Clauses · FAR · Payment and financing
FAR 52.232-16 Progress Payments
Does the regulation require it to flow down?
Yes
Conditional, and the condition is the whole story. The mandate bites only when the prime elects to make financing payments to the sub AND wants to count them in the base of its own progress payment request. 52.232-16(j) sets the price of that: the subcontract must run at least ~6 months (4 months if the sub is small) from start of work to first delivery ((j)(2)); its progress payment terms must be substantially similar to this clause — with Alt I if the sub is small ((j)(3)(i)) — at least as favorable to the Government ((j)(3)(ii)), no more favorable to the sub than this clause is to the prime ((j)(3)(iii)), conforming to 32.504(e) ((j)(3)(iv)), and subordinating all the sub's property rights to the Government's right to demand delivery if the prime defaults or the sub goes bankrupt ((j)(3)(v)). 32.504(e) then fixes three wording rules: title vests in the GOVERNMENT and not the prime; 'Contracting Officer' and 'the Government' may be expanded to include the prime but never deleted from the records-access paragraph (g); and the default paragraph (h) through (h)(1) must be carried. If the prime is NOT financing you, nothing in this clause reaches you at all — it is a prime-level Government financing clause.
- Form
- substance — FAR 32.504(e): 'the Progress Payments clause at 52.232-16 requires that the subcontract include the substance of the Progress Payments clause in the prime contract, modified to indicate that the contractor, not the Government, awards the subcontract and administers the progress payments'; with Alternate I for a small business subcontractor per 52.232-16(j)(3)(i)
- Reaches
- all tiers — the requirement re-attaches at every tier that actually extends progress-payment financing downward
Checked against acquisition.gov on 2026-08-05 · edition NOV 2021 (Basic; Alt I MAR 2000, Alt II APR 2003, Alt III JUN 2020) · base v0.9.3 Read the text ↗
What it makes you produce
4 items for your checklist, slowest first.
A program you have to be running
You are either running it or you are not, and what the prime asks for is the date it started.
- FAR 52.232-16(f)
An accounting system and controls adequate for the proper administration of the clause, which for a subcontract means segregating its costs
Owed only where the prime elects to make progress payments to you
Something you write
Days to weeks, and nobody outside your company has to agree to it.
- FAR 52.232-16(g)
The reports, certificates, financial statements and other pertinent information behind each request, with records open to both the prime and the contracting officer
Owed only where the prime elects to make progress payments to you
Something you fill in and send back
Hours, once you know which one is missing.
- FAR 52.232-16(a) and (g)(3)(i)
Each request for progress payment on Standard Form 1443, made as work progresses and no more often than monthly
Owed only where the prime elects to make progress payments to you — paragraph (j) sets the conditions on that election
Nothing to send now
It does not hold the order. It decides what money moves later — what you can claim, what can be claimed from you, and what can be held back — and none of that changes after signature.
Title to the property described in paragraph (d) — work in process, materials, inventory, special tooling and deliverable drawings allocable to the subcontract — vests in the Government, not in the prime, and stays there whatever a lender or a retention-of-title term says
FAR 52.232-16(d)
When it is used
FAR 32.502-4(a)(1): insert in solicitations that may result in contracts providing for cost-based progress payments and in fixed-price contracts under which the Government will provide progress payments based on costs. It is a fixed-price financing device only — cost-reimbursement work is financed by 52.216-7, and commercial buys by commercial financing under 32.202-1/32.206. Alternates are prescription-driven: 32.502-4(b) Alt I if the contractor is a small business (85%); (c) Alt II for a letter contract; (d) Alt III if not small and progress payments are authorized under an IDIQ, BOA or equivalent (exempts individual orders at or below the SAT, $350k). Rates come from 32.501-1: 80% customary, 85% small business — but DFARS 232.501-1(a) makes the DoD customary rates 80% large / 90% small, and DFARS 232.502-4-70(b) directs use of 252.232-7004 (OCT 2014) instead of Alt I for a small business. FAR 32.104(d)(1)(i) is the practical gate: financing is for work where first delivery is roughly 4+ months out for a small business (6+ for others) with a significant working-capital impact in the predelivery period.
Read closely
FAR 32.504(e) fixes the wording when the clause is used downward: title vests in the Government rather than in the prime, and 'Contracting Officer' and 'the Government' may be widened to include the prime in the records paragraph but never removed from it. Paragraph (j) sets the price of the election — roughly six months to first delivery, four if the supplier is small, terms at least as favorable to the Government, and the supplier's property rights subordinated to the Government's right to demand delivery on default or insolvency. On DoD work DFARS 232.501-1(a) sets the customary rates at 80 percent for a large business and 90 percent for a small one, so a small supplier handed a straight FAR Alternate I at 85 percent is being financed five points under the DoD customary rate. Progress payments are contract financing rather than payment for delivery.
Alternates
Alt I · MAR 2000
FAR 32.502-4(b) — contractor is a small business concern. On DoD contracts DFARS 232.502-4-70(b) directs 252.232-7004 (90 percent) INSTEAD OF this Alternate.
Alternate I moves every progress payment and liquidation rate to the customary small business figure of 85 percent, leaving alone the 80 percent cap at paragraph (k) for undefinitized contract actions. It changes the percentage on the money and not the Standard Form 1443 request, the accounting controls or the reports.
Alt II · APR 2003
FAR 32.502-4(c) — the contract is a letter contract.
Alternate II is the letter-contract version. It adds paragraphs (n) and (o) covering how unliquidated progress payments are liquidated when the letter contract is superseded, terminated or partly both, immediate repayment of any unliquidated balance on demand, and a ceiling on the unliquidated amount at up to 80 percent of the Government's maximum liability. All of it is money and timing; the request, the controls and the reports stay the basic clause's.
Alt III · JUN 2020
FAR 32.502-4(d) — contractor is NOT a small business concern and progress payments are authorized under an indefinite-delivery contract, basic ordering agreement, or equivalent.
Alternate III adds a paragraph switching the clause off for individual orders at or below the simplified acquisition threshold, $350,000 since 2025-10-01, and renumbers to (p) where Alternate II is also used. It moves which orders are reached rather than what is produced on the ones that are.
The 1 template that name it, with the line
Source: acquisition.gov, FAR 52.232-16, FAR 32.502-4, FAR 32.504, FAR 32.501-1, FAR 32.104(d), DFARS 232.501-1, DFARS 232.502-4-70(b) and DFARS 252.232-7004 (verified 2026-08-05)
This is research, not legal advice. It states what the regulation says about this clause and cites the paragraph behind it. It does not rule on your order, and it does not rule on whether a prime's markings are correct.