Miller On Procurement

EDP Weekly's IT Monitor, Feb 11, 2002 by Terry Miller

**ADVANCED PAYMENTS**

In the commercial market place it is not at all unusual for a company to require prepayment for goods and services. This is particularly true when dealing with software/hardware maintenance where there is an annual fee that is paid up front. When dealing with the government, advanced payments, in general are prohibited by 31 U.S.C. 3324. This statute reads as follows:

"(a) Except as provided in this section, a payment under a contract to provide a service or deliver an article for the United States Government may not be more than the value of the service already provided or the article already delivered.

"(b) An advance of public money may be made only if it is authorized by -

"(1) a specific appropriation or other law..."

The primary purpose of the statute is to protect the government from the risk of non-performance. Although as stated above there are some exception, such as prepayment for training, magazine and newspaper subscriptions, grants, partial payments and progress payments, even these exceptions are limited.

We often get questions from clients where and agency was prepaying for a service such as software maintenance and then a new CO comes on board and refuses to prepay. There is nothing you can really do about the situation, if you get an agency to pay upfront, more power to you, but if someone gets wind of it and stops the practice you don't have a contractual leg to stand on. I remember years ago when software vendors use to call their prepaid maintenance a software subscription since subscriptions to magazines and newspapers could be prepaid. It may even still be done to some extent but a smart agency isn't going to buy into it.