52.232-28 Invitation to Propose Performance-Based Payments
Source: FAR 52.232-28 on acquisition.gov
Offerors may propose performance-based payment terms, but these must comply with FAR limits, be reasonable, and include detailed supporting information for Government evaluation.
Overview
FAR 52.232-28, "Invitation to Propose Performance-Based Payments," allows offerors to propose terms for performance-based contract financing payments as part of their proposal. The provision outlines the requirements and limitations for such proposals, ensuring that any performance-based payment terms are reasonable, consistent with the offer, and in the Government's best interest. The Contracting Officer will evaluate and may incorporate these terms into the contract, provided they comply with FAR 32.1004 and do not exceed 90% of the contract or delivery item price. The provision also requires offerors to submit detailed information about payment events, amounts, and their investment in the contract. If Alternate I is used, the Government will adjust proposed prices to reflect the cost of providing performance-based payments, following FAR 32.205(c). This clause is designed to encourage innovative financing arrangements while protecting the Government's interests.
Key Rules
- Offeror Proposal of Performance-Based Payments
- Offerors may propose performance-based payment terms, which will be evaluated as part of their proposal.
- Compliance with FAR 32.1004 and Payment Limits
- Proposed terms must comply with FAR 32.1004 and cannot exceed 90% of the contract or delivery item price.
- Required Proposal Information
- Proposals must include contractual language, payment schedules, delivery dates, and information on contractor investment.
- Government Evaluation and Incorporation
- The Contracting Officer will evaluate and may incorporate acceptable terms; conflicts default to FAR 52.232-32.
- Alternate I Price Adjustment
- If Alternate I applies, the Government will adjust prices to account for the cost of performance-based payments.
Responsibilities
- Contracting Officers: Evaluate proposed terms for compliance, reasonableness, and Government interest; incorporate terms if acceptable; apply price adjustments if Alternate I is used.
- Contractors: Submit detailed, compliant proposals for performance-based payments; ensure terms are reasonable and within limits.
- Agencies: Oversee adherence to FAR requirements and ensure financing arrangements protect Government interests.
Practical Implications
- This provision enables flexible financing but imposes strict compliance and documentation requirements.
- Contractors must carefully structure proposals to meet regulatory limits and provide detailed supporting information.
- Common pitfalls include exceeding payment limits, failing to align with FAR 32.1004, or providing insufficient proposal detail.
As prescribed in 32.1005(b)(1), insert the following provision:
Invitation to Propose Performance-Based Payments (Mar 2000)
(a) The Government invites the offeror to propose terms under which the Government will make performance-based contract financing payments during contract performance. The Government will consider performance-based payment financing terms proposed by the offeror in the evaluation of the offeror’s proposal. The Contracting Officer will incorporate the financing terms of the successful offeror and the FARclause, Performance-Based Payments, at FAR 52.232-32, in any resulting contract.
(b) In the event of any conflict between the terms proposed by the offeror and the terms in the clause at FAR 52.232-32, Performance-Based Payments, the terms of the clause at FAR 52.232-32 shall govern.
(c) The Contracting Officer will not accept the offeror’s proposed performance-based payment financing if the financing does not conform to the following limitations:
(1) The Government will make delivery payments only for supplies delivered and accepted, or services rendered and accepted in accordance with the payment terms of this contract.
(2) The terms and conditions of the performance-based payments must-
(i) Comply with FAR 32.1004;
(ii) Be reasonable and consistent with all other technical and cost information included in the offeror’s proposal; and
(iii) Their total shall 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 terms and conditions of the performance-based financing must be in the best interests of the Government.
(d) The offