CFCM Contract Financing & Payments 4 — Questions and Answers
Question 1: Under FAR 32.503, what is the maximum percentage of the contract price that can be paid as a customary progress payment for a large business?
- 75%
- 80% (Correct answer)
- 85%
- 90%
Correct answer: 80%
FAR 32.503 establishes 80% as the customary progress payment rate for large businesses and 85% for small businesses.
Question 2: Which of the following best describes 'loan guarantee' authority under FAR Part 32?
- A direct cash advance from the government to the contractor
- A government guarantee of a private loan to enable contractor performance (Correct answer)
- An assignment of contract proceeds to a lending institution
- A surety bond requirement for high-risk contracts
Correct answer: A government guarantee of a private loan to enable contractor performance
Loan guarantees under FAR 32.3 allow the government to guarantee private loans so contractors can obtain financing needed to perform federal contracts.
Question 3: When a contractor requests a reduction in the unliquidated progress payment balance, this process is known as:
- Recoupment
- Liquidation (Correct answer)
- Novation
- Deobligation
Correct answer: Liquidation
Liquidation is the process by which progress payments are reduced (recovered) from contract payments as deliveries or services are accepted.
Question 4: Under FAR 32.112, what action must a contracting officer take if a contractor's progress payment financing becomes unsatisfactory?
- Immediately terminate the contract for default
- Reduce or suspend progress payments after notifying the contractor (Correct answer)
- Require the contractor to obtain a surety bond
- Convert progress payments to performance-based payments
Correct answer: Reduce or suspend progress payments after notifying the contractor
FAR 32.112 permits the contracting officer to reduce or suspend progress payments if the contractor's financial condition or performance is unsatisfactory, after providing notice.
Question 5: What is the primary purpose of a 'fast payment' procedure under FAR Subpart 13.4?
- To pay contractors within 7 days regardless of delivery confirmation
- To allow payment prior to Government verification of receipt for small-value supplies (Correct answer)
- To expedite payment for emergency procurements over $100,000
- To authorize advance payments without Comptroller General approval
Correct answer: To allow payment prior to Government verification of receipt for small-value supplies
FAR Subpart 13.4 fast payment procedures allow payment for small-value supply contracts before the government verifies receipt, relying on the contractor's certificate.
Question 6: Which contract type is MOST compatible with performance-based payments under FAR 32.10?
- Cost-plus-fixed-fee contracts
- Fixed-price contracts (Correct answer)
- Cost-plus-award-fee contracts
- Time-and-materials contracts
Correct answer: Fixed-price contracts
Performance-based payments are a financing tool used primarily with fixed-price contracts, tied to measurable performance outcomes rather than costs incurred.
Question 7: Under the Prompt Payment Act, what is the standard payment due date for construction contracts if no invoice is received?
- 14 days after acceptance
- 30 days after acceptance (Correct answer)
- 7 days after acceptance
- 45 days after acceptance
Correct answer: 30 days after acceptance
The Prompt Payment Act requires payment within 30 days after acceptance or receipt of a proper invoice for most government contracts, including construction.
CFCM Contract Financing & Payments 4
Under FAR 32.503, what is the maximum percentage of the contract price that can be paid as a customary progress payment for a large business?