance-based payments in accordance with subpart 32.10 (but not both). (e) Financing of contracts for supplies or services awarded under a sole-source acquisition as defined in 2.101 and using the procedures of part 15 , through either progress payments based on costs in accordance with subpart 32.5 , or performance-based payments in accordance with subpart 32.10 (but not both). (f) Financing of contracts for supplies or services through advance payments in accordance with subpart 32.4 . (g) Financing of contracts for supplies or services through guaranteed loans in accordance with subpart 32.3 . (h) Financing of contracts for supplies or services through any appropriate combination of advance payments, guaranteed loans, and either performance-based payments or progress payments (but not both) in accordance with their respective subparts.