§ 255. — Contract financing.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 41USC255]
TITLE 41--PUBLIC CONTRACTS
CHAPTER 4--PROCUREMENT PROCEDURES
SUBCHAPTER IV--PROCUREMENT PROVISIONS
Sec. 255. Contract financing
(a) Payment authority
Any executive agency may--
(1) make advance, partial, progress or other payments under
contracts for property or services made by the agency; and
(2) insert in solicitations for procurement of property or
services a provision limiting to small business concerns advance or
progress payments.
(b) Performance-based payments
Whenever practicable, payments under subsection (a) of this section
shall be made on any of the following bases:
(1) Performance measured by objective, quantifiable methods such
as delivery of acceptable items, work measurement, or statistical
process controls.
(2) Accomplishment of events defined in the program management
plan.
(3) Other quantifiable measures of results.
(c) Payment amount
Payments made under subsection (a) of this section may not exceed
the unpaid contract price.
(d) Security for advance payments
Advance payments under subsection (a) of this section may be made
only upon adequate security and a determination by the agency head that
to do so would be in the public interest. Such security may be in the
form of a lien in favor of the Government on the property contracted
for, on the balance in an account in which such payments are deposited,
and on such of the property acquired for performance of the contract as
the parties may agree. This lien shall be paramount to all other liens
and is effective immediately upon the first advancement of funds without
filing, notice, or any other action by the United States.
(e) Conditions for progress payments
(1) The executive agency shall ensure that any payment for work in
progress (including materials, labor, and other items) under a contract
of an executive agency that provides for such payments is commensurate
with the work accomplished that meets standards established under the
contract. The contractor shall provide such information and evidence as
the executive agency determines necessary to permit the executive agency
to carry out the preceding sentence.
(2) The executive agency shall ensure that progress payments
referred to in paragraph (1) are not made for more than 80 percent of
the work accomplished under the contract so long as the executive agency
has not made the contractual terms, specifications, and price definite.
(3) This subsection applies to any contract in an amount greater
than $25,000.
(f) Conditions for payments for commercial items
(1) Payments under subsection (a) of this section for commercial
items may be made under such terms and conditions as the head of the
executive agency determines are appropriate or customary in the
commercial marketplace and are in the best interests of the United
States. The head of the executive agency shall obtain adequate security
for such payments. If the security is in the form of a lien in favor of
the United States, such lien is paramount to all other liens and is
effective immediately upon the first payment, without filing, notice, or
other action by the United States.
(2) Advance payments made under subsection (a) of this section for
commercial items may include payments, in a total amount of not more
than 15 percent of the contract price, in advance of any performance of
work under the contract.
(3) The conditions of subsections (d) and (e) of this section need
not be applied if they would be inconsistent, as determined by the head
of the executive agency, with commercial terms and conditions pursuant
to paragraphs (1) and (2).
(g) Action in case of fraud
(1) In any case in which the remedy coordination official of an
executive agency finds that there is substantial evidence that the
request of a contractor for advance, partial, or progress payment under
a contract awarded by that executive agency is based on fraud, the
remedy coordination official shall recommend that the executive agency
reduce or suspend further payments to such contractor.
(2) The head of an executive agency receiving a recommendation under
paragraph (1) in the case of a contractor's request for payment under a
contract shall determine whether there is substantial evidence that the
request is based on fraud. Upon making such a determination, the head of
the executive agency may reduce or suspend further payments to the
contractor under such contract.
(3) The extent of any reduction or suspension of payments by an
executive agency under paragraph (2) on the basis of fraud shall be
reasonably commensurate with the anticipated loss to the United States
resulting from the fraud.
(4) A written justification for each decision of the head of an
executive agency whether to reduce or suspend payments under paragraph
(2), and for each recommendation received by the executive agency in
connection with such decision, shall be prepared and be retained in the
files of the executive agency.
(5) The head of each executive agency shall prescribe procedures to
ensure that, before the head of the executive agency decides to reduce
or suspend payments in the case of a contractor under paragraph (2), the
contractor is afforded notice of the proposed reduction or suspension
and an opportunity to submit matters to the executive agency in response
to such proposed reduction or suspension.
(6) Not later than 180 days after the date on which the head of an
executive agency reduces or suspends payments to a contractor under
paragraph (2), the remedy coordination official of the executive agency
shall--
(A) review the determination of fraud on which the reduction or
suspension is based; and
(B) transmit a recommendation to the head of such executive
agency whether the suspension or reduction should continue.
(7) The head of each executive agency who receives recommendations
made by a remedy coordination official of the executive agency to reduce
or suspend payments under paragraph (2) during a fiscal year shall
prepare for such year a report that contains the recommendations, the
actions taken on the recommendations and the reasons for such actions,
and an assessment of the effects of such actions on the Federal
Government. Any such report shall be available to any Member of Congress
upon request.
