Payment schedules provide forecasted financial requirements for an FMS case and project the timing and/or amounts of purchaser deposits needed to meet the requirements. Payment schedules for LOA documents are prepared by the DSCA (Operations Directorate, Case Writing Division) during the case development process.
C9.9.1.
Payment Schedule Preparation.
C9.9.1.1.
Payment Schedule Requirement.
A payment schedule is developed for each case unless the Term of Sale is “Cash With Acceptance;” or the case is fully funded with FMS Credit (Non-Repayable) and/or MAP Merger, the total case value is less than $5M, and the country is not authorized cash flow financing. In these instances, the Initial Deposit covers the entire case value. The following paragraphs provide criteria for developing payment schedules.
C9.9.1.2.
Line Level.
Payment schedules are built, using DSAMS, at the line level (or sub-line or delivery set level) and rolled-up to a case-level schedule.
C9.9.1.3.
Information Needed to Prepare the Payment Schedule.
Payment schedules are prepared using pricing estimates and estimated dates for when purchasers will accept the LOA, the LOA will be implemented, requisitions will be initiated, contracts will be awarded, payments will be made to contractors, deliveries will occur, and personnel costs will be incurred. Other information required to prepare the payment schedule include contractor termination schedules (used in the termination liability worksheet), lead times and/or availability, periods of performance, and disbursement histories for like-item cases or lines already implemented. This information is needed at the line-level and must be provided by the IA to the DSCA (Operations Directorate, Case Writing Division) for payment schedule preparation.
C9.9.1.4.
Timing of Payments.
Typically, the payment schedule projects quarterly payments due by the 15th day of March, June, September, and December. Exceptions to these dates must be approved by the DSCA (Business Operations Directorate). Table C9.T12. shows how payment schedule dates should be determined.
Table C9.T12. Payment Schedule Dates
| Offer Expiration/Acceptance Dates of LOAs |
Earliest Payment Date on the Payment Schedule |
For Period Covering |
11 Sep -- 10 Dec |
15 Mar |
Apr-Jun |
11 Dec -- 10 Mar |
15 Jun |
Jul-Sep |
11 Mar -- 10 Jun |
15 Sep |
Oct-Dec |
11 Jun -- 10 Sep |
15 Dec |
Jan-Mar |
C9.9.1.5.
Payment Distribution.
Each deposit amount covers all costs to be incurred on the purchaser’s behalf during the next quarter, plus a reserve to cover Termination Liability (for sales from procurement). Costs may include such items as anticipated deliveries of services and stock items, and progress payments on contracts.
C9.9.1.5.1.
Initial Deposit.
Each LOA includes an Initial Deposit to cover the outlays and/or deliveries anticipated until the first quarterly payment is received. The Term of Sale, type of case, projected date of delivery or performance of services, anticipated date of LOA acceptance, and source of supply impact the Initial Deposit. The purchaser forwards the Initial Deposit to DFAS Indianapolis by wire transfer (the preferred method of payment) or by check. The purchaser may use excess FMS Trust Fund Holding Account funds to pay the Initial Deposit. Amendments use the term “Due with Amendment Acceptance” vice Initial Deposit. The amount of the Initial Deposit is determined as shown in Table C9.T13.
Table C9.T13. Initial Deposit Requirements
| Condition |
Initial Deposit Amount |
|
Delivery of the defense article or service is within 90 days of LOA acceptance.
The Term of Sale is “Cash With Acceptance.”
|
Full case value
|
|
Total performance is anticipated to be completed before DFAS Indianapolis can bill and collect additional payments.
