Overview
This section outlines the specific conditions under which a contracting officer is authorized to implement performance-based payments (PBPs) for individual contracts or orders.
Key Rules
- Mutual Agreement: The contracting officer and the offeror must formally agree on the specific terms of the performance-based payments.
- Fixed-Price Limitation: PBPs are restricted to fixed-price contracts, individual orders, or specific fixed-price line items.
- No Concurrent Financing: Performance-based payments cannot be used on any contract or indefinite delivery order that already provides for progress payments.
- Applicability: The criteria apply to both standard contracts and individual orders issued under indefinite delivery contracts.
Practical Implications
- Contracting officers must make a binary choice for financing: they can use either progress payments or performance-based payments, but never both for the same requirement.
- Because PBPs require mutual agreement, the specific milestones and payment values often become a significant focal point of pre-award negotiations to ensure they are objective and measurable.