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4.70.30.25. Holdbacks

  1. For all contracts where progress payments are provided, holdbacks must be used to avoid overpayment and to act as an incentive for the contractor to complete the job. However, for contracts using milestone payments, a requirement for a holdback may be included at the discretion of the contracting officer.
  2. The following limits on payments for contracts involving progress payments apply:
    1. Firm Price with milestone payments:
      Total Allowable Costs: up to 100 percent of negotiated milestones
      Purchased Accountable Advance Materials: Nil
      Goods and Services Tax/Harmonized Sales Tax: Nil
      Profit: Nil
    2. Firm Price with progress payment on basis of negotiated cost3:
      Total Allowable Costs: Up to 90 percent
      Purchased Accountable Advance Materials: 100 percent
      Goods and Services Tax/Harmonized Sales Tax: If payable
      Profit: Pro rata
    3. Cost Reimbursable:
      Total Allowable Costs: Up to 90 percent
      Purchased Accountable Advance Materials: 100 percent
      Goods and Services Tax/Harmonized Sales tax: If payable
      Profit: Pro rata
    4. Fixed Time Rate:
      Total Allowable Costs: Up to 90 percent
      Purchased Accountable Advance Materials: 100 percent
      Goods and Services Tax/Harmonized Sales Tax: If payable
      Profit: Pro rata
    5. Price to be negotiated:
      1. Last year's negotiated rates/prices serve as interim rates for the new year4:
        Total Allowable Costs: Up to 100 percent
        Purchased Accountable Advance Materials: 100 percent
        Goods and Services Tax/Harmonized Sales Tax: If payable
        Profit: Pro rata
      2. All Other Contracts3:
        Total Allowable Costs: Up to 75 percent
        Purchased Accountable Advance Materials: 100 percent
        Goods and Services Tax/Harmonized Sales Tax: If payable
        Profit: Pro rata
  3. Exceptions to these payment ceilings may be considered:
    1. when recognized trade practices supporting such exceptions can be demonstrated;
    2. in the case of organizations that do not receive a profit or fee; or
    3. when alternative methods of financial protection are employed, for example, security deposits (government guaranteed bonds, bills of exchange, irrevocable standby letters of credit) or surety bonds.
  4. The timing for making decisions relating to the method of payment to be used varies with the solicitation method employed:
    1. for an Invitation to Tender (ITT), the method of payment must be selected, before issuing, and included in the solicitation documents (see SACC Manual clause H1003C.) Financing costs will not constitute an evaluation factor;
    2. for competitive solicitations, the solicitation will clearly specify that any requirement on the part of the supplier for receipt of progress or advance payments will constitute an evaluation criterion (this may require SACC Manual clause H1003C). When evaluating bids/offers, the cost to Canada of providing the progress payments or advance payments will be taken into account, as will the risk of exposure from the method of payment, and the availability of funds.
  5. This cost determination may be waived when all responsive suppliers have requested the identical method and pattern of payment (for example, progress payments on a cost-incurred basis with virtually identical payout schedules).

3The percentages shown apply to incurred costs (incurred hours for fixed time rate contracts).

4The percentages shown apply to the previous year's rates.