Overview
This section outlines the three permissible criteria that serve as the foundation for authorizing performance-based payments in a federal contract. It establishes that all payments must be rooted in verifiable achievements rather than the mere passage of time or incurrence of costs.
Key Rules
- Objective Measurement: Payments may be based on performance evaluated through objective and quantifiable methods.
- Event-Based Triggers: The successful accomplishment of specific, predefined milestones or events serves as a valid basis for payment.
- Quantifiable Results: Any other measures used to trigger payment must be quantifiable and focused on the results achieved by the contractor.
Practical Implications
- Contractors and Contracting Officers must collaborate to define clear, unambiguous "payment events" during negotiations to avoid disputes over whether a milestone was met.
- Because these payments are not cost-based, they incentivize efficiency and timely delivery, but require rigorous technical verification by the government before funds are released.