41 U.S.C. § 4503 — Security for advance payments

Page 136 TITLE 41—PUBLIC CONTRACTS § 4501 HISTORICAL AND REVISION NOTES Revised Section Source (U.S. Code) Source (Statutes at Large) 4310(a) ........ 41:256(k)(6). June 30, 1949, ch. 288, title III, § 306(k), as added Pub. L. 100–700, § 8(a)(1), Nov. 19, 1988, 102 Stat. 4634; Pub. L. 103–355, title II, § 2151, Oct. 13, 1994, 108 Stat. 3313. 4310(b) ........ 41:256(k)(1). 4310(c) ........ 41:256(k)(2). 4310(d) ........ 41:256(k)(3). 4310(e) ........ 41:256(k)(4). 4310(f) ........ 41:256(k)(5). Editorial Notes AMENDMENTS 2016—Pub. L. 114–261, § 1(b)(2)(A)(i), (ii), inserted ‘‘, subcontractor, or personal services contractor’’ after ‘‘contractor’’ and ‘‘, subcontract, or personal services contract’’ after ‘‘contract’’ wherever appearing. Subsec. (b)(1). Pub. L. 114–261, § 1(b)(2)(A)(iii), inserted ‘‘or to any other activity described in section 4712(a)(1) of this title’’ after ‘‘statute or regulation’’. 2013—Subsec. (b). Pub. L. 112–239, § 828(d)(1), sub- stituted ‘‘commenced by the Federal Government, by a State, or by a contractor or grantee employee submit- ting a complaint under section 4712 of this title’’ for ‘‘commenced by the Federal Government or a State’’. Subsec. (c)(3). Pub. L. 112–239, § 828(d)(2), substituted ‘‘the imposition of a monetary penalty or an order to take corrective action under section 4712 of this title’’ for ‘‘the imposition of a monetary penalty’’. CHAPTER 45—CONTRACT FINANCING Sec. 4501. Authority of executive agency. 4502. Payment. 4503. Security for advance payments. 4504. Conditions for progress payments. 4505. Payments for commercial products and com- mercial services. 4506. Action in case of fraud. Editorial Notes AMENDMENTS 2018—Pub. L. 115–232, div. A, title VIII, § 836(b)(18)(B)(ii), Aug. 13, 2018, 132 Stat. 1864, sub- stituted ‘‘Payments for commercial products and com- mercial services’’ for ‘‘Payments for commercial items’’ in item 4505. § 4501. Authority of executive agency An executive agency may— (1) make advance, partial, progress or other payments under contracts for property or services made by the agency; and (2) insert in solicitations for procurement of property or services a provision limiting to small business concerns advance or progress payments. (Pub. L. 111–350, § 3, Jan. 4, 2011, 124 Stat. 3790.) HISTORICAL AND REVISION NOTES Revised Section Source (U.S. Code) Source (Statutes at Large) 4501 ............ 41:255(a). June 30, 1949, ch. 288, title III, § 305(a), 63 Stat. 396; July 12, 1952, ch. 703, § 1(m), 66 Stat. 594; Pub. L. 85–800, § 4, Aug. 28, 1958, 72 Stat. 966; Pub. L. 103–355, title II, § 2051(a)(2), (c), Oct. 13, 1994, 108 Stat. 3304. Statutory Notes and Related Subsidiaries RELATIONSHIP TO PROMPT PAYMENT REQUIREMENTS Pub. L. 103–355, title II, § 2051(f), Oct. 13, 1994, 108 Stat. 3306, provided that: ‘‘The amendments made by this section [see Tables for classification] are not intended to impair or modify procedures required by the provi- sions of chapter 39 of title 31, United States Code, and the regulations issued pursuant to such provisions of law (as such procedures are in effect on the date of the enactment of this Act [Oct. 13, 1994]), except that the Government may accept payment terms offered by a contractor offering a commercial item.’’ § 4502. Payment (a) BASIS FOR PAYMENT.—When practicable, payments under section 4501 of this title shall be made on any of the following bases: (1) Performance measured by objective, quantifiable methods such as delivery of ac- ceptable items, work measurement, or statis- tical process controls. (2) Accomplishment of events defined in the program management plan. (3) Other quantifiable measures of results. (b) PAYMENT AMOUNT.—Payments made under section 4501 of this title may not exceed the un- paid contract price. (Pub. L. 111–350, § 3, Jan. 4, 2011, 124 Stat. 3791.) HISTORICAL AND REVISION NOTES Revised Section Source (U.S. Code) Source (Statutes at Large) 4502(a) ........ 41:255(b). June 30, 1949, ch. 288, title III, § 305(b), as added Pub. L. 103–355, title II, § 2051(b), Oct. 13, 1994, 108 Stat. 3304. 4502(b) ........ 41:255(c). June 30, 1949, ch. 288, title III, § 305(c), 63 Stat. 396; July 12, 1952, ch. 703, § 1(m), 66 Stat. 594; Pub. L. 85–800, § 4, Aug. 28, 1958, 72 Stat. 966; Pub. L. 103–355, title II, § 2051(a)(3), (5), Oct. 13, 1994, 108 Stat. 3304. § 4503. Security for advance payments Advance payments under section 4501 of this title may be made only on adequate security and a determination by the agency head that to do so would be in the public interest. The secu- rity may be in the form of a lien in favor of the Federal Government on the property contracted for, on the balance in an account in which the payments are deposited, and on such of the prop- erty acquired for performance of the contract as the parties may agree. This lien shall be para- mount to all other liens and is effective imme- diately upon the first advancement of funds without filing, notice, or any other action by the Federal Government. (Pub. L. 111–350, § 3, Jan. 4, 2011, 124 Stat. 3791.) HISTORICAL AND REVISION NOTES Revised Section Source (U.S. Code) Source (Statutes at Large) 4503 ............ 41:255(d). June 30, 1949, ch. 288, title III, § 305(d), 63 Stat. 396; July 12, 1952, ch. 703, § 1(m), 66 Stat. 594; Pub. L. 85–800, § 4, Aug. 28, 1958, 72 Stat. 966; Pub. L. 103–355, title II, § 2051(a)(4), (5), (d), Oct. 13, 1994, 108 Stat. 3304. Page 137 TITLE 41—PUBLIC CONTRACTS § 4506 § 4504. Conditions for progress payments (a) PAYMENT COMMENSURATE WITH WORK.