CFCM Contract Financing & Payments 2 — Questions and Answers
Question 1: Under FAR 32.6, what is the primary purpose of assignment of claims in government contracting?
- To allow contractors to transfer contract performance to a successor company
- To permit contractors to assign their right to payment to a financing institution (Correct answer)
- To enable the government to redirect payments to subcontractors directly
- To facilitate novation agreements between contractors
Correct answer: To permit contractors to assign their right to payment to a financing institution
Assignment of claims under FAR 32.6 allows contractors to assign their right to receive payments under a contract to a bank or other financing institution as collateral for a loan.
Question 2: The liquidation rate applied to progress payments refers to:
- The penalty rate charged for late repayment of advance payments
- The percentage withheld from delivery payments to recoup progress payments (Correct answer)
- The interest rate charged on outstanding financing balances
- The rate at which unallowable costs are removed from invoices
Correct answer: The percentage withheld from delivery payments to recoup progress payments
The liquidation rate is the percentage deducted from each delivery payment to recover (liquidate) previously made progress payments.
Question 3: Which FAR part governs the interest penalties the government must pay to contractors for late payments?
- FAR Part 31
- FAR Part 32 (Correct answer)
- FAR Part 33
- FAR Part 52
Correct answer: FAR Part 32
FAR Part 32 implements the Prompt Payment Act and governs interest penalties owed to contractors when the government makes late payments.
Question 4: Under FAR 32.503-5, the contracting officer may reduce or suspend progress payments if:
- The contractor requests a contract modification
- The contractor is found to be in a loss position on the contract (Correct answer)
- The prime contractor hires a new subcontractor
- Inflation causes the contract price to increase
Correct answer: The contractor is found to be in a loss position on the contract
FAR 32.503-5 requires the contracting officer to take action including reducing progress payments when the contractor is in a loss position to protect the government's financial interest.
Question 5: A 'proper invoice' under the Prompt Payment Act must include which of the following?
- The contractor's DUNS number and CAGE code only
- Name, invoice date, contract number, description of goods/services, and payment terms (Correct answer)
- A certified cost breakdown and auditor signature
- The contracting officer's technical representative approval
Correct answer: Name, invoice date, contract number, description of goods/services, and payment terms
A proper invoice must contain specific information including the contractor's name, invoice date, contract number, description, quantity, unit price, and payment terms to start the payment clock.
Question 6: Performance-based payments must not exceed what percentage of the contract price?
- 80%
- 85%
- 90% (Correct answer)
- 95%
Correct answer: 90%
Under FAR 32.1004, the total of performance-based payments must not exceed 90% of the contract price at any time.
Question 7: Under the Assignment of Claims Act, which type of contract is NOT eligible for assignment of claims?
- Fixed-price supply contracts
- Cost-reimbursement service contracts
- Contracts for less than $1,000 (Correct answer)
- Time-and-materials contracts
Correct answer: Contracts for less than $1,000
The Assignment of Claims Act exempts contracts for amounts less than $1,000 from eligibility for assignment of claims to financing institutions.
CFCM Contract Financing & Payments 2
Under FAR 32.6, what is the primary purpose of assignment of claims in government contracting?