Overview
This section prescribes the mandatory solicitation provisions and contract clauses required when the government intends to use or allow for performance-based payments (PBPs) in fixed-price and negotiated contracts.
Key Rules
- Mandatory Contract Clause: Contracting Officers must insert FAR 52.232-32, Performance-Based Payments, in all solicitations and fixed-price contracts where PBPs will be provided.
- Negotiated Solicitation Provision: FAR 52.232-28, Invitation to Propose Performance-Based Payments, must be included in negotiated solicitations if the government is allowing offerors to suggest their own PBP structures.
- Evaluation Adjustments (Alternate I): In competitive negotiated solicitations, Alternate I of provision 52.232-28 must be used if the government plans to adjust proposed prices for evaluation purposes to account for the time value of money regarding the proposed financing.
Practical Implications
- Contractors must be prepared to provide detailed milestone or performance data to justify payments under the 52.232-32 clause.
- In competitive environments, offerors should be aware that their proposed PBP schedules may be mathematically adjusted during price evaluation, potentially affecting their competitive standing.