The obligation to make prompt payments for products delivered or services rendered is, generally speaking, the primary obligation of the government on a procurement contract. Payment is, naturally, of utmost importance to the small business. Your contract will specify the government office responsible for payment and will contain invoicing instructions. The more accurate your invoices, the more quickly you will be paid, so it is important to understand the payment process thoroughly. Prompt payment on all contracts serves the best interest of both the contractor and the government. Under certain circumstances if the government does not accomplish prompt payment, you can submit a request for interest payments.
Under fixed-price contracts, the method of payment can vary with the dollar value of the contract. For relatively small contracts with a single item of work, you will generally be paid the total contract price in one lump sum. Payment is made after the government accepts delivery. For larger contracts with many items, you can invoice and receive partial payments. For example, in a contract for 120 units with a delivery rate of 10 per month, you can invoice each month for the price of delivered (and accepted) items.
Larger fixed-price contracts and subcontracts where the first delivery is several months after award may contain a clause permitting you to receive progress payments based upon costs incurred as work progresses.
Because progress payments are based on work that is not completed, you must repay them if you fail to complete the work. To protect its interest, the government takes title to your work-in-process for which progress payments have been made. To qualify for progress payments, you must have an accounting system that can accurately identify and segregate contract costs.
Information courtesy of the Small Business Administration.
