CONTRACT FINANCING.

SEC. 2001. CONTRACT FINANCING. (a) Reorganization of Principal Authority Provision.— Section 2307 of title 10, United States Code, is amended— (1) by striking out the section heading and inserting in lieu thereof the following: “§2307. Contract financing”; (2) by inserting “Payment Authority.—” after “(a)” in subsection (a); (3) by inserting “Payment Amount.—” after “(b)” in subsection (b); (4) by inserting “Security for Advance Payments.—” after “(c)” in subsection (c); (5) by inserting “Conditions for Progress Payments.—” after “(d)” in subsection (d); (6) by inserting “Action in Case of Fraud.—” after “(e)” in subsection (e); and (7) by redesignating subsections (b), (c), (d), and (e) as subsections (c), (d), (e), and (h), respectively. 108 STAT. 3302 (b) Performance-Based Payments.— Such section, as amended by subsection (a), is further amended by inserting after subsection (a) the following new subsection (b): “(b) Performance-Based Payments—Whenever practicable, payments under subsection (a) shall be made on any of the following oases: “(1) Performance measured by objective, quantifiable methods such as delivery of acceptable items, work measurement, or statistical process controls. “(2) Accomplishment of events defined in the program management plan. “(3) Other quantifiable measures of results.”. (c) Terminology Correction.— Subsection (a)(2) of such section is amended by striking out “bid”. (d) Effective Date of Lien Related to Advance Payments.— Such section, as amended by subsection (a)(7), is further amended in subsection (d) by inserting before the period at the end of the third sentence the following: “and is effective immediately upon the first advancement of funds without filing, notice, or any other action by the United States”. (e) Conditions for Progress Payments.— Such section, as amended by subsection (a)(7), is further amended in subsection (e)— (1) in the first sentence of paragraph (1), by striking out “work, which” and all that follows through “accomplished” and inserting in lieu thereof “work accomplished that meets standards established under the contract”; and (2) by striking out paragraph (3) and inserting in lieu thereof the following: “(3) This subsection applies to any contract in an amount greater than $25,000.”. (f) Conditions for Payments for Commercial Items.— Such section, as amended by subsection (a)(7), is further amended by inserting after subsection (e) the following new subsection (f): “(f) Conditions for Payments for Commercial Items.— (1) Payments under subsection (a) for commercial items may be made under such terms and conditions as the head of the agency determines are appropriate or customary in the commercial marketplace and are in the best interests of the United States. The head of the agency shall obtain adequate security for such payments. If the security is in the form of a lien in favor of the United States, such lien is paramount to all other liens and is effective immediately upon the first payment, without filing, notice, or other action by the United States. “(2) Advance payments made under subsection (a) for commercial items may include payments, in a total amount of not more than 15 percent of the contract price, in advance of any performance of work under the contract. “(3) The conditions of subsections (d) and (e) need not be applied if they would be inconsistent, as determined by the head of the agency, with commercial terms and conditions pursuant to paragraphs (1) and (2).”. (g) Navy Contracts.— Such section, as amended by subsection (f), is further amended by inserting after subsection (f) the following new subsection (g): “(g) Certain Navy Contracts.— (1) The Secretary of the Navy shall provide that the rate for progress payments on any contract 108 STAT. 3303awarded by the Secretary for repair, maintenance, or overhaul of a naval vessel shall be not less than— “(A) 95 percent, in the case of a firm considered to be a small business; and “(B) 90 percent, in the case of any other firm. “(2) The Secretary of the Navy may advance to private salvage companies such funds as the Secretary considers necessary to provide for the immediate financing of salvage operations. Advances under this paragraph shall be made on terms that the Secretary considers adequate for the protection of the United States. “(3) The Secretary of the Navy shall provide, in each contract for construction or conversion of a naval vessel, that, when partial, progress, or other payments are made under such contract, the United States is secured by a lien upon work in progress and on property acquired for performance of the contract on account of all payments so made. The lien is paramount to all other liens.”. (h) Relationship To Prompt Payment Requirements.— The amendments made by this section are not intended to impair or modify procedures required by the provisions of chapter 39 of title 31, United States Code, and the regulations issued pursuant to such provisions of law (as such procedures are in effect on the date of the enactment of this Act), except that the Government may accept payment terms offered by a contractor offering a commercial item. (i) Clerical Amendment.— The table of sections at the beginning of chapter 137 of title 10, United States Code, is amended by striking out the item relating to section 2307 and inserting in lieu thereof the following: “2307. Contract financing.”. (j) Repeal of Superseded Provisions.— (1) Sections 7312, 7364, and 7521 of title 10, United States Code, are repealed. (2) Section 7522 of such title is amended— (A) by striking out subsection (b); and (B) by redesignating subsection (c) as subsection (b). (3) Chapters 633, 637, and 645 of such title are amended by striking out items in the tables of sections for such chapters as follows: (A) For chapter 633, the item relating to section 7312. (B) For chapter 637, the item relating to section 7364. (C) For chapter 645, the item relating to section 7521.