FAR 32.405—Applying Pub.L.85-804 to advance payments under sealed bid contracts.
Plain-English Summary
FAR 32.405 explains how Pub. L. 85-804 authority can be used to make advance payments in connection with sealed bid contracts, and how that authority interacts with the normal sealed bidding rules. It covers three main topics: the ability of designated agencies to make advance payments at or after award to support the national defense, the right of bidders to request advance payments even when the IFB does not include an advance payment clause, and the contracting officer’s duty to reject any bid that makes advance payments a condition of acceptance. It also describes the agency’s choices when an advance payment request is made: award the contract with advance payments under Part 32, award without advance payments if the contractor does not actually need them, or deny award if the request has been disapproved under 32.409-2 and the bidder lacks other adequate performance funds. In practice, this section is about preserving the integrity of sealed bidding while still allowing extraordinary financing assistance when authorized and necessary for national defense. It matters because advance payments can be a critical tool for contractor cash flow, but they cannot be used to turn a sealed bid into a conditional offer or to bypass the competition rules that govern bid acceptance.
Key Rules
Advance payments are authorized
Designated agencies may make advance payments under Pub. L. 85-804 to facilitate the national defense, and this authority applies to sealed bid contracts as well as negotiated contracts. The payments may be made at or after award, subject to the requirements of Part 32 and the agency’s authority.
Bidders may request them
A bidder may ask for advance payments before or after award even if the invitation for bids does not include an advance payment provision. The absence of such a clause in the IFB does not prevent the bidder from making the request.
Conditional bids must be rejected
The contracting officer must reject any bid that requires advance payments as a condition for acceptance. A sealed bid cannot be accepted if it is contingent on the government providing financing as part of the bid terms.
Agency may award with advance payments
If advance payments are requested and approved, the agency may enter into the contract and include advance payment terms that comply with Part 32. This is the normal path when the contractor needs the financing and the request is supportable.
Agency may award without advance payments
If the contractor does not actually need advance payments, the agency may still award the contract without providing them. The request for advance payments does not automatically require the government to grant them.
Agency may deny award in limited cases
If the advance payment request has been disapproved under 32.409-2 and the bidder does not have adequate funds otherwise available to perform, the agency may deny award. This protects the government from awarding to a bidder that cannot perform without disapproved financing.
Responsibilities
Contracting Officer
Review bids for conditional language and reject any bid that makes advance payments a basis for acceptance. When advance payments are requested, determine whether the contract may be awarded with advance payments under Part 32, awarded without them, or denied in the limited circumstances described in the rule.
Bidder/Offeror
May request advance payments before or after award, but must not make the bid contingent on receiving them. The bidder should be prepared to show why advance payments are needed and whether other funds are available for performance.
Agency/Designated Agency
Use Pub. L. 85-804 authority only when appropriate to facilitate the national defense and in accordance with Part 32 and agency approval procedures. Decide whether to approve, deny, or condition advance payments based on the contractor’s need and the status of any disapproval under 32.409-2.
Approving Authority under 32.409-2
Evaluate and decide whether the requested advance payments should be disapproved under the applicable procedures. That decision affects whether the agency may still award the contract or may deny award if no other adequate performance funds are available.
Practical Implications
A bidder can ask for advance payments without being disqualified just because the IFB was silent, but the bid itself cannot say, in effect, 'award only if you give me advance payments.'
Contracting officers need to separate a financing request from bid responsiveness: a request may be considered, but a conditional bid must be rejected.
If advance payments are approved, the contract must be structured to comply with Part 32 requirements; this is not an informal or ad hoc financing arrangement.
If advance payments are denied, the agency should assess whether the bidder can still perform with its own resources or other available financing before deciding whether award can proceed.
A common pitfall is treating advance payment requests as automatically required or automatically prohibited; this section allows them in limited circumstances but preserves sealed bidding integrity and the government’s discretion.
Official Regulatory Text
(a) Actions that designated agencies may take to facilitate the national defense without regard to other provisions of law relating to contracts, as explained in 50.101-1 (a), also include making advance payments. These advance payments may be made at or after award of sealed bid contracts, as well as negotiated contracts. (b) Bidders may request advance payments before or after award, even if the invitation for bids does not contain an advance payment provision. However, the contracting officer shall reject any bid requiring that advance payments be provided as a basis for acceptance. (c) When advance payments are requested, the agency may- (1) Enter into the contract and provide for advance payments conforming to this part 32 ; (2) Enter into the contract without providing for advance payments if the contractor does not actually need advance payments; or (3) Deny award of the contract if the request for advance payments has been disapproved under 32.409-2 and funds adequate for performance are not otherwise available to the offeror.