Section 22-B9804. CONTRACT FINANCING AND FUNDING

 

9804.1Contract financing in the form of progress payments may be to assist a contractor when private financing for a contract is either unavailable or insufficient.

 

9804.2The CO shall not make progress payments or increase the contract price beyond the funds obligated under the contract, as amended.

 

9804.3Bids conditioned on progress payments when the solicitation does not provide for progress payments shall be rejected as nonresponsive.

 

9804.4The CO may provide for customary progress payments if the contractor will not be able to bill for delivery of products (or other performance milestones) for a substantial time (not less than four (4) months) after work must begin and, during the predelivery period, will make expenditures for contract performance that have a significant impact on the contractor’s working capital.

 

9804.5The CO shall not provide for progress payments if the contract items are quick turnover types for which progress payments are not a customary commercial practice such as the following:

 

(a)Subsistence;

 

(b)Clothing;

 

(c)Medical and dental supplies; or

 

(d)Standard commercial items not requiring a substantial accumulation of predelivery expenditures by the contractor.

 

9804.6In each contract providing for progress payments, the CO shall include provisions giving the Hospital the right to conduct postpayment reviews or audits at the discretion of the CO.

 

9804.7In each contract that provides for progress payments, the CO shall include provisions that assert the Hospital’s right to reduce or suspend progress payments.

 

9804.8Progress payments shall be recouped by the Hospital through the deduction of liquidations from payments that would otherwise be due the contractor for completed contract items. To determine the amount of liquidation, the CO shall apply a liquidation rate to the contract price of contract items delivered and accepted.

 

9804.9The CO shall include a provision with the progress payment provisions in the contract which provides that the Hospital shall receive title to all of the materials, work-in-process, finished goods, and other items of property under the contract.

 

9804.10The CO shall require additional protective provisions, if deemed necessary, to establish and protect the Hospital’s title.

 

9804.11The CO shall include a provision with the progress payment provisions of the contract which provides that, except for normal spoilage, the contractor shall bear the risk of loss, theft, destruction, or damage to property affected by the provision, unless the Hospital has expressly assumed that risk.

 

9804.12The contractor shall be obligated to repay the Hospital the amount of unliquidated progress payments based on costs allocable to the property if the loss occurred after the contractor assumed the risk of loss.

 

9804.13The contract shall not be obligated to pay for the loss of property for which the Hospital has assumed the risk of loss.

 

9804.14Contractor may provide progress payments to subcontractors on terms.

 

9804.15When determining the amount of any contract debt, the CO shall fairly consider both the Hospital’s claim and any contract claims by the contractor against the Hospital pursuant to the provisions for protest and disputes set forth in this regulation.

 

9804.16The CO, or other official designated to administer the collection of contract debts and applicable interest, shall use all proper means available for collecting debts as rapidly as possible.

 

9804.17Except in cases in which an agreement has been entered into for deferment of collections, or when bankruptcy proceedings against the contractor have been initiated, the contractor shall liquidate the debt by either of the following methods:

 

(a)Cash payment in a lump sum, on demand; or

 

(b)Credit against existing payments due to the contractor.

 

9804.18The CO shall make a demand for payment as soon as the amount of contract debt due has been computed.

 

9804.19The CO shall attempt to resolve expeditiously the amount of contract debt and refund through negotiations with the contractor. If the CO and contractor agree upon a refund to the Hospital, the CO shall promptly write a memorandum to document the agreement and the contract debt.

 

9804.20In accordance with the Anti-Deficiency Act (31 U.S.C. §665), no CO or other Hospital employee shall make or authorize an encumbrance or expenditure in advance of appropriations or which exceeds the budget authority available under a current appropriation.

 

9804.21Before executing any contract, the CO shall obtain certification from an official designated by the Hospital Budget Office that the amount of the contract does not exceed the amount of unencumbered budget authority as of the date on which the contract is executed.

 

9804.22For purposes of this section, “unencumbered budget authority” shall mean that portion of an appropriation which has been allocated to the object of the procurement and which has not been reallocated to another purpose, committed to any other procurement, or expended.

 

9804.23If the contract provides for expenditures in excess of the amount of unencumbered budget authority, the CO shall not sign the contract unless the contract contains a provision that expressly provides that the portion of the contract requiring payment of any amount in excess of available budget authority is conditioned upon the appropriation or allocation of additional budget authority.