—The executive agency shall ensure that a payment for work in progress (including materials, labor, and other items) under a contract of an execu- tive agency that provides for those payments is commensurate with the work accomplished that meets standards established under the contract. The contractor shall provide information and evidence the executive agency determines is necessary to permit the executive agency to carry out this subsection. (b) LIMITATION.—The executive agency shall ensure that progress payments referred to in subsection (a) are not made for more than 80 percent of the work accomplished under the con- tract as long as the executive agency has not made the contractual terms, specifications, and price definite. (c) APPLICATION.—This section applies to a contract in an amount greater than $25,000. (Pub. L. 111–350, § 3, Jan. 4, 2011, 124 Stat. 3791.) HISTORICAL AND REVISION NOTES Revised Section Source (U.S. Code) Source (Statutes at Large) 4504 ............ 41:255(e). June 30, 1949, ch. 288, title III, § 305(e), as added Pub. L. 103–355, title II, § 2051(e), Oct. 13, 1994, 108 Stat. 3304, as amended Pub. L. 104–106, title XLIII, § 4321(a)(4), Feb. 10, 1996, 110 Stat. 671. § 4505. Payments for commercial products and commercial services (a) TERMS AND CONDITIONS FOR PAYMENTS.— Payments under section 4501 of this title for commercial products or commercial services may be made under terms and conditions that the head of the executive agency determines are appropriate or customary in the commercial marketplace and are in the best interests of the Federal Government. (b) SECURITY FOR PAYMENTS.—The head of the executive agency shall obtain adequate security for the payments. If the security is in the form of a lien in favor of the Federal Government, the lien is paramount to all other liens and is effec- tive immediately on the first payment, without filing, notice, or other action by the Federal Government. (c) LIMITATION ON ADVANCE PAYMENTS.—Ad- vance payments made under section 4501 of this title for commercial products or commercial services may include payments, in a total amount not more than 15 percent of the contract price, in advance of any performance of work under the contract. (d) NONAPPLICATION OF CERTAIN CONDITIONS.— The conditions of sections 4503 and 4504 of this title need not be applied if they would be incon- sistent, as determined by the head of the execu- tive agency, with commercial terms and condi- tions pursuant to this section. (Pub. L. 111–350, § 3, Jan. 4, 2011, 124 Stat. 3791; Pub. L. 115–232, div. A, title VIII, § 836(b)(18)(A), (B)(i), Aug. 13, 2018, 132 Stat. 1864.) HISTORICAL AND REVISION NOTES Revised Section Source (U.S. Code) Source (Statutes at Large) 4505 ............ 41:255(f). June 30, 1949, ch. 288, title III, § 305(f), as added Pub. L. 103–355, title II, § 2051(e), Oct. 13, 1994, 108 Stat. 3304, as amended Pub. L. 104–106, title XLIII, § 4321(a)(4), Feb. 10, 1996, 110 Stat. 671. Editorial Notes AMENDMENTS 2018—Pub. L. 115–232, § 836(b)(18)(B)(i), substituted ‘‘Payments for commercial products and commercial services’’ for ‘‘Payments for commercial items’’ in sec- tion catchline. Subsecs. (a), (c). Pub. L. 115–232, § 836(b)(18)(A), sub- stituted ‘‘commercial products or commercial services’’ for ‘‘commercial items’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2018 AMENDMENT Amendment by Pub. L. 115–232 effective Jan. 1, 2020, subject to a savings provision, see section 836(h) of Pub. L. 115–232, set out as an Effective Date of 2018 Amend- ment; Savings Provision note under section 453b of Title 6, Domestic Security. § 4506. Action in case of fraud (a) DEFINITION.—In this section, the term ‘‘remedy coordination official’’, with respect to an executive agency, means the individual or en- tity in that executive agency who coordinates within that executive agency the administration of criminal, civil, administrative, and contrac- tual remedies resulting from investigations of fraud or corruption related to procurement ac- tivities. (b) RECOMMENDATION TO REDUCE OR SUSPEND PAYMENTS.—In any case in which the remedy co- ordination official of an executive agency finds that there is substantial evidence that the re- quest of a contractor for advance, partial, or progress payment under a contract awarded by that executive agency is based on fraud, the remedy coordination official shall recommend that the executive agency reduce or suspend fur- ther payments to that contractor. (c) REDUCTION OR SUSPENSION OF PAYMENTS.— The head of an executive agency receiving a rec- ommendation under subsection (b) in the case of a contractor’s request for payment under a con- tract shall determine whether there is substan- tial evidence that the request is based on fraud. On making an affirmative determination, the head of the executive agency may reduce or sus- pend further payments to the contractor under the contract. (d) EXTENT OF REDUCTION OR SUSPENSION.—The extent of any reduction or suspension of pay- ments by an executive agency under subsection (c) on the basis of fraud shall be reasonably com- mensurate with the anticipated loss to the Fed- eral Government resulting from the fraud. (e) WRITTEN JUSTIFICATION.—A written jus- tification for each decision of the head of an ex- ecutive agency whether to reduce or suspend payments under subsection (c), and for each rec- ommendation received by the executive agency