FAR 32.204—Procedures for contracting officer-specified commercial contract financing.
Plain-English Summary
FAR 32.204 explains how a contracting officer must handle government-specified commercial contract financing in a solicitation and during source selection. It covers five main topics: including financing terms in the solicitation, prohibiting contract financing from being used as an evaluation factor, barring offerors from proposing alternative financing terms, allowing an offeror to decline the offered financing without penalty, removing the financing provisions from the final contract if the awardee declined them, and preventing any price adjustment based on financing because the financing effect is already built into each offeror’s price. In practice, this rule keeps financing separate from technical and price evaluation so the government compares offers on a consistent basis. It also protects competition by ensuring that an offeror is not rejected or downgraded merely because it does not want the government’s financing terms. For contracting officers, the section is a drafting and evaluation control: the solicitation must clearly state the financing terms, but evaluators must ignore financing as a discriminator. For contractors, the key practical point is that declining the specified financing does not make the offer unacceptable, but it may affect the contractor’s cash flow and contract administration if awarded without financing provisions.
Key Rules
Include financing in solicitation
If the contracting officer intends to provide commercial contract financing, the financing terms must be stated in the solicitation. Offerors need to know the exact terms up front so they can price and structure their proposals accordingly.
No evaluation factor
Contract financing may not be used as a factor in evaluating proposals. Source selection must not reward or penalize an offeror based on whether it accepts the government-specified financing terms.
No alternative financing offers
Offerors may not submit alternative financing terms for consideration in place of the contracting officer-specified terms. The solicitation is not a negotiation over financing alternatives, except where the solicitation itself is amended under the cited FAR provisions.
Declining financing is allowed
An offeror may state that it will not use the specified financing terms, and that statement does not make the offer nonresponsive or otherwise unacceptable. The offer remains eligible for award on the same basis as other offers.
Omit financing from award contract
If award is made to an offeror that declined the proposed financing, the resulting contract must not include the financing provisions. The final contract should match the financing posture actually accepted by the awardee.
No price adjustment for financing
The government may not adjust proposed prices to account for financing because the effect of financing is already reflected in each offeror’s proposed price. Evaluators must compare prices as submitted, without adding or subtracting financing-related amounts.
Responsibilities
Contracting Officer
State any contracting officer-specified commercial contract financing terms in the solicitation, ensure evaluators do not use financing as a source selection factor, reject alternative financing terms unless the solicitation is properly amended, and omit financing provisions from the awarded contract if the selected offeror declined them.
Source Selection/Evaluation Team
Evaluate proposals without considering contract financing as a discriminator and avoid any price normalization or adjustment based on financing terms.
Offeror/Contractor
Decide whether to accept or decline the specified financing terms, submit the offer accordingly, and understand that declining the financing does not make the offer unacceptable or nonresponsive.
Agency
Ensure procurement policies and solicitation templates reflect the rule that financing terms are disclosed in the solicitation but not used as an evaluation factor, and support consistent application across acquisitions.
Practical Implications
Contracting officers should draft financing terms clearly and early, because they must be part of the solicitation and cannot be introduced later as an evaluation issue.
Evaluators should not try to “level” offers by adjusting prices for financing differences; doing so would conflict with the rule that financing effects are already embedded in proposed prices.
A contractor can decline government financing without losing eligibility, which is important for firms that prefer their own working-capital arrangements or do not need the offered terms.
If the awardee declines financing, the contract file and final award document must be cleaned up so the financing clause or provision is not carried into the contract by mistake.
A common pitfall is treating financing as a hidden discriminator in best-value tradeoffs; this section requires that source selection focus on the stated evaluation criteria, not on whether an offeror accepts the government’s financing package.
Official Regulatory Text
The financing terms shall be included in the solicitation. Contract financing shall not be a factor in the evaluation of resulting proposals, and proposals of alternative financing terms shall not be accepted (but see 14.208 and 15.206 concerning amendments of solicitations). However, an offer stating that the contracting officer-specified contract financing terms will not be used by the offeror does not alter the evaluation of the offer, nor does it render the offer nonresponsive or otherwise unacceptable. In the event of award to an offeror who declined the proposed contract financing, the contract financing provisions shall not be included in the resulting contract. Contract financing shall not be a basis for adjusting offerors’ proposed prices, because the effect of contract financing is reflected in each offeror’s proposed prices.