This is a play on words question. Subject FAR prescribed language states, "unsatisfactory performance", while the Progress payment clause states, "failure to make progress".
If the FAR clause is stated, the contractor will most certainly object to state that they are making progress, but the issue is not the contractor making progress, but it is that the progress is "unsatisfactory".
Do I have to state specifically what the clause states or can I state in the letter what it actually is, which is "unsatisfactory performance"?
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Your letter can address the contractor’s unsatisfactory performance. It should be based on you the contracting officer acting fairly and reasonably and on substantial evidence (FAR 32.503-6 Reduction or Suspension of Payment.) Assuming that DCMA administers the contract, the ACO should have performed a risk analysis which could provide that evidence. The challenge with financing is protecting the Government against loss while continuing to provide financing to the extent possible to meet the contractor’s need for working capital. If certain costs are in dispute and others are not, those costs not in dispute can be paid.