Which statement correctly describes Progress Payments under FAR 32.104?

Which statement correctly describes Progress Payments under FAR 32.104?

• A. Progress Payments are based on the value of events and tailored to progress.
• B. Progress Payments are based on costs incurred and require an approved accounting system.
• C. Progress Payments are only used for commercial items.
• D. Progress Payments are not allowed on production contracts.

Answer: (B)

Progress payments under FAR 32.104 are a financing tool that provides payment as work progresses, but the payment is based on costs actually incurred by the contractor to date rather than the value of specific milestones or events. The requirement for an approved accounting system ensures that those costs are tracked and allocated properly, so the government can verify allowability and accuracy before releasing funds. This combination—costs incurred plus an approved cost accounting system—is what makes this option the correct description. Progress payments are not limited to commercial items, and they can be used on production contracts as appropriate, so the other statements don’t fit FAR 32.104.

Progress payments under FAR 32.104 are a financing tool that provides payment as work progresses, but the payment is based on costs actually incurred by the contractor to date rather than the value of specific milestones or events. The requirement for an approved accounting system ensures that those costs are tracked and allocated properly, so the government can verify allowability and accuracy before releasing funds. This combination—costs incurred plus an approved cost accounting system—is what makes this option the correct description. Progress payments are not limited to commercial items, and they can be used on production contracts as appropriate, so the other statements don’t fit FAR 32.104.