Contract Financing: Factors That Influence the Use of Financing Methods and DOD’s Progress on Proposed Actions

The Department of Defense provides billions of dollars through contract financing to acquire things like weapon systems and satellites. This financing can help contractors avoid expensive commercial loans and may help DOD reduce costs. In April 2023, DOD published a study on the effect of its contract financing policies on the defense industry.

Based on its April 2023 Contract Finance study, DOD proposed 16 actions it could take to help expand the defense industrial base. As of January 2024, DOD had taken steps toward implementing the majority of the proposed actions. Several of these proposed actions are intended to help subcontractors and small businesses, and include:

  • Improving the ability of subcontractors to contact the contracting officer when they do not receive payments from prime contractors, and
  • Modifying various regulations, as needed, to improve timely payments to subcontractors, including small businesses.

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