Do federal contracts pay upfront or in advance?

Federal payment practices differ significantly from some commercial arrangements: **Standard payment process:** - Contractor performs work or delivers supplies - Contractor submits invoice for completed work - Government reviews and processes payment - Payment within 30 days (Prompt Payment Act) - Interest penalties for late government payments **Limited advance payment situations:** - Contract financing (FAR Part 32) - Requires specific circumstances and approval - Must be in government's best interest - Contractor must provide adequate security - Unusual, not routine **Progress payments (more common):** - Available for certain contracts - Based on costs incurred, not completion - Typically 80% of incurred costs (85% for small business) - Requires adequate accounting system - Government has lien on work-in-progress **Performance-based payments:** - Tied to objective milestones - Can provide cash flow similar to progress payments - Based on accomplishment, not costs - Must be negotiated into contract **Planning for federal payment timing:** - Build working capital requirements into business plan - Factor 45-60 day payment cycle into cash flow - Consider lines of credit for startup phase - SBA loans may help bridge timing gaps - Invoice promptly when work is complete **Commercial items exception:** - Commercial item contracts may have more flexible terms - Still generally pay after delivery - Faster payment under commercial terms