The Term of Sale is “Cash With Acceptance.”
|
Full case value
|
|
Cash sale from procurement when the purchaser is not authorized Dependable Undertaking.
|
Full case value
|
|
Case is financed wholly with “FMS Credit (Non-Repayable)” or “MAP Merger” and
Case value is less than $5,000,000, and
Country is not authorized cash flow financing.
|
Full case value
|
|
Case is partially funded by FMS Credit (Non-Repayable) and/or MAP Merger Funds, and not authorized for cash flow financing
|
Include all FMS Credit (Non-Repayable) and/or MAP Merger Funds up to $5M regardless of the case value.
|
|
Delivery of the defense article or service is longer than 90 days after LOA acceptance.
|
Any Small Case Management Line (SCML) value; plus dollar value associated with performance until a quarterly payment can be made; plus half of the total FMS Administrative Surcharge. If the calculated FMS Administrative Surcharge value is $30,000 or less, the entire FMS Administrative Surcharge value must be included in the initial deposit.
|
|
No performance scheduled on the case and no contractual actions occur during the period prior to the first quarterly payment.
|
Any SCML value; plus half of the total FMS Administrative Surcharge. If the calculated FMS Administrative Surcharge value is $30,000 or less, the entire FMS Administrative Surcharge value must be included in the initial deposit.
|
|
When items are placed on contract before the first quarterly payment and no Standby Letter of Credit (SBLC) applies
|
Any SCML value; plus half of the total FMS Administrative Surcharge; plus that portion of TL required if the contract is terminated during the period covered by the Initial Deposit; plus contractor holdback. If the calculated FMS Administrative Surcharge value is $30,000 or less, the entire FMS Administrative Surcharge value must be included in the initial deposit.
|
C9.9.1.5.2.
Payment Schedule Curves.
Payment schedule curves (most of which are in DSAMS) profile the expenditure patterns for types of cases and/or weapon systems. They are used to estimate how payments for each line should be distributed in the payment schedule. The IA may recommend adding new curves. The IA validates the need for a new curve and verifies how it should be constructed. After its review is complete, the IA sends the proposed new curve package to the DSCA (Business Operations Directorate) for review and approval.
C9.9.1.5.2.1.
Materiel from Stock.
Payment schedule distributions for materiel sold from stock are based on estimated deliveries during each 90-day period following the quarterly payment. Historical delivery information of specific generic codes and other materiel categories may be used.
C9.9.1.5.2.2.
Materiel from Procurement.
Payment schedule distributions for procured materiel requiring progress payments to contractors are based on progress payment schedules or historical cost curves. Payment schedules should include estimated disbursements to contractors, an appropriate contract hold-back percentage, and Termination Liability (if no Standby Letter of Credit (SBLC)) exists that covers the amount of the case). See
paragraph C9.9.1.5.3.
and
paragraph C9.9.1.5.4.
on Termination Liability and SBLC, respectively.
C9.9.1.5.2.3.
Concurrent Spare Parts.
Payment schedule distributions for concurrent spare parts are based on estimated dollar deliveries consistent with the delivery of the supported end items.
C9.9.1.5.2.4.
Purchaser-Initiated Requisitions.
Payment schedule distributions for case lines involving purchaser-initiated requisitions are based on equal quarterly payments unless the USG is aware of a varying requisition activity schedule. See
Appendix 6
for exact note wording.
C9.9.1.5.2.5.
Services.
Payment schedule distributions for services are based on the scheduled performance dates and elements of cost of the provided services.
C9.9.1.5.2.6.
Training.
Payment schedule distributions for defined order training are based on estimated start date of the training courses. Payment schedule distributions for blanket order training require an Initial Deposit of 25 percent of the line when the case exceeds $25,000. If no other information is available regarding course schedules, blanket order training payment schedules should reflect equal payments for the estimated period (just like any other blanket order case).
C9.9.1.5.2.7.
Royalties or Non-Recurring Costs.
Payment schedule distributions for royalties or NCs are based on production schedules of the applicable end item.
C9.9.1.5.2.8.
FMS Administrative Surcharge and Accessorial Charges.
Payment schedule distributions for the FMS Administrative Surcharge and accessorial costs are based on estimated delivery of the primary items or services. Half of the FMS Administrative Surcharge is included in the Initial Deposit. If the calculated FMS Administrative Surcharge value is $30,000 or less, the entire FMS Administrative Surcharge value is included in the Initial Deposit. Any exceptions to this policy must be approved by the DSCA (Business Operations Directorate, Financial Policy and Internal Operations Division).
C9.9.1.5.3.
Termination Liability (TL).
TL is the potential cost for which the USG would be liable if a particular FMS case is terminated prior to completion. It applies to any FMS case that has procurement contracts. Contractor termination schedules are used to calculate the TL that would apply for a specific FMS case. If these schedules are not available, the TL component of the payment schedule curve is used. If no other curve is available, the “DoD Standard Curve” shown in
DoD 7000.14-R, Volume 15, Chapter 7,
is used. A Termination Liability Worksheet (TLW) to show the amount of TL included in quarterly payments is prepared (using DSAMS). A TLW must be prepared whenever a case contains a Pricing Element Code (PEC) of “CC.” TLWs are maintained in the case file (they are not submitted to DSCA when the case package is forwarded for electronic countersignature). If a specific case or line contains more than one PEC, pro-rate the “CC” component when computing the TL.
C9.9.1.5.4.
Standby Letter of Credit (SBLC).
A SBLC may be used instead of TL to guarantee termination payments. FMF programs are not eligible to participate.
C9.9.1.5.4.1.
The purchaser may request participation in the SBLC program. The purchaser’s request(s) must be sent to DSCA (Business Operations Directorate, Country Financial Management Division), in writing, and signed by an official authorized to accept the SBLC documents on behalf of the purchaser’s government and/or organization. The purchaser must specify the bank(s) it wishes to use. The purchaser is responsible for paying all fees associated with the SBLC to the issuing bank. No fees can be capitalized or included in the dollar amount specified in the SBLC documents. The purchaser must sign the agreement specifying the terms and conditions in order for the associated SBLC to be implemented. The purchaser must notify DSCA (Business Operations Directorate), in writing, if it wishes to terminate the agreement with the bank(s).
C9.9.1.5.4.2.
DSCA (Business Operations Directorate) is the beneficiary stated on the SBLC. DSCA (Business Operations Directorate) is also the focal point for SBLC issues and engages the DSCA (Office of the General Counsel), USD(C), DFAS Indianapolis, and the IAs, as appropriate, to ensure effective SBLC execution.
C9.9.1.5.4.3.
DSCA (Business Operations Directorate) notifies the IA and the DSCA (Operations Directorate, Case Writing Division) when an SBLC is implemented. The notification includes a list of cases (or indicates that it applies to all cases) governed by the SBLC. DSCA (Operations Directorate, Case Writing Division) and the IA ensure the TL is not included in the payment schedules for any of these cases. If an SBLC is terminated, the payment schedule is revised to include TL as appropriate. DSCA (Business Operations Directorate) also notifies DFAS and the purchaser.
C9.9.1.5.4.4.
Drawdowns (sight drafts) from the SBLC are a demand for payment from the SBLC bank. A sight draft may be completed by DSCA (Business Operations Directorate), coordinated and approved by the Director or Deputy Director, DSCA, and sent to the bank for any of the following reasons:
C9.9.1.5.4.5.
The payment is remitted to the account specified on the sight draft. Upon receipt, DFAS ensures the payment is credited to the FMS case(s) as directed on the wire transfer. DFAS Indianapolis notifies DSCA (Business Operations Directorate) of the deposit date and the FMS case(s) is credited within 3 business days of demand payment receipt.
C9.9.2.
Purchaser-Requested Schedules.
The purchaser may request a specific payment schedule for a given case. This schedule may be based on its internal budget allocation, other constraints, or a desire to accelerate payments.
C9.9.2.1.
Purchaser requests for specific payment schedules are reviewed by the IA prior to submission of the LOA package to DSCA (Operations Directorate, Case Writing Division) for case preparation. A copy of the purchaser’s request is included in the case preparation request. The IA will approve the schedule as part of the LOA document coordination/countersignature process.
C9.9.2.2.
DSCA (Operations Directorate, Case Writing Division) constructs the standard payment schedule (to include any contract termination costs) and compares it to the purchaser’s requested schedule. DSCA (Operations Directorate, Case Writing Division) analyzes the purchaser’s proposed schedule to determine if it provides sufficient funds to meet projected requirements identified on the standard payment schedule. If the purchaser’s requested schedule is sufficient to cover the USG’s forecasted requirements, DSCA (Operations Directorate, Case Writing Division) will proceed with the request. If DSCA (Operations Directorate, Case Writing Division) determines that the purchaser’s requested schedule will not meet forecasted requirements, DSCA (Operations Directorate, Case Writing Division) will notify the IA (with an information copy to DSCA (Business Operations Directorate, Country Finance Director) and return the case document to the IA for further action. The IA may consult with DSCA (Business Operations Directorate, Country Finance Director) to deny the purchaser’s request or may work with the purchaser to redefine the requirements. Part of the payment schedule comparison and analysis includes developing the TLW. The TLW is first based on the USG-developed payment schedule (to include contractor termination costs); it should then be recalculated using the purchaser-requested schedule, if approved.
C9.9.2.3.
When a purchaser-requested schedule is approved and used on the LOA, a note is included beneath the payment schedule. See Appendix 6 for exact note wording. The USG-developed standard payment schedule does not appear on the LOA but is maintained in the case file and in DSAMS.
C9.9.3.
Payment Schedule Revisions.
Payment schedule updates are necessary to reflect revisions to delivery schedules, scope changes, pricing updates, actual contract award dates, contractor payment milestone revisions, etc. To determine whether an update is needed, payment schedule reviews occur at least annually as part of the case review and reconciliation process. Payment schedules must be evaluated for possible changes when a Modification or Amendment is processed. If the contract award date slips, the payment schedule must be adjusted by a Modification within 30 days of contract award. A new payment schedule should be furnished whenever there is a substantive change in payment requirements.
C9.9.3.1.
Payment Schedule Revision Format for Amendments.
Amendments use the payment schedule format in Table C9.T14. When either the Term of Sale is “Cash With Acceptance;” or the case is fully funded with FMS Credit (Non-Repayable) and/or MAP Merger, the total case value is less than $5M, and cash flow financing is not authorized, the Amount Due with Amendment Acceptance shall equal the increase in case value.
Table C9.T14. Payment Schedule Revision Format for Amendments
| Payment Date |
Quarterly |
Cumulative |
Previous Payments Scheduled (DD MMM YYYY) |
N/A |
$ |
Current USG Financial Requirements |
|
$ |
Amount received from Purchaser |
|
$ |
Due with Amendment Acceptance |
$ |
$ |
DD MMM YYYY |
$ |
$ |
DD MMM YYYY |
$ |
$ |
C9.9.3.2.
Payment Schedule Revision Format for Modifications.
Modifications use the payment schedule format in Table C9.T15. When either the Term of Sale is “Cash With Acceptance;” or the case is fully funded with FMS Credit (Non-Repayable) and/or MAP Merger, the total case value is less than $5M, and cash flow financing is not authorized, the next quarterly payment due shall equal the increase in case value.
Table C9.T15. Payment Schedule Revision Format for Modifications
| Payment Date |
Quarterly |
Cumulative |
Previous Payments Scheduled (DD MMM YYYY) |
N/A |
$ |
Current USG Financial Requirements |
|
$ |
Amount received from Purchaser |
|
$ |
Revised Payments Scheduled (DD MMM YYYY) |
$ |
$ |
DD MMM YYYY |
$ |
$ |
DD MMM YYYY |
$ |
$ |
C9.9.3.3.
Showing Collections on Payment Schedules.
In addition to showing quarterly payments, payment schedules on Amendments and Modifications also show the amount already paid by the FMS purchaser. The revised payment schedule is based on the forecasted requirements remaining on the case. Once these requirements are computed, the collections already received from the purchaser are considered.
C9.9.3.4.
Purchaser Requests For Payment Schedule Review.
Purchasers who wish a review or revision of a specific case payment schedule should forward a request to the appropriate IA.
Page Updated 06-06-2012
