48 CFR 32.202-4 - Security for Government financing.

32.202-4 Security for Government financing.


(1) 10 U.S.C. 2307(f) and 41 U.S.C. 4505 require the Government to obtain adequate security for Government financing. The contracting officer shall specify in the solicitation the type of security the Government will accept. If the Government is willing to accept more than one form of security, the offeror shall be required to specify the form of security it will provide. If acceptable to the contracting officer, the resulting contract shall specify the security (see 32.206(b)(1)(iv)).

(2) Subject to agency regulations, the contracting officer may determine the offeror's financial condition to be adequate security, provided the offeror agrees to provide additional security should that financial condition become inadequate as security (see paragraph (c) of the clause at 52.232-29, Terms for Financing of Purchases of Commercial Items). Assessment of the contractor's financial condition shall consider both net worth and liquidity. If the contracting officer finds the offeror's financial condition is not adequate security, the contracting officer shall require other adequate security. Paragraphs (b), (c), and (d) of this subsection list other (but not all) forms of security that the contracting officer may find acceptable.

(3) The value of the security must be at least equal to the maximum unliquidated amount of contract financing payments to be made to the contractor. The value of security may be adjusted periodically during contract performance, as long as it is always equal to or greater than the amount of unliquidated financing.

(b)Paramount lien.

(1) The statutes cited in 32.201 provide that if the Government's security is in the form of a lien, 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) When the Government's security is in the form of a lien, the contract shall specify what the lien is upon, e.g., the work in process, the contractor's plant, or the contractor's inventory. Contracting officers may be flexible in the choice of assets. The contract must also give the Government a right to verify the existence and value of the assets.

(3) Provision of Government financing shall be conditioned upon a contractor certification that the assets subject to the lien are free from any prior encumbrances. Prior liens may result from such things as capital equipment loans, installment purchases, working capital loans, various lines of credit, and revolving credit arrangements.

(c)Other assets as security. Contracting officers may consider the guidance at 28.203-2, 28.203-3, and 28.204 in determining which types of assets may be acceptable as security. For the purpose of applying the guidance in part 28 to this subsection, the term “surety” and/or “individual surety” should be interpreted to mean “offeror” and/or “contractor.”

(d)Other forms of security. Other acceptable forms of security include -

(1) An irrevocable letter of credit from a federally insured financial institution;

(2) A bond from a surety, acceptable in accordance with part 28 (note that the bond must guarantee repayment of the unliquidated contract financing);

(3) A guarantee of repayment from a person or corporation of demonstrated liquid net worth, connected by significant ownership to the contractor; or

(4) Title to identified contractor assets of adequate worth.

(e)Management of risk and security. In establishing contract financing terms, the contracting officer must be aware of certain risks. For example, very high amounts of financing early in the contract (front-end loading) may unduly increase the risk to the Government. The security and the amounts and timing of financing payments must be analyzed as a whole to determine whether the arrangement will be in the best interest of the Government.

[ 60 FR 49711, Sept. 26, 1995, as amended at 79 FR 24211, Apr. 29, 2014]

This is a list of United States Code sections, Statutes at Large, Public Laws, and Presidential Documents, which provide rulemaking authority for this CFR Part.

This list is taken from the Parallel Table of Authorities and Rules provided by GPO [Government Printing Office].

It is not guaranteed to be accurate or up-to-date, though we do refresh the database weekly. More limitations on accuracy are described at the GPO site.

United States Code
U.S. Code: Title 10 - ARMED FORCES

§ 2301 - Repealed. Pub. L. 103–355, title I, § 1501(a), Oct. 13, 1994, 108 Stat. 3296]

§ 2302 - Definitions

§ 2302a - Simplified acquisition threshold

§ 2302b - Implementation of simplified acquisition procedures

§ 2302c - Repealed. Pub. L. 114–328, div. A, title VIII, § 833(b)(5)(A)(i), Dec. 23, 2016, 130 Stat. 2285]

§ 2302d - Major system: definitional threshold amounts

§ 2303 - Applicability of chapter

§ 2303a - Repealed. Pub. L. 98–577, title III, § 302(c)(1), Oct. 30, 1984, 98 Stat. 3077]

§ 2304 - Contracts: competition requirements

§ 2304a - Task and delivery order contracts: general authority

§ 2304b - Task order contracts: advisory and assistance services

§ 2304c - Task and delivery order contracts: orders

§ 2304d - Task and delivery order contracts: definitions

§ 2304e - Contracts: prohibition on competition between Department of Defense and small businesses and certain other entities

§ 2305 - Contracts: planning, solicitation, evaluation, and award procedures

§ 2305a - Design-build selection procedures

§ 2306 - Kinds of contracts

§ 2306a - Cost or pricing data: truth in negotiations

§ 2306b - Multiyear contracts: acquisition of property

§ 2306c - Multiyear contracts: acquisition of services

§ 2307 - Contract financing

§ 2308 - Buy-to-budget acquisition: end items

§ 2309 - Allocation of appropriations

§ 2310 - Determinations and decisions

§ 2311 - Assignment and delegation of procurement functions and responsibilities

§ 2312 - Remission of liquidated damages

§ 2313 - Examination of records of contractor

§ 2313a - Defense Contract Audit Agency: annual report

§ 2314 - Laws inapplicable to agencies named in section 2303 of this title

§ 2315 - Law inapplicable to the procurement of automatic data processing equipment and services for certain defense purposes

§ 2316 - Disclosure of identity of contractor

§ 2317 - Repealed. Pub. L. 103–160, div. A, title VIII, § 821(a)(2), Nov. 30, 1993, 107 Stat. 1704]

§ 2318 - Advocates for competition

§ 2319 - Encouragement of new competitors

§ 2320 - Rights in technical data

§ 2321 - Validation of proprietary data restrictions

§ 2322 - Management of intellectual property matters within the Department of Defense

§ 2323 - Contract goal for small disadvantaged businesses and certain institutions of higher education

§ 2323a - Credit for Indian contracting in meeting certain subcontracting goals for small disadvantaged businesses and certain institutions of higher education

§ 2324 - Allowable costs under defense contracts

§ 2325 - Restructuring costs

§ 2326 - Undefinitized contractual actions: restrictions

§ 2327 - Contracts: consideration of national security objectives

§ 2328 - Release of technical data under Freedom of Information Act: recovery of costs

§ 2329 - Procurement of services: data analysis and requirements validation

§ 2330 - Procurement of contract services: management structure

§ 2330a - Procurement of services: tracking of purchases

§ 2331 - Procurement of services: contracts for professional and technical services

§ 2332 - Share-in-savings contracts

§ 2333 - Joint policies on requirements definition, contingency program management, and contingency contracting

§ 2334 - Independent cost estimation and cost analysis

§ 2335 - Prohibition on collection of political information

§ 2336 - Renumbered § 2679]

§ 2337 - Life-cycle management and product support


Title 48 published on 02-Jun-2018 05:07

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 48 CFR Part 32 after this date.

  • 2017-01-13; vol. 82 # 9 - Friday, January 13, 2017
    1. 82 FR 4709 - Federal Acquisition Regulation; Uniform Use of Line Items
      GPO FDSys XML | Text
      Final rule.
      Effective: January 13, 2017. In order to provide agencies with time to transition their information systems, agencies have until October 1, 2019, to apply the requirements of FAR 4.1002 through 4.1008 of subpart 4.10.
      48 CFR Parts 2, 3, 4, 5, 7, 8, 9, 12, 14, 15, 16, 17, 27, 32, 42, 48, 49, and 52
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