U.S. flag
          An official website of the United States Government  Main navigation
  

        

              Data Initiatives
                              Regulations
                                                                        Row 1
                                              FAR FAR
                              Smart Matrix Smart Matrix
                              Chapter 99 (CAS) Chapter 99 (CAS)
                              Row 2
                                              DFARS DFARS
                              DFARSPGI DFARSPGI
                              AFARS AFARS
                              DAFFARS DAFFARS
                              DAFFARS MP DAFFARS MP
                              DARS DARS
                              DLAD DLAD
                              NMCARS NMCARS
                              Row 3
                                              SOFARS SOFARS
                              TRANSFARS TRANSFARS
                              AGAR AGAR
                              AIDAR AIDAR
                              CAR CAR
                              DEAR DEAR
                              DIAR DIAR
                              DOLAR DOLAR
                              Row 4
                                              DOSAR DOSAR
                              DTAR DTAR
                              EDAR EDAR
                              EPAAR EPAAR
                              FEHBAR FEHBAR
                              GSAM/R GSAM/R
                              HHSAR HHSAR
                              HSAR HSAR
                              Row 5
                                              HUDAR HUDAR
                              IAAR IAAR
                              JAR JAR
                              LIFAR LIFAR
                              NFS NFS
                              NRCAR NRCAR
                              TAR TAR
                              VAAR VAAR
                              Tools
                                                                        Archives
                              Smart Matrix
                              Regulations Search
                              Acquisition Regulation Comparator (ARC)
                              Policy Network
                                                                        CAOC
                              CAAC
                              FAR Council
                              ISDC
 Breadcrumb
        Home
                            Regulations
                            FAR
                            32.1004 Procedures.
        
                  FAR
FAR
FAC Number: 2024-03 Effective Date: 02/23/2024
PartPart 1Part 2Part 3Part 4Part 5Part 6Part 7Part 8Part 9Part 10Part 11Part 12Part 13Part 14Part 15Part 16Part 17Part 18Part 19Part 20Part 21Part 22Part 23Part 24Part 25Part 26Part 27Part 28Part 29Part 30Part 31Part 32Part 33Part 34Part 35Part 36Part 37Part 38Part 39Part 40Part 41Part 42Part 43Part 44Part 45Part 46Part 47Part 48Part 49Part 50Part 51Part 52Part 53
Subpart32.032.132.232.332.432.532.632.732.832.932.1032.11
Section32.100032.100132.100232.100332.100432.100532.100632.100732.100832.100932.1010
Leave this field blank
        
                  

                                
                  
