Withholding payment under 52.232-7

Under which paragraph of the clause would you find authority to withhold monies?

What payment are you planning to withhold from? Under a T&M/LH contract, the contractor may invoice only for hours actually provided. If they haven't had someone in a position for 3 months, they couldn't have been invoicing for it, so what is the rationale for withholding?

Paragraph (a) 7 provides for withholding of monies:

(7) Unless otherwise prescribed in the Schedule, the Contracting Officer may unilaterally issue a contract modification requiring the Contractor to withhold amounts from its billings until a reserve is set aside in an amount that the Contracting Officer considers necessary to protect the Government’s interests. The Contracting Officer may require a withhold of 5 percent of the amounts due under paragraph (a), but the total amount withheld for the contract shall not exceed $50,000. The amounts withheld shall be retained until the Contractor executes and delivers the release required by paragraph (g) of this clause.

Note that this withholding is unrelated to the contractor’s failure to provide personnel it is required to provide under the contract. If the contractor is failing to meet its obligations to provide qualified personnel, then you should not be paying it for hours not provided and you should consider issuing a delinquency notice described in FAR 49.607.

The CO had better think long and hard before withholding payment due for hours actually worked because the contractor did not provide a certain kind of worker. I seriously doubt the legality of that course of action. Withholding payment is a very serious thing to do. If the CO refuses to pay for hours actually worked he or she will be vulnerable to a breach of contract claim.