(8) The head of an executive agency may not delegate
responsibilities under this subsection to any person in a position below
level IV of the Executive Schedule.
(9) In this subsection, the term ``remedy coordination official'',
with respect to an executive agency, means the person or entity in that
executive agency who coordinates within that executive agency the
administration of criminal, civil, administrative, and contractual
remedies resulting from investigations of fraud or corruption related to
procurement activities.
(June 30, 1949, ch. 288, title III, Sec. 305, 63 Stat. 396; July 12,
1952, ch. 703, Sec. 1(m), 66 Stat. 594; Pub. L. 85-800, Sec. 4, Aug. 28,
1958, 72 Stat. 966; Pub. L. 103-355, title II, Sec. 2051(a)-(e), Oct.
13, 1994, 108 Stat. 3303, 3304; Pub. L. 104-106, div. D, title XLIII,
Sec. 4321(a)(4), Feb. 10, 1996, 110 Stat. 671.)
References in Text
Level IV of the Executive Schedule, referred to in subsec. (g)(8),
is set out in section 5315 of Title 5, Government Organization and
Employees.
Amendments
1996--Subsecs. (e) to (g). Pub. L. 104-106 made technical correction
to directory language of Pub. L. 103-355, Sec. 2051(e). See 1994
Amendment note below.
1994--Pub. L. 103-355, Sec. 2051(a)(1), inserted section catchline.
Subsec. (a). Pub. L. 103-355, Sec. 2051(a)(2), (c), inserted heading
and struck out ``bid'' before ``solicitations'' in par. (2).
Subsec. (b). Pub. L. 103-355, Sec. 2051(a)(5), (b), added subsec.
(b) and redesignated former subsec. (b) as (c).
Pub. L. 103-355, Sec. 2051(a)(3), inserted heading.
Subsec. (c). Pub. L. 103-355, Sec. 2051(a)(5), redesignated subsec.
(b) as (c). Former subsec. (c) redesignated (d).
Pub. L. 103-355, Sec. 2051(a)(4), inserted heading.
Subsec. (d). Pub. L. 103-355, Sec. 2051(d), inserted before period
at end of third sentence ``and is effective immediately upon the first
advancement of funds without filing, notice, or any other action by the
United States''.
Pub. L. 103-355, Sec. 2051(a)(5), redesignated subsec. (c) as (d).
Subsecs. (e) to (g). Pub. L. 103-355, Sec. 2051(e), as amended by
Pub. L. 104-106, added subsecs. (e) to (g).
1958--Pub. L. 85-800 authorized advance or other payments under
contracts for property or services by agency and insertion in bid
solicitations of provision limiting advance or progress payments to
small business concerns, restricted payments under subsec. (a) of this
section to unpaid contract price, and reworded generally conditions for
making advance payments.
1952--Subsecs. (a), (b). Act July 12, 1952, substituted ``property''
for ``supplies'' wherever appearing.
Effective Date of 1996 Amendment
Section 4321(a) of Pub. L. 104-106 provided that the amendment made
by that section is effective as of Oct. 13, 1994, and as if included in
Pub. L. 103-355 as enacted.
Effective Date of 1994 Amendment
For effective date and applicability of amendment by Pub. L. 103-
355, see section 10001 of Pub. L. 103-355, set out as a note under
section 251 of this title.
Effective Date
Section effective July 1, 1949, see section 605, formerly section
505, of act June 30, 1949, ch. 288, 63 Stat. 403; renumbered by act
Sept. 5, 1950, ch. 849, Sec. 6(a), (b), 64 Stat. 583.
Exemption of Functions
Functions authorized by Foreign Assistance Act of 1961, as amended,
as exempt, see Ex. Ord. No. 11223, eff. May 12, 1965, 30 F.R. 6635, set
out as a note under section 2393 of Title 22, Foreign Relations and
Intercourse.
Relationship to Prompt Payment Requirements
Section 2051(f) of Pub. L. 103-355 provided that: ``The amendments
made by this section [amending this section] are not intended to impair
or modify procedures required by the provisions of chapter 39 of title
31, United States Code, and the regulations issued pursuant to such
provisions of law (as such procedures are in effect on the date of the
enactment of this Act [Oct. 13, 1994]), except that the Government may
accept payment terms offered by a contractor offering a commercial
item.''
Definitions
The definitions in section 102 of Title 40, Public Buildings,
Property, and Works, apply to this subchapter.
Section Referred to in Other Sections
This section is referred to in sections 257, 262 of this title;
title 8 section 1363a; title 19 section 2081; title 26 section 7608.
