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4.70.30.10. Types of Method of Payment

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  1. There are a number of ways payment may be carried out. Payment for the work performed or goods delivered may be made as a single payment, multiple payments or progress payments.
    1. Single payment: When a single payment will be made upon completion of all work and deliveries, Standard Acquisition Clauses and Conditions (SACC) Manual clause H1000C may be used for contracts for goods and services (except construction and utility contracts).
    2. Multiple payments: When there are multiple deliveries and payments will be made on completion of each delivery, SACC Manual clause H1001C may be used in contracts for goods (except construction and utility contracts).
    3. Progress Payments and Advance Payments: In all cases, a payment cannot be made in the current fiscal year for a contract that will not start until the next fiscal year. The requirement that payment be made only for goods or services received in the same fiscal year may require modification of the method of payment for requirements whose period of delivery or service spans fiscal years. Specifically, it may be necessary to provide for multiple payments, at the appropriate point in the contract period.
  2. Progress payments or advance payments may be considered only if all of the following conditions are met:
    1. adequate security for the payment is ensured;
    2. Canada receives value commensurate with the amount of the payment;
    3. the client department has adequate funds to provide the financing; and
    4. one of the following circumstances exists:
      1. There is economic advantage to Canada that clearly outweighs the financing cost associated with the progress payment or advance payment.
      2. The contractor could suffer hardship or provide financing only with difficulty or at rates considered to be uneconomical in relation to prevailing chartered bank prime lending rates.
      3. The value of the contract is considered to be beyond the assessed financial capabilities of the contractor.
      4. There is to be a long duration for contract performance; orthere is an entrenched tradition or practice of receiving progress payments or advance payments from the purchaser in a particular industry or segment of industry. However, payments can only be made for goods or services received in the same fiscal year. Funds must be spent in the fiscal year for which they are appropriated and cannot be carried forward by means of advance payments.
      5. In the case of subscriptions or insurance premiums, which are often for a term of one full year and which may not start exactly on April 1, payments can be restricted to goods or services provided in no more than the current and next fiscal years. For instance, a publication subscription paid in February 2009 cannot cover a period beyond March 2010.
      6. In the case of multi-year contracts requiring continuing advances, contracting officers can negotiate the payment of a series of separate advances covering each fiscal year. Thus, a payment can be made for a maintenance contract, for the period of a contract, from February to March 2009, and then another payment covering the period from April 2009 to March 2010.
      7. In exceptional situations, such as armament purchases or extended warranty service, where up-front payments covering more than one fiscal year must be made to the supplier, contracting officers can determine if an advance payment is unavoidable and can be substantiated. This type of case should be extremely rare.
  3. Special Considerations for Foreign Purchases:
    1. in the case of United States purchases, progress payments or other payments on account have an effect on the application of taxes, relating to the time and place of ownership being transferred to Canada. Legal Services should be consulted to ensure that appropriate terms in the contract protect against unnecessary taxes;
    2. for other foreign purchases, where progress payments or other payments on account are granted, a check should be made to determine if the application of sales, use, or some other form of tax is related to the time and place of ownership being transferred to Canada. If this is the case, Legal Services must be consulted.