---
kind: "range"
citation: "10 U.S.C. §§ 3801–3808"
title: "10"
from: "3801"
to: "3808"
count: 8
release: "119-102"
url: "https://uscodex.org/usc/10/3801..3808"
---

# §3801. Authority of agency

- (a) **Payment Authority.—** The head of any [agency](/usc/10/4701.md?p=g-1) may—
  - (1) make advance, partial, progress, or other payments under contracts for property or services made by the [agency](/usc/10/4701.md?p=g-1); and
  - (2) insert in solicitations for procurement of property or services a provision limiting to small business concerns advance or progress payments.
- (b) **Payment Dates for Contractors That Are Small Business Concerns.—**
  - (1) **Prime contractors.—** For a prime [contractor](/usc/10/9511.md?p=7) (as defined in [section 8701 of title 41](/usc/41/8701.md)) that is a small business concern (as defined in section 3 of the Small Business Act ([15 U.S.C. 632](/usc/15/632.md))), the Secretary of Defense shall, to the fullest extent permitted by law, establish an accelerated payment date with a goal of 15 days after receipt of a proper invoice for the amount due.
  - (2) **Subcontractors.—** For a prime [contractor](/usc/10/9511.md?p=7) that subcontracts with a small business concern, the Secretary of Defense shall, to the fullest extent permitted by law, establish an accelerated payment date with a goal of 15 days after receipt of a proper invoice for the amount due if the prime [contractor](/usc/10/9511.md?p=7) agrees to make payments to the subcontractor in accordance with the accelerated payment date, to the maximum extent practicable, without any further consideration from or fees charged to the subcontractor.

# §3802. Payment

- (a) **Preference for Performance-Based Payments.—** Whenever practicable, payments under [section 3801 of this title](/usc/10/3801.md) shall be made using performance-based payments on any of the following bases:
  - (1) Performance measured by objective, quantifiable methods such as [delivery](/usc/10/8697.md?p=d-2) of acceptable items, work measurement, or statistical process controls.
  - (2) Accomplishment of events defined in the program management plan.
  - (3) Other quantifiable measures of results.
- (b) **Basis for performance-based payments.—** Performance-based payments shall not be conditioned upon costs incurred in contract performance but on the achievement of performance outcomes listed in [subsection (a)](#a).
- (c) **Contractor Accounting Systems.—**
  - (1) In order to receive performance-based payments, a [contractor](/usc/10/9511.md?p=7)’s accounting system shall be in compliance with Generally Accepted Accounting Principles, and there shall be no requirement for a [contractor](/usc/10/9511.md?p=7) to develop Government-unique accounting systems or practices as a prerequisite for agreeing to receive performance-based payments.
  - (2) Nothing in this chapter shall be construed to grant the Defense Contract Audit [Agency](/usc/10/4701.md?p=g-1) the authority to audit compliance with Generally Accepted Accounting Principles.
- (d) **Payment Amount.—** Payments made under [section 3801 of this title](/usc/10/3801.md) may not exceed the unpaid contract price.
- (e) **Eligibility of Nontraditional Defense Contractors.—** The Secretary of Defense shall ensure that [nontraditional defense contractors](/usc/10/3014.md) and other private sector companies are eligible for performance-based payments, consistent with best commercial practices.

# §3803. Security for advance payments


Advance payments made under [section 3801 of this title](/usc/10/3801.md) may be made only if the [contractor](/usc/10/9511.md?p=7) gives adequate security and after a determination by the head of the [agency](/usc/10/4701.md?p=g-1) that to do so would be in the public interest. Such security may be in the form of a lien in favor of the [United States](/usc/10/101.md?p=a-1) on the property contracted for, on the balance in an account in which such payments are deposited, and on such of the property acquired for performance of the contract as the parties may agree. This lien is paramount to any other liens and is effective immediately upon the first advancement of [funds](/usc/10/2871.md?p=6) without filing, notice, or any other action by the [United States](/usc/10/101.md?p=a-1).


