FAR 52.232-31—Invitation to Propose Financing Terms.
Plain-English Summary
FAR 52.232-31 is a solicitation provision used when the Government wants offerors to propose their own contract financing terms for commercial products or commercial services. It tells offerors that financing terms will be evaluated as part of the source selection, and that the financing terms of the successful offeror will be incorporated into the resulting contract together with FAR 52.232-29, Terms for Financing of Purchases of Commercial Products and Commercial Services. The provision also establishes a hierarchy: if the offeror’s proposed financing terms conflict with FAR 52.232-29, the FAR clause controls. In addition, it imposes statutory limits on what financing can be accepted, including restrictions on delivery payments, a 15 percent cap on financing before performance begins, and requirements that the terms be commercially customary and in the best interests of the United States. Finally, it requires offerors to submit specific financing language and a payment schedule, and it directs the Government to evaluate the proposal’s financing cost using the solicitation’s stated interest rate and delivery schedule. In practice, this provision is important because it lets the Government compare not just price, but also the cash-flow impact and risk of the financing structure offered by each competitor.
Key Rules
Offerors may propose financing
The solicitation invites offerors to propose contract financing terms for use during performance. Those terms are not optional background information; they are part of the proposal and will be considered in evaluation.
Financing terms affect evaluation
The proposed financing terms must be evaluated as a factor in source selection. This means an offeror can improve or hurt its competitive standing based on the cost and structure of the financing it proposes.
FAR 52.232-29 controls conflicts
The successful offeror’s financing terms are incorporated into the contract, but any conflict with FAR 52.232-29 is resolved in favor of the FAR clause. Offerors cannot override mandatory Government financing terms by proposing different language.
Statutory limits restrict acceptable financing
Proposed financing must comply with statutory restrictions, including that delivery payments are only for delivered and accepted supplies or services, financing before performance cannot exceed 15 percent of contract price, and the terms must be commercially customary and in the Government’s best interest.
Offerors must submit specific details
The proposal must include the actual contractual language describing the financing arrangement and a listing of the earliest date and greatest amount for each financing payment, plus the amount of each delivery payment. The resulting contract cannot allow earlier or larger financing payments than those listed.
Evaluation uses solicitation assumptions
The Government evaluates the combined effect of proposed prices and financing terms using the interest rate and delivery schedule stated elsewhere in the solicitation. This ensures all offers are compared on a common basis.
Responsibilities
Contracting Officer
Include this provision when financing terms are to be proposed, ensure the solicitation states the applicable interest rate and delivery schedule, evaluate proposed financing terms as part of source selection, and incorporate the successful offeror’s financing terms into the contract subject to FAR 52.232-29 and statutory limits.
Offeror/Contractor
Propose financing terms in the required format, provide the contractual language and payment schedule, ensure the proposed terms comply with statutory limits and commercial-marketplace standards, and understand that the Government will evaluate the cost impact of the financing structure.
Agency/Government
Use the provision only when appropriate under the cited prescriptions, apply the statutory and regulatory limits consistently, and ensure the resulting contract does not authorize financing payments earlier or in greater amounts than the offeror listed.
Practical Implications
This provision can materially change award outcomes because financing is evaluated alongside price, so a lower price with expensive financing may be less competitive than a slightly higher price with better financing terms.
Offerors should be careful not to propose financing structures that look attractive commercially but violate the 15 percent pre-performance cap or the requirement that delivery payments be tied to accepted deliveries or services.
The solicitation’s stated interest rate and delivery schedule matter a great deal because they are used to calculate the Government’s cost of the financing proposal; mismatches or assumptions can distort the evaluation.
Contracting officers should verify that the proposed financing language is consistent with FAR 52.232-29 and should not allow the contract to drift into custom terms that conflict with mandatory clause language.
A common pitfall is treating the financing proposal as a separate side agreement; under this provision, the financing terms become part of the contract and are enforceable only to the extent they fit within the FAR clause and statutory constraints.
Official Regulatory Text
As prescribed in 32.205 (b) and 32.206 , insert the following provision: Invitation to Propose Financing Terms (Dec 2022) (a) The offeror is invited to propose terms under which the Government shall make contract financing payments during contract performance. The financing terms proposed by the offeror shall be a factor in the evaluation of the offeror’s proposal. The financing terms of the successful offeror and the clause, Terms for Financing of Purchases of Commercial Products and Commercial Services, at Federal Acquisition Regulation (FAR) 52.232-29 , shall be incorporated in any resulting contract. (b) The offeror agrees that in the event of any conflict between the terms proposed by the offeror and the terms in the clause at FAR 52.232-29 , Terms for Financing of Purchases of Commercial Products and Commercial Services, the terms of the clause at FAR 52.232-29 shall govern. (c) Because of statutory limitations ( 10 U.S.C. 3805 and 41 U.S.C. 4505 ), the offeror’s proposed financing shall not be acceptable if it does not conform to the following limitations: (1) Delivery payments shall be made only for supplies delivered and accepted, or services rendered and accepted in accordance with the payment terms of this contract; (2) Contract financing payments shall not exceed 15 percent of the contract price in advance of any performance of work under the contract; (3) The terms and conditions of the contract financing must be appropriate or customary in the commercial marketplace; and (4) The terms and conditions of the contract financing must be in the best interests of the United States. (d) The offeror’s proposal of financing terms shall include the following: (1) The proposed contractual language describing the contract financing (see FAR 32.202-2 for appropriate definitions of types of payments); and (2) A listing of the earliest date and greatest amount at which each contract financing payment may be payable and the amount of each delivery payment. Any resulting contract shall provide that no contract financing payment shall be made at any earlier date or in a greater amount than shown in the offeror’s listing. (e) The offeror’s proposed prices and financing terms shall be evaluated to determine the cost to the United States of the proposal using the interest rate and delivery schedule specified elsewhere in this solicitation. (End of provision)