Does cost-plus contract AR advance differently than fixed-price contract AR at term sheet?
No: ABL term sheets do not list a universal advance-rate delta by cost-plus versus fixed-price label alone. FAR defines firm-fixed-price and cost-reimbursement pricing; Palmstone carves progress-billing, unbilled, and retainage AR from the eligible base; ABL Advisor and Bank of America flag construction progress billings as hard-to-lend AR. Crestmont lists Contract Type only as a factoring checklist item.
Last updated: September 13, 2026
FAR pricing labels are not ABL advance formulas
FAR 16.202-1 states that "A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor's cost experience in performing the contract." FAR 16.301-1 states that "Cost-reimbursement types of contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract." Those provisions define government contract pricing.
Crestmont Capital construction factoring lists "Contract Type Fixed-price, T&M, Cost-plus" on an underwriting checklist and states "Clear scope of work and payment terms are essential." That is a factoring checklist item.
Progress billings, unbilled, retainage
Palmstone Capital walks Gross trade AR down by carving "disputed, contra, affiliate, unbilled, future, foreign, retainage, and progress-billing AR" before "= eligible AR," then "Eligible AR x advance rate - lender reserves - existing advances / loan balance = current availability." Eligibility is invoice-status driven.
ABL Advisor states that "most working capital providers do not lend to the construction industry because of the nature of accounts receivable activity (i.e. progress billings)" and names cost in excess of billings ("Under Billings," an asset on the balance sheet) and billings in excess of cost ("Over Billings," a liability on the balance sheet). Bank of America Business Capital states that "in the case of a construction company, lenders may not feel comfortable lending against accounts receivable that could be difficult to collect due to progress billings, retention or the presence of bonding requirements."
Factoring on progress billings
Crestmont markets construction factoring to "convert their approved progress billings and accounts receivable into immediate working capital." Zeo construction factoring states that "Construction invoice factoring may allow eligible firms to convert approved progress billings and draw invoices into working capital before payment arrives" and flags "project-specific risks — including retainage, backcharges, and lien rights — not present in standard commercial factoring." Those are factoring product claims, not ABL borrowing-base advance rates.
OCC rails: eligible-AR advance range and unbilled ineligible
The OCC Comptroller's Handbook: Asset-Based Lending says "Common advance rates range from 70 percent to 85 percent of eligible accounts receivable" and lists "Unbilled accounts receivable" among characteristics of receivables commonly designated as ineligible.
| Frame | What the source says today | Use at term sheet |
|---|---|---|
| FAR firm-fixed-price | Price not subject to adjustment on contractor cost experience | Pricing label only |
| FAR cost-reimbursement | Payment of allowable incurred costs as prescribed | Pricing label only |
| Palmstone eligible base | Progress-billing / unbilled / retainage carved before eligible AR | Eligibility before any advance rate |
| ABL Advisor / BofA | Progress billings / retention / bonding make construction AR hard to lend | Collectibility rails |
| OCC eligible AR | 70 percent to 85 percent of eligible accounts receivable | General eligible-AR range |
| Crestmont / Zeo (factoring) | Contract Type checklist; progress billings as factoring object | Label factoring — not ABL BBC advance rates |
| Claim | Listed | URL |
|---|---|---|
| FAR firm-fixed-price definition (pricing label, not advance rate) | A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor's cost experience in performing the contract. | FAR 16.202-1 firm-fixed-price |
| FAR cost-reimbursement / cost-plus definition (pricing label) | Cost-reimbursement types of contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract. | FAR 16.301-1 cost-reimbursement |
| Crestmont construction factoring — Contract Type checklist | Contract Type Fixed-price, T&M, Cost-plus | Crestmont construction factoring |
| Crestmont construction factoring — progress billings as financeable object | convert their approved progress billings and accounts receivable into immediate working capital | Crestmont construction factoring |