# §3804. Conditions for progress payments

- (a) **Payment Commensurate With Work.—** The Secretary of Defense shall ensure that any payment for work in progress (including materials, labor, and other items) under a defense contract that provides for such payments is commensurate with the work accomplished that meets standards established under the contract. The [contractor](/usc/10/9511.md?p=7) shall provide such information and evidence as the Secretary of Defense determines necessary to permit the Secretary to carry out the preceding sentence.
- (b) **Limitation.—** The Secretary shall ensure that progress payments referred to in [subsection (a)](#a) are not made for more than 80 percent of the work accomplished under a defense contract so long as the Secretary has not made the contractual terms, specifications, and price definite.
- (c) **Applicability.—** This section applies to any contract in an amount greater than $25,000.

# §3805. Payments for commercial products and commercial services

- (a) **Terms and Conditions for Payments.—** Payments under [section 3801 of this title](/usc/10/3801.md) for commercial products and commercial services may be made under such terms and conditions as the head of the [agency](/usc/10/4701.md?p=g-1) determines are appropriate or customary in the commercial marketplace and are in the best interests of the [United States](/usc/10/101.md?p=a-1).
- (b) **Security for Payments.—** The head of the [agency](/usc/10/4701.md?p=g-1) shall obtain adequate security for such payments. If the security is in the form of a lien in favor of the [United States](/usc/10/101.md?p=a-1), such lien is paramount to all other liens and is effective immediately upon the first payment, without filing, notice, or other action by the [United States](/usc/10/101.md?p=a-1).
- (c) **Limitation on Advance Payments.—** Advance payments made under [section 3801 of this title](/usc/10/3801.md) for commercial products and commercial services may include payments, in a total amount of not more than 15 percent of the contract price, in advance of any performance of work under the contract.
- (d) **Nonapplication of Certain Conditions.—**
  - (1) The conditions of sections [3803](/usc/10/3803.md) and [3804](/usc/10/3804.md) of this title need not be applied if they would be inconsistent, as determined by the head of the [agency](/usc/10/4701.md?p=g-1), with commercial terms and conditions pursuant to this section.
  - (2) For the purposes of [section 3803 of this title](/usc/10/3803.md), a payment for [covered services](#e-2) acquired through a [commercially utilized acquisition strategy](#e-1) shall not be considered an advance payment made under [section 3801 of this title](/usc/10/3801.md).
- (e) **Definitions.—** In this section:
  - (1) The term “commercially utilized acquisition strategy” means an [acquisition](/usc/10/3001.md?p=c) of a service by the [head of an agency](/usc/10/3004.md) under terms and conditions that—
    - (A) are similar to the terms and conditions under which such service is available to the public; and
    - (B) provide such service—
      - (i) as a consumption-based solution (as defined in [section 3605 of this title](/usc/10/3605.md)); or
      - (ii) under a technology subscription model or other model based on predetermined pricing for access to such service.
  - (2) The term “covered service” means a commercial service that [includes](/usc/10/101.md?p=g-4) access to or use of any combination of hardware, equipment, software, labor, or services, including access to commercial satellite data and associated services, that is integrated to provide a capability.

# §3806. Action in case of fraud

- (a) **Remedy Coordination Official Defined.—** In this section, the term “remedy coordination official”, with respect to an [agency](/usc/10/4701.md?p=g-1), means the person or entity in that [agency](/usc/10/4701.md?p=g-1) who coordinates within that [agency](/usc/10/4701.md?p=g-1) the administration of criminal, civil, administrative, and contractual remedies resulting from investigations of fraud or corruption related to procurement activities.
- (b) **Recommendation to Reduce or Suspend Payments.—** In any case in which the [remedy coordination official](#a) of an [agency](/usc/10/4701.md?p=g-1) finds that there is substantial evidence that the request of a [contractor](/usc/10/9511.md?p=7) for advance, partial, or progress payment under a contract awarded by that [agency](/usc/10/4701.md?p=g-1) is based on fraud, the [remedy coordination official](#a) shall recommend that the head of the [agency](/usc/10/4701.md?p=g-1) reduce or suspend further payments to such [contractor](/usc/10/9511.md?p=7).
- (c) **Reduction or Suspension of Payments.—** The [head of an agency](/usc/10/3004.md) receiving a recommendation under [subsection (b)](#b) in the case of a [contractor](/usc/10/9511.md?p=7)’s request for payment under a contract shall determine whether there is substantial evidence that the request is based on fraud. Upon making such a determination, the [agency](/usc/10/4701.md?p=g-1) head may reduce or suspend further payments to the [contractor](/usc/10/9511.md?p=7) under such contract.
- (d) **Extent of Reduction or Suspension.—** The extent of any reduction or suspension of payments by the [head of an agency](/usc/10/3004.md) under [subsection (c)](#c) on the basis of fraud shall be reasonably commensurate with the anticipated loss to the [United States](/usc/10/101.md?p=a-1) resulting from the fraud.
- (e) **Written Justification.—** A written justification for each decision of the [head of an agency](/usc/10/3004.md) whether to reduce or suspend payments under [subsection (c)](#c) and for each recommendation received by such [agency](/usc/10/4701.md?p=g-1) head in connection with such decision shall be prepared and be retained in the files of such [agency](/usc/10/4701.md?p=g-1).
- (f) **Notice.—** The [head of an agency](/usc/10/3004.md) shall prescribe procedures to ensure that, before such [agency](/usc/10/4701.md?p=g-1) head decides to reduce or suspend payments in the case of a [contractor](/usc/10/9511.md?p=7) under [subsection (c)](#c), the [contractor](/usc/10/9511.md?p=7) is afforded notice of the proposed reduction or suspension and an opportunity to submit matters to the head of the [agency](/usc/10/4701.md?p=g-1) in response to such proposed reduction or suspension.
- (g) **Review.—** Not later than 180 days after the date on which the [head of an agency](/usc/10/3004.md) reduces or suspends payments to a [contractor](/usc/10/9511.md?p=7) under [subsection (c)](#c), the [remedy coordination official](#a) of such [agency](/usc/10/4701.md?p=g-1) shall—
  - (1) review the determination of fraud on which the reduction or suspension is based; and
  - (2) transmit a recommendation to the head of such [agency](/usc/10/4701.md?p=g-1) whether the suspension or reduction should continue.
- (h) **Annual Report.—** The [head of an agency](/usc/10/3004.md) shall prepare for each year a report containing the recommendations made by the [remedy coordination official](#a) of that [agency](/usc/10/4701.md?p=g-1) to reduce or suspend payments under [subsection (c)](#c), the actions taken on the recommendations and the reasons for such actions, and an assessment of the effects of such actions on the Federal Government. The Secretary of each military [department](/usc/10/101.md?p=a-6) shall transmit the annual report of such [department](/usc/10/101.md?p=a-6) to the Secretary of Defense. Each such report shall be available to any [member](/usc/10/1408.md?p=a-5) of Congress upon request.
- (i) **Restriction on Delegation.—** The [head of an agency](/usc/10/3004.md) may not delegate responsibilities under this section to any person in a position below level IV of the Executive Schedule.
- (j) **Inapplicability to Coast Guard.—** This section applies to the [agencies](/usc/10/4701.md?p=g-1) named in paragraphs (1), (2), (3), (4), and (6) of [section 3063 of this title](/usc/10/3063.md).

# §3807. Vesting of title in the United States


If a contract paid by a method authorized under [section 3801(a) of this title](/usc/10/3801.md?p=a) provides for title to property to vest in the [United States](/usc/10/101.md?p=a-1), the title to the property shall vest in accordance with the terms of the contract, regardless of any security interest in the property that is asserted before or after the contract is entered into.


# §3808. Certain Navy contracts

- (a) **Repair, Maintenance, or Overhaul of Naval Vessels: Rate for Progress Payments.—** The Secretary of the Navy shall provide that the [rate](/usc/10/101.md?p=b-9) for progress payments on any contract awarded by the Secretary for repair, maintenance, or overhaul of a naval vessel shall be not less than—
  - (1) 95 percent, in the case of a firm considered to be a small business; and
  - (2) 90 percent, in the case of any other firm.
- (b) **Authority to Advance Funds for Immediate Salvage Operations.—** The Secretary of the Navy may advance to private salvage companies such [funds](/usc/10/2871.md?p=6) as the Secretary considers necessary to provide for the immediate financing of salvage operations. Advances under this subsection shall be made on terms that the Secretary considers adequate for the protection of the [United States](/usc/10/101.md?p=a-1).
- (c) **Security for Construction and Conversion of Naval Vessels.—** The Secretary of the Navy shall provide, in each contract for construction or conversion of a naval vessel, that, when partial, progress, or other payments are made under such contract, the [United States](/usc/10/101.md?p=a-1) is secured by a lien upon work in progress and on property acquired for performance of the contract on account of all payments so made. The lien is paramount to all other liens.