 

9804.24If the contract provides for expenditures in a future fiscal year, the CO shall not sign the contract unless the contract contains a provision, approved by the CO, that expressly provides that the portion of the contract requiring expenditures in a future fiscal year is conditioned upon the appropriation of budget authority for that fiscal year.

 

9804.25Before execution of a contract, the CO shall ensure that the appropriate amount of allocated budget authority is encumbered to cover the cost of the contract.

 

9804.26Budget authority shall be encumbered as follows:

 

(a)In an amount sufficient to cover the price or target price of a fixed-price contract, or the price of that portion of the contract to be performed in the current fiscal year; or

 

(b)In an amount sufficient to cover the estimated cost and any fee of a cost-reimbursement contract, or that portion of the estimated cost and fee applicable to the current fiscal year.

 

9804.27Each encumbrance shall expire at the end of the fiscal year to which it applies. The portion of any contract not performed or delivered during the fiscal year shall be handled as follows:

 

(a)If the contract does not extend beyond the end of the fiscal year, that portion of the contract shall be canceled; or

 

(b)If the contract extends to the following fiscal year, that portion of the contract shall be encumbered against appropriated budget authority in the following fiscal year or canceled if budget authority is not available.

 

9804.28A contractor shall not perform services or deliver supplies under a contract conditioned upon the availability of funds until the CO has given written notice to the contractor that funds are available. The CO shall not give notice to the contractor until the appropriate amount of budget authority has been encumbered.

 

9804.29The Hospital shall not accept supplies or services under a contract conditioned upon the availability of funds until the CO has given written notice to the contractor that funds are available.

 

9804.30Upon learning that a partially-funded contract will receive no further funds, the CO shall promptly give the contractor notice of the decision not to provide funds.

 

9804.31Under a cost-reimbursement contract, the CO, upon learning that the contractor is approaching the estimated cost of the contract or the limit of the budget authority allocated and encumbered, shall promptly obtain information about funding and programming pertinent to the continuation of the contract and notify the contractor in writing of one (1) of the following:

 

(a)That additional funding is available or the estimated cost has been increased in a specified amount;

 

(b)That the contract will not be further funded, and that the contractor shall submit a proposal for an adjustment of fee, if any, based on the percentage of work completed in relation to the total work called for under the contract;

 

(c)That the contract will be terminated; or

 

(d)That the Hospital is considering whether to allot additional funds or increase the estimated cost, that the contractor is entitled by the contract terms to stop work when the funding or cost limit is reached, and that any work beyond the funding or cost limit will be at the contractor’s risk.

 

9804.32Under a cost-reimbursement contract, the CO may issue a change order, a direction to replace or repair defective items or work, or a termination notice without immediately increasing the funds available.

 

9804.33Under a cost-reimbursement contract, because a contractor is not obligated to incur costs in excess of the estimated cost in the contract, the CO shall ensure availability of funds for directed actions.

 

9804.34Under a cost-reimbursement contract, the CO may direct that any increase in the estimated cost or amount allotted to a contract be used for the sole purpose of funding termination or other specified expenses.

 

9804.35A contractor may assign monies due or to become due under a contract if all the following conditions are met:

 

(a)The contract specifies payments aggregating one thousand dollars ($1,000) or more;

 

(b)The assignment is made to a bank, trust company, or other financing institution; and

 

(c)The contract does not prohibit the assignment.

 

9804.36Unless otherwise expressly permitted in the contract, an assignment shall cover all unpaid amounts payable under the contract.

 

9804.37Unless expressly permitted in the contract, an assignment may be made only to one (1) party, except that any assignment may be made to one (1) party as agent or trustee for two (2) or more parties participating in the financing of the contract.

 

9804.38Unless expressly permitted in the contract, an assignment of contract payments shall not be subject to further assignment.

 

9804.39The assignee shall be required to send written notice of assignment together with a true copy of the assignment instrument to the following:

 

(a)The CO;

 

(b)The surety on any bond applicable to the contract; and

 

(c)The disbursing officer designated in the contract to make payment.

 

9804.40A contract may prohibit the assignment of contract payments if the CO determines that the prohibition is in the best interest of the Hospital.

 

source

Final Rulemaking published at 41 DCR 4508, 4540 (July 8, 1994).