| Zeo construction factoring — progress billings / draw invoices | Construction invoice factoring may allow eligible firms to convert approved progress billings and draw invoices into working capital before payment arrives. | Zeo construction factoring |
| Zeo construction factoring — retainage / backcharge / lien risks | project-specific risks — including retainage, backcharges, and lien rights — not present in standard commercial factoring | Zeo construction factoring |
| Palmstone eligible-base carve (progress-billing / unbilled / retainage) | disputed, contra, affiliate, unbilled, future, foreign, retainage, and progress-billing AR | Palmstone AR financing |
| Palmstone borrowing-base availability math | Eligible AR x advance rate - lender reserves - existing advances / loan balance = current availability | Palmstone AR financing |
| ABL Advisor — progress billings as reason construction AR is hard to lend | most working capital providers do not lend to the construction industry because of the nature of accounts receivable activity (i.e. progress billings). | ABL Advisor construction sector |
| ABL Advisor — Under/Over Billings twin of progress-billing timing | cost in excess of billings ("Under Billings," an asset on the balance sheet) and billings in excess of cost ("Over Billings," a liability on the balance sheet) | ABL Advisor construction sector |
| Bank of America — construction AR progress billings / retention / bonding | in the case of a construction company, lenders may not feel comfortable lending against accounts receivable that could be difficult to collect due to progress billings, retention or the presence of bonding requirements. | Bank of America Business Capital ABL |
| OCC eligible-AR advance range (general) | Common advance rates range from 70 percent to 85 percent of eligible accounts receivable. | OCC Comptroller's Handbook: Asset-Based Lending |
| OCC unbilled AR among commonly ineligible | Unbilled accounts receivable. | OCC Comptroller's Handbook: Asset-Based Lending |
Frequently asked questions
Does cost-plus contract AR advance differently than fixed-price contract AR at term sheet?
No universal ABL advance delta by cost-plus versus fixed-price label alone. FAR defines firm-fixed-price and cost-reimbursement as pricing structures. Palmstone carves progress-billing, unbilled, and retainage from eligible AR before the advance rate. ABL Advisor and Bank of America treat construction progress billings as hard-to-lend receivables.
What do FAR firm-fixed-price and cost-reimbursement definitions cover at term sheet?
FAR 16.202 states a firm-fixed-price contract provides for a price not subject to adjustment on the contractor's cost experience. FAR 16.301-1 states cost-reimbursement contracts provide for payment of allowable incurred costs to the extent prescribed. Those provisions define government pricing labels.
Why do progress billings, retention, and bonding trouble construction ABL?
ABL Advisor states that most working capital providers do not lend to construction because of progress billings. Bank of America says lenders may not feel comfortable lending against construction AR that is hard to collect due to progress billings, retention, or bonding requirements. Those rails speak to collectibility, not cost-plus versus fixed-price pricing labels.
What does Palmstone carve from the eligible AR base?
Palmstone's eligible-base walk subtracts disputed, contra, affiliate, unbilled, future, foreign, retainage, and progress-billing AR before eligible AR. Availability then follows Eligible AR times advance rate minus reserves and existing advances. The carve is invoice-status driven.
What OCC rails list for eligible AR advance rates and unbilled receivables?
The OCC Comptroller's Handbook on asset-based lending states that common advance rates range from 70 percent to 85 percent of eligible accounts receivable. The same handbook lists Unbilled accounts receivable among characteristics commonly designated as ineligible.
Related
- Before binding an ABL revolver, which AR lines are ineligible and which get carved back at term sheet?
- Do progress billings count toward the borrowing base before an ABL revolver binds?
- Why is construction AR harder to finance than manufacturing AR at term sheet?
- Does unbilled cost-in-excess count toward the borrowing base at term sheet?
- What is the difference between billings-in-excess liability and unbilled asset on a contractor balance sheet?
- Does retention AR from bonded construction contracts count toward the ABL borrowing base at term sheet?