Public financing institutions are encouraged to provide the Federal Reserve Banks and the services with such information, recommendations, and certifications relative to applications for T-Loans through private financing institutions as the public financing institutions may deem helpful; and the Federal Reserve Banks and the services shall give due consideration to, and may rely upon, such information and recommendations, and shall treat any certification of a public financing institution as to a war contractor's eligibility for a T-Loan under the terms of a particular application as prima facie evidence of such eligibility.

AUTHORITY: §§ 8041.1 to 8041.29, inclusive, issued under secs. 4 (b), 8 (c), 58 Stat. 651, 655; 41 U.S.C., Sup., 104 (b), 108 (c).

SOURCE: §§ 8041.1 to 8041.29, inclusive, contained in General Regulation 2, Sept. 8, 1944, 9 F.R. 11275.

§ 8041.1 General policies. The contracting agencies are hereby directed to provide war contractors having any termination claim or claims with adequate interim financing within 30 days after proper application therefor to such agencies. Upon request of war contractors, such interim financing shall be effected through partial payments to the greatest extent practicable. Contracting agencies and war contractors shall take adequate steps to assure that subcontractors receive partial payments when desired by them. Determination of the amount of partial payments to be made under this part shall be without prejudice in the negotiation of final settlement. Such

payments shall be subject to section 9 (b) of the act, providing any amount paid in excess of the amount finally determined to be due on the termination claim shall be treated as a loan from the Government to the war contractor receiving it.

§ 8041.2 Types of partial payments. (a) The types of partial payments which shall be made are as follows:

(1) Immediate partial payments, based on contractors' estimates;

(2) Cost-supported partial payments; and

(3) Controlled partial payments into special accounts.

(b) Partial payments shall, in general, be made to prime contractors on their own applications based on their own termination charges and on the applications of subcontractors transmitted through the prime contractor and any intervening subcontractors to the contracting agency. Such applications shall be made, by both prime contractors and subcontractors, in substantially the form of Application for Partial Payment provided. In appropriate cases, partial payments may be made to war contractors to enable them in advance of subcontractors' requests, to set up a fund from which prompt partial and final payments may be made to their subcontractors; in such cases, special requests will be made, which need not follow the application form. The contracting agencies may, in addition, vary the application form in such manner as they deem appropriate to the particular case to provide for the making of partial payments upon a group of war contracts.

§ 8041.3 Immediate partial payments (a) based on contractors' estimates. Contracting agencies shall make immediate partial payments for the benefit of any war contractor, whether prime contractor or subcontractor, promptly upon the filing of application therefor. Contracting agencies should promptly grant the request for partial payment in the largest amount believed reasonable under all the circumstances then known, but such amount shall not exceed 90% of the amount certified in the application as due on account of the contractor's own costs allocable to the terminated portion of the contract. In deciding the amount to be paid, the contractor's application should be considered in the light of the general reputation of the

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contractor and other relevant factors. Contracting agencies should authorize personnel making partial payments to base their determination of the amount to be paid solely on the contractor's application unless there is knowledge of other relevant factors militating against such payment.

(b) An immediate partial payment will be made in each case in an amount not less than 75% of the contract price of completed articles not delivered, plus 75% of the contractor's estimated costs of raw materials, purchased parts, supplies, direct labor and overhead allocable to the terminated portion of a contract (but not including the cost of special facilities or other items deemed likely to be of a controversial character, and not including profit), unless (1) the contracting agency has reason to believe that the application for immediate partial payment was not filed in good faith, or that the amount requested is excessive, or that protection of the Government's interests requires denial of the application or payment in a lesser amount, or (2) unless the contractor requests payment in a lesser amount. This provision for minimum partial payments shall not be construed to limit the responsibility of the contracting agencies to make partial payments in the largest amount believed reasonable under the proviisons of paragraph (a) of this section.

