CONTRACT FINANCING: Factors That Influence the Use of Financing Methods and DOD's Progress on Proposed Actions.

The Department of Defense (DOD) utilizes contract financing, including progress payments and performance-based payments, to assist contractors in managing the costs of producing weapon systems. In fiscal year 2023, DOD provided $28 billion in progress payments and $22 billion in performance-based payments. DOD has proposed several measures to enhance the defense industrial base, such as improving communication between subcontractors and contracting officers and modifying regulations to ensure timely payments to subcontractors. DOD plans to introduce a new cash-flow model in 2024 to facilitate better negotiations for the government. The document also discusses the differences between progress payments and performance-based payments, as well as factors that influence the choice between the two. It highlights the financial health of the defense industry but acknowledges potential delays in payments for subcontractors and small businesses. The article concludes by mentioning ongoing efforts by DOD to improve contract financing, including the study of performance-based payments and the exploration of better oversight for prime contractors' payments to subcontractors. [Extracted from the article]