Payment schedules, billing and late payment

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1. Four dates a year

A payment schedule is a forecast of when the United States will need money, converted into dates the partner has to meet. The rhythm is fixed: "Typically, the payment schedule projects quarterly payments due by the 15th day of March, June, September, and December" (SAMM C9.9.1.4).

Which of those four dates is the first depends on when the offer is accepted. The manual maps acceptance windows to the earliest payment date and to the quarter that payment covers, so an offer accepted in one quarter funds performance in a later one (SAMM Table C9.T16).

Not every partner gets a schedule at all. Partners "ineligible for DU are not authorized payment schedules" and must use the cash with acceptance term (SAMM C9.9.1.1). The term of sale decides that, and it is settled first, as described in terms of sale and the dependable undertaking.

2. What the initial deposit is really for

The first payment is rarely a simple proportion of the case. The manual sets out the conditions and what each requires. The same components recur: the small case management line where one exists, the value of performance expected before the first scheduled payment, a share of the administrative surcharge, and any termination liability already incurred (SAMM Table C9.T17).

The surcharge share is front loaded. Where the calculated surcharge exceeds $30,000, 35 percent of it is collected in the initial deposit. Where it does not, the whole surcharge is collected then.

Termination liability is the element that surprises people, because it is not about what will be delivered. The manual defines it as "the potential cost for which the USG would be liable if a particular FMS case is terminated prior to completion" (SAMM C9.9.1.5.3). A case can therefore call for a large early payment against work that has barely started.

Some conditions require the full value at acceptance. Delivery within ninety days of acceptance is one. A cash sale without a dependable undertaking is another.

One more figure is worth carrying. Blanket order training lines require an initial deposit of a quarter of the line value where the case exceeds $25,000, which is a different rule from the general deposit calculation above (SAMM C9.9.1.5.2). Cases that mix training with materiel therefore carry two deposit logics at once.

3. The bill, not the schedule, is the demand

This is the single most useful sentence in the chapter for anyone managing a case: "The billing, not the payment schedule, contains the required payment amount" (SAMM C9.10.1).

The reason is in the mechanics. The amount billed is the figure on the current payment schedule or the quarterly forecast of financial requirements accompanying the statement, whichever is greater (SAMM C9.10.1). A schedule agreed a year ago does not cap what falls due this quarter.

The cycle itself is stable and worth planning against. A quarter ends, a statement follows about two weeks later, and payment is due at the finance center roughly two months after that, covering the quarter ahead (SAMM Table C9.T25).

4. The special arrangement, and how it ends

Larger programs may run under a special billing arrangement, billed monthly, quarterly or semi-annually as that arrangement specifies. It works on a working capital figure, reduced by reserves for termination liability and for any major case, then by a working fund and a baseline reserve, with the remainder falling due (SAMM Table C9.T27).

Ending one is a defined process rather than a drift. Such arrangements "can be terminated by the USG or FMS partner with at least 30 days of notice" (SAMM C9.10.2.6), and a final bill issues within ten business days of that notice.

Termination can also be imposed. Where a partner regularly fails to pay, or loses its eligibility for a dependable undertaking, the agency's chief financial officer may terminate on thirty days notice. No new scope is then authorized on cases in execution until the final amount is paid (SAMM C9.10.2.6.2).

If the partner cannot meet the final bill at once, there is a structured route, with a stated limit: "The timeframe for repayment may not exceed the four subsequent quarters" (SAMM C9.10.2.6.3). Failing that process moves the balance into ordinary arrears, and arrears carry interest.

5. Late payment

The manual is realistic about what goes wrong: "Most collection problems are caused by late payment, rather than default on payments" (SAMM C9.11.8). It also records the normal lag, noting that it "generally takes 45-75 days after the billing statement mailing to receive collection".

Interest is not discretionary. "The AECA requires DoD to assess interest on delinquent FMS program debts" (SAMM C9.11.8.1).

How it is computed matters more than it first appears. Interest "is based on the net arrearage owed by a purchaser taking into account cumulative financial requirements and cumulative payments received on each FMS case" (SAMM C9.11.8.1). It is a running position across the case, not a charge on an individual late invoice.

The charge is visible where the money is. "The DD Form 645, Quarterly Billing Statement, reflects the amount of interest charged to each applicable case" (SAMM C9.11.8.1). The chapter states the obligation to charge interest but not the rate, which sits in the financial management regulation rather than here.

6. What this means for a delivery schedule

Schedules are revised, and the manual gives criteria for which cases are prioritized for earlier collection. They include cases less than three quarters collected or delivered, cases funded solely by the partner, cases on a dependable undertaking, and cases where collections already exceed disbursements by at least a million dollars (SAMM C9.9.3.1).

For a supplier the practical point is that funding availability on a case moves on a quarterly rhythm that has nothing to do with the production plan. Work authorized in principle can wait on a payment date, and a case that looks fully funded on paper can be short of collected cash.

Key terms

TL	Termination liability, the cost the government would carry if the case ended early. SAMM C9.9.1.5.3.
DD Form 645	The quarterly billing statement, which carries the amount actually due and any interest.
Initial deposit	The payment at acceptance, built from several components rather than a flat percentage.
SBA	Special billing arrangement, an alternative cycle for larger programs.
Net arrearage	Cumulative requirements less cumulative payments, the basis on which interest is assessed.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

How Sentfore supports this

Funding arrives on a quarterly rhythm that rarely matches an operational one. Sentfore supports the delivery end of defense programs in difficult environments, providing secure transport, protective security, facilities and life support. Requirements can be sent through the contact page.