§ 8041.4 Cost-supported partial payments. When the contractor has submitted substantial accounting data, and a preliminary review thereof indicates that the application is proper and is supported by the data submitted, the contracting agency, to the extent requested, shall make an additional partial payment, or if none has previously been made, a partial payment, in an amount which, together with any other partial payments previously made on the same termination claim, equals:

(a) An amount equal to 100 percent of the amount payable, at the contract price, on account of acceptable items completed prior to the termination date under the terms of the contract, or completed thereafter with the approval of the contracting agency; plus

(b) An amount equal to 90% of the cost of raw materials, purchased parts, supplies, direct labor, and manufacturing overhead allocable to the terminated portion of the war contract; plus

(c) A reasonable percentage of other allowable costs, including administrative overhead, allocable to the terminated portion of the war contract not included in the foregoing; plus

(d) Such additional amounts, if any, as the contracting agency deems necessary to provide the war contractor with adequate interim financing.

The amount to be paid under paragraphs (a) to (d) of this section should not be greater than the amount which, in the opinion of the contracting agency after such a preliminary review, is due to the contractor by reason of the termination.

§ 8041.5 Controlled partial payments. When a war contractor requesting, or forwarding an application for a partial payment, is deemed to be insolvent or in imminent danger of insolvency, or when an application for immediate partial payment under the conditions set forth in § 8041.3 above has been in whole or in part denied, partial payments may be deposited in a special account. Partial payments deposited in special accounts will be released as particular items of cost or payments to subcontractors are approved. The interest of the Government in such controlled accounts shall be protected by such methods as the contracting agency considers advisable. Additional payments may be made, from time to time, into the controlled account by the contracting agency.

§ 8041.6 Partial payments to subcontractors. The application of a subcontractor for partial payment shall be filed with the war contractor in the tier immediately above him, and unless that war contractor makes the payment pursuant to authorization from the contracting agency, shall be transmitted through contractual channels to the contracting agency having jurisdiction over the prime contract. Each prime contractor and upper tier subcontractor transmitting the application shall subscribe thereon a statement substantially as set forth on the form of application; or, in any appropriate case, an explanation of its unwillingness to subscribe to such a statement. In the event that the contracting agency totally denies the application for partial payment it shall provide for the transmission of notice of the denial through contractual channels or otherwise, to the applicant. Partial payments to subcontractors are authorized to be made as follows:

(a) Such payments shall, so far as possible, be made to prime contractors in reliance on their agreement to pay over to their subcontractors or to credit against amounts owing from such subcontractors the amounts received by them for the benefit of such subcontractors.

(b) If a prime contractor or an intervening subcontractor is deemed to be insolvent or in imminent danger of insolvency, or for any other reason is unable or unwilling to pay over to his subcontractors any partial payment received for their benefit, the contracting agency may utilize the controlled account procedure set forth in § 8041.5.

(c) The contracting agencies may make partial payments directly to subcontractors, in accordance with such procedures as have been or may be authorized by such agencies; and should make such partial payments directly where there is evidence of unwarranted delay under the normal procedures.

In the cases provided for in paragraphs (b) and (c) of this section, payments may be made without the certificates of intervening contractors, provided that sufficient other information justifying such partial payments is available.

Nothing in this part shall be construed to prevent any war contractor from making partial or other payments to its subcontractors pursuant to delegation from the contracting agency, or subject to subsequent approval by the contracting agency.

§ 8041.7 Estimates of partial payment arrived at in advance of termination. Interim financing by means of partial payments will be facilitated if contractors estimate the amounts required where this is practicable, in advance of actual termination. Such prior estimates will be based upon the cost of the estimated inventory, including raw materials and work-in-process, allocable to the terminated portion of a contract at specified stages of completion, excluding those items which he intends to retain. Estimates arrived at between the contractor and a contracting agency in advance of termination will not constitute binding commitments upon a contracting agency but will be subject to confirmation and adjustment by the contracting agency on or after termination. They will, however, provide a realistic means

for contractors to discuss their probable financing requirements with contracting agencies and with their immediate customers and will afford a basis on which, prior to termination, the reasonableness of contractors' estimates of costs on which the partial payments will be granted, may be checked, subject to any necessary adjustment after termination.

§ 8041.8 Assignments. Any interim financing by means of partial payments hereunder shall be made in such a manner as not to impair or modify any valid assignment of any claim under a war contract without the consent of the parties thereto. Contracting agencies in making partial payments, however, may rely on the statement in the application that no assignments are outstanding, in the absence of actual knowledge to the contrary by the contracting officer or notice given in accordance with the Assignment of Claims Act of 1940.

§ 8041.9 Deduction of outstanding advances, etc. In determining the amount of partial payments to be made, there shall be deducted from the amount otherwise payable under this part:

(a) Any unliquidated balances of advance and partial payments theretofore made to such war contractor, which are allocable to the terminated war contract or the terminated part of the war contract; and

(b) The amount of all credits for the disposal or retention of property as to which costs or estimated costs were included in any application for partial payment under the terminated contract.

§ 8041.10 Demands for repayment. Under the terms of the application form, the contractor requesting a partial payment agrees to repay to the Government, upon demand, the whole or any part of the partial payment if the contractor fails to file the prescribed forms in support of its claim within the required time, and under other stated conditions. Contracting agencies are not required to demand repayment of any partial payment or portion thereof under these conditions, but may do so whenever in their opinion the interest of the Government so requires.

§ 8041.11 Overpayments. Any amount of a partial payment in excess of the amount finally determined to be due on account of the war contractor's own charges shall be treated as a loan

from the Government to the war contractor receiving it, and shall be payable upon demand with a penalty of 6% per annum from the date such excess arises until the date such excess is repaid. The contracting agencies shall be charged with the responsibility for instituting procedures for determining the existence of any such

excess.

§ 8041.12 Overstatements of claims. If a war contractor overstates the amount due on account of his own termination charges in connection with any partial payment applicable to such charges, he shall pay to the United States a penalty of 6% of the amount of such overstatement; if not paid, this penalty may be deducted in the final settlement of his claim. The Director of Contract Settlement may suspend or modify any such penalty if in his opinion the imposition thereof would be inequitable.

§ 8041.29 Forms.

Form approved

Bureau of the Budget 17-R009

§ 8041.13 Provisions in this part not exclusive. Nothing contained in this part shall restrict the authority and discretion of contracting agencies to provide other methods of interim financing in accordance with the Contract Settlement Act of 1944, or to make immediate partial payments on other bases or in amounts larger than those required to be made hereunder, or to take appropriate action to protect the interest of the United States under guaranteed loans previously made to war contractors receiving partial payments.

§ 8041.14 Speed in final settlement. The making of partial or advance payments shall not relieve contracting agencies of the responsibility for making final settlements with the utmost promptness. Interim financing shall not be refused, restricted, or unduly delayed in order to compel a contractor to accept a settlement.

Office of Contract Settlement Form 4

Total.

Total.

IV. Agreement of applicant. Under section 9 (b) of the Contract Settlement Act of 1944, the amount of any partial payment made to the applicant in excess of the amount finally determined to be due on its termination claim shall be treated as a loan from the Government payable upon demand with a penalty payable by the applicant at the rate of 6% per annum from the date of the excess payment to the date of repayment. Accordingly, in requesting a partial payment, the applicant recognizes its obligation to establish promptly the amount due and to protect the interest of the Government pending final settlement, and in consideration of any partial payment which may be made, agrees as follows:

(1) Prompt preparation of claim. The applicant will, with all reasonable dispatch, prepare and file its statement of costs and inventory lists on the prescribed forms, and will make every reasonable effort to expedite final settlement of the termination claim and the claims of its subcontractors.

(2) Disposal and retention of inventory. Whenever the amount of any proceeds hereafter received by the applicant on the disposal of termination inventory plus the cost or agreed value, as the case may be, of any termination inventory which the applicant hereafter elects to retain, exceeds 10% of the amount stated by the applicant in this application as the amount of his charges

(section III, line 9) and the amount of such credits has not been included as a receipt (section III, line c), the applicant within ten days will notify the contracting agency of the amount of credits on account of such inventory disposal or retention.

(3) Repayment. The applicant will repay to the Government upon demand, together with interest from the date of such demand at the rate of 6% per annum, the whole or any part of the partial payment to be made hereunder, if:

(a) A statement of costs and inventory lists on the prescribed forms, as provided in subparagraph 1 above, have not been filed within three months after receipt of the partial payment for which request is herein made, or within such extended period as may be allowed by the Government;

(b) The contracting agency shall find that the applicant's estimate under section III above (own costs) is overstated by reason of the disposal or retention of termination inventory subsequent to the date of this application or for any other reason;

(c) The applicant withdraws the whole or any part of its claim.

Demand for repayment may be made under subparagraphs (b) and (c) only as to that portion of the partial payment that, in the opinion of the contracting agency, has become excessive.