        « PreviousNext »
32.1004 Procedures.32.1004 Procedures.       Performance-based payments may be made either on a whole contract or on a deliverable item basis, unless otherwise prescribed by agency regulations. Financing payments to be made on a whole contract basis are applicable to the entire contract, and not to specific deliverable items. Financing payments to be made on a deliverable item basis are applicable to a specific individual deliverable item. (A deliverable item for these purposes is a separate item with a distinct unit price. Thus, a line item for 10 airplanes, with a unit price of $1,000,000 each, has 10 deliverable items-the separate planes. A line item for 1 lot of 10 airplanes, with a lot price of $10,000,000, has only one deliverable item-the lot.)                                       (a) 						            Establishing performance bases.                                                         (1) 								                The basis for performance-based payments may be either specifically described events (*e.g.*, milestones) or some measurable criterion of performance. Each event or performance criterion that will trigger a finance payment shall be an integral and necessary part of contract performance and shall be identified in the contract, along with a description of what constitutes successful performance of the event or attainment of the performance criterion. The signing of contracts or modifications, the exercise of options, the passage of time, or other such occurrences do not represent meaningful efforts or actions and shall not be identified as events or criteria for performance-based payments. An event need not be a critical event in order to trigger a payment, but the Government must be able to readily verify successful performance of each such event or performance criterion.                                                            (2) 								                Events or criteria may be either severable or cumulative. The successful completion of a severable event or criterion is independent of the accomplishment of any other event or criterion. Conversely, the successful accomplishment of a cumulative event or criterion is dependent upon the previous accomplishment of another event. A contract may provide for more than one series of severable and/or cumulative performance events or criteria performed in parallel. The contracting officer shall include the following in the contract:                                                                           (i) 										                    The contract shall not permit payment for a cumulative event or criterion until the dependent event or criterion has been successfully completed.                                                                              (ii) 										                    The contract shall specifically identify severable events or criteria.                                                                              (iii) 										                    The contract shall specifically identify cumulative events or criteria and identify which events or criteria are preconditions for the successful achievement of each event or criterion.                                                                              (iv) 										                    Because performance-based payments are contract financing, events or criteria shall not serve as a vehicle to reward the contractor for completion of performance levels over and above what is required for successful completion of the contract.                                                                              (v) 										                    If payment of performance-based finance amounts is on a deliverable item basis, each event or performance criterion shall be part of the performance necessary for that deliverable item and shall be identified to a specific line item or subline item.                                                                                                                            (b) 						            Establishing performance-based finance payment amounts.                                                         (1) 								                The contracting officer shall establish a complete, fully defined schedule of events or performance criteria and payment amounts when negotiating contract terms. If a contract action significantly affects the price, or event or performance criterion, the contracting officer responsible for pricing the contract modification shall adjust the performance-based payment schedule appropriately.                                                            (2) 								                Total performance-based payments shall-                                                                           (i) 										                    Reflect prudent contract financing provided only to the extent needed for contract performance (see  32.104(a)); and                                                                              (ii) 										                    Not exceed 90 percent of the contract price if on a whole contract basis, or 90 percent of the delivery item price if on a delivery item basis.                                                                                                           (3) 								                The contract shall specifically state the amount of each performance-based payment either as a dollar amount or as a percentage of a specifically identified price (*e.g.*, contract price or unit price of the deliverable item). The payment of contract financing has a cost to the Government in terms of interest paid by the Treasury to borrow funds to make the payment. Because the contracting officer has wide discretion as to the timing and amount of the performance-based payments, the contracting officer shall ensure that-                                                                           (i) 										                    The total contract price is fair and reasonable, all factors considered; and                                                                              (ii) 										                    Performance-based payment amounts are commensurate with the value of the performance event or performance criterion and are not expected to result in an unreasonably low or negative level of contractor investment in the contract. To confirm sufficient investment, the contracting officer may request expenditure profile information from offerors, but only if other information in the proposal, or information otherwise available to the contracting officer, is expected to be insufficient.                                                                                                           (4) 								                Unless agency procedures prescribe the bases for establishing performance-based payment amounts, contracting officers may establish them on any rational basis, including (but not limited to)-                                                                           (i) 										                    Engineering estimates of stages of completion;                                                                              (ii) 										                    Engineering estimates of hours or other measures of effort to be expended in performance of an event or achievement of a performance criterion; or                                                                              (iii) 										                    The estimated projected cost of performance of particular events.                                                                                                           (5) 								                When subsequent contract modifications are issued, the contracting officer shall adjust the performance-based payment schedule as necessary to reflect the actions required by those contract modifications.                                                                             (c)                   *Instructions for multiple appropriations*. If there is more than one appropriation account (or subaccount) funding payments on the contract, the contracting officer shall provide instructions to the Government payment office for distribution of financing payments to the respective funds accounts. Distribution instructions shall be consistent with the contract’s liquidation provisions.                                          (d)                   *Liquidating performance-based finance payments*. Performance-based amounts shall be liquidated by deducting a percentage or a designated dollar amount from the delivery payments. The contracting officer shall specify the liquidation rate or designated dollar amount in the contract. The method of liquidation shall ensure complete liquidation no later than final payment.                                                         (1) 								                If the contracting officer establishes the performance-based payments on a delivery item basis, the liquidation amount for each line item is the percent of that delivery item price that was previously paid under performance-based finance payments or the designated dollar amount.                                                            (2) 								                If the performance-based finance payments are on a whole contract basis, liquidation is by predesignated liquidation amounts or liquidation percentages.                                                                             (e) 						            Competitive negotiated solicitations.                                                         (1) 								                If a solicitation requests offerors to propose performance-based payments, the solicitation shall specify-                                                                           (i) 										                    What, if any, terms shall be included in all offers; and                                                                              (ii) 										                    The extent to which and how offeror-proposed performance-based payment terms will be evaluated. Unless agencies prescribe other evaluation procedures, if the contracting officer anticipates that the cost of providing performance-based payments would have a significant impact on determining the best value offer, the solicitation should state that the evaluation of the offeror’s proposed prices will include an adjustment to reflect the estimated cost to the Government of providing each offeror’s proposed performance-based payments (see Alternate I to the provision at  52.232-28).                                                                                                           (2) 								                The contracting officer shall-                                                                           (i) 										                    Review the proposed terms to ensure they comply with this section; and                                                                              (ii) 										                    Use the adjustment method at  32.205(c) if the price is to be adjusted for evaluation purposes in accordance with paragraph (e)(1)(ii) of this section.    **Parent topic:**  Subpart 32.10 - Performance-Based Payments
« PreviousNext »
FavoriteX

      Far Parts
            Regulations FAR Menu
  

        
      Index
                              List of Sections Affected
                              DOD Deviations
                              CAAC Deviations
                              1
                              2
                              3
                              4
                              5
                              6
                              7
                              8
                              9
                              10
                              11
                              12
                              13
                              14
                              15
                              16
                              17
                              18
                              19
                              20
                              21
                              22
                              23
                              24
                              25
                              26
                              27
                              28
                              29
                              30
                              31
                              32
                              33
                              34
                              35
                              36
                              37
                              38
                              39
                              40
                              41
                              42
                              43
                              44
                              45
                              46
                              47
                              48
                              49
                              50
                              51
                              52
                              53
                              Chapter 99 (CAS)Definitions
    Toggle
FAC Changes
    Toggle
Style Formatter
    Toggle

      ×
        Data Initiatives
                                                              Regulations
                                                              Tools
                                              Archives
                                                              Smart Matrix
                                                              Regulations Search
                                                              Acquisition Regulation Comparator (ARC)
                                                              Policy Network
                                              CAO.gov
                                                        CAO Home
                                                              Council Member
                                                                    Large Agencies
                                                              Small Agencies
                                                              Council Defining Documents
                                                                    CAOC History
                                                              CAOC Charter
                                                              Civilian Agency Acquisition Council (CAAC)
                                                              Federal Acquisition Regulatory Council
                                                              Interagency Suspension and Debarment Committee (ISDC)
                                                              Search
 ˄ Top Sign up for FAR News

                            Share the FAR
                        Upper Footer Menu
  

        
      Useful Links
                              FAR Resources
                              Training
                              Acquisition Systems
            
                            **Contact Us/FAQs**
                        **Privacy and Security Notice**
                        **Accessibility Aids**
                        **Last Updated 03/29/2024**
 ACQUISITION.GOV
                An official website of the General Services Administration About GSA
                Accessibility support
                FOIA requests
                No FEAR Act data
                Office of the Inspector General
                Performance reports
                Privacy policy Looking for U.S. government information and services?
            Visit USA.gov
 «
    
    Tt