37. Delivery of Contract Line Items

Comment: A respondent suggested that the contracting officer discontinue withholding of payments and release any payments previously held upon delivery of contract line items.

Response: In accordance with the clause at DFARS 252.242-7005, Contractor Business Systems, a payment withhold is only applied to progress payments, performance-based payments, and interim payments under cost-reimbursement contracts, incentive type contracts, T&M contracts, and labor-hour contracts. Payment withholding shall not apply to payments on fixed-price line items where performance is complete and the items were accepted by the Government. However, since contract line items under cost-reimbursement contracts are based on a contractor's actual costs and not on negotiated fixed prices, payment withholding will not be discontinued and previously withheld payments will not be released until the contract is completed, or all significant deficiencies have been corrected, whichever comes first.