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ARTICLE · 02 APRIL 2020

DOD Progress Payment Rate Increase Improves Cash Flow For Contractors

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On March 20, 2020, the US Department of Defense ("DoD") issued a Class Deviation raising the customary progress payment rates for defense contractors from 80% to 90% for large businesses and from 90% to 95% for small businesses.

United StatesCoronavirus (COVID-19)
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Marcia Madsen
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On March 20, 2020, the US Department of Defense ("DoD") issued a Class Deviation raising the customary progress payment rates for defense contractors from 80% to 90% for large businesses and from 90% to 95% for small businesses. This change, which is effective immediately and remains effective until rescinded, was issued "in response to the Coronavirus Disease 2019 (COVID-19) national emergency" to boost cash flow for both small and large defense contractors in the midst of the economic shocks caused by the pandemic. The increase helps cash flow not only for contractors but also for their subcontractors and suppliers.

Progress Payments

DoD uses progress payments based on cost to help cover some of the upfront costs for contractors who might otherwise lack the necessary cash flow to perform (or who are reluctant or unable to obtain sufficient private financing). Under this approach, the federal government reimburses the contractor at regular intervals for a fixed

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