32.1002
Bases for performance-based payments
Performance-based payments must be tied to objective, quantifiable performance measures, defined events, or other measurable results to ensure accountability and incentivize results.
Overview
FAR 32.1002 outlines the acceptable bases for making performance-based payments in government contracts. It specifies that such payments can be structured around objective, quantifiable performance measures, the accomplishment of defined events, or other quantifiable results. This section provides flexibility in structuring payment milestones, as long as the criteria are measurable and clearly defined, ensuring that payments are tied to actual performance rather than mere passage of time or incurred costs. The intent is to incentivize contractors to achieve specific outcomes and to provide contracting officers with clear standards for authorizing payments.
Key Rules
- Objective, Quantifiable Methods
- Payments may be based on performance measured by objective, quantifiable criteria.
- Defined Events
- Payments may be triggered by the accomplishment of specific, pre-defined events.
- Other Quantifiable Results
- Payments may be based on any other quantifiable measures of results, as agreed upon in the contract.
Responsibilities
- Contracting Officers: Must ensure payment criteria are objective, measurable, and clearly documented in the contract.
- Contractors: Must achieve the specified performance measures, events, or results to receive payment.
- Agencies: Should oversee that performance-based payments are properly structured and administered.
Practical Implications
- This section exists to ensure that government payments are tied to actual, measurable contractor performance, reducing risk and incentivizing results.
- It impacts daily contracting by requiring clear definition and documentation of payment milestones.
- Common pitfalls include vague or subjective payment criteria, which can lead to disputes or improper payments.