Are you trying to figure out how to have a government contract while still maintaining some semblance of cash flow? Here are a couple methods where you can work with your Contracting Officer to put them into place to assist with the cash flow. Of course these all depend on a lot of different variables, not to mention that they are usually at the discretion of your CO. I’ve put these in order of a typical CO’s likelihood of allowing them; from most likely to least likely. With any of these, make sure that if you even think you’ll need it (and who doesn’t need positive cash flow?) discuss it with your contracting officer prior to award (i.e. prior to when you’ll need it!). It is easier to incorporate before award. And for some of the more complex ones, prior to award is the only time to incorporate it.

This third installment talks about other non-financing options that you could consider.

Offering Discounts for Prompt Payments. Most of us are familiar with this term – we are all acutely aware when we are due a payment and want to be paid on time. First, realize that this does not apply if you are using one of the other contract financing methods described earlier in this series. But, did you realize that if you offer a discount for a quick payment, the government is supposed to take advantage of that? Unless specifically outlined as an evaluation factor, Contracting Officers can’t evaluate this as an element of your competitive proposal. However, you are always welcome (and encouraged) to provide discounted rates. So, by offering a 1% Net-15 for example, the government will take advantage of this and pay you in 15 days (after receipt of a proper invoice) instead of the standard 30 days. When I was a CO, I learned this the ‘hard’ way with one of my contractors. We had an invoice ready to go and processed within days, but DFAS (Defense Finance and Accounting Services) waited the entire 30 days to make the payment.

Providing Accelerated Payments to Small business Subcontractors. If you are a subcontractor waiting to get paid by your prime, check for FAR 52.232-40 in their (and your) contract. If your contract was written after Dec 2013, it should be in both their contract and their subcontract with you. The government understands that many times primes (and no, not always just large prime contractors) practice an ‘I’ll pay you when it benefits me’ (the prime) mentality, and that this was detrimental to the cash flow of smaller businesses; and, as a result, could jeopardize the success of the contract. The primes were helping their cash flow at the expense of their supporting vendors. Not a good recipe for good long term relationships.

Read more about contract financing in Part 32 of the FAR. This series of posts is not inclusive of all your options, (or stipulations or uses) but knowing these basics will help you have the conversation with your Contracting Officer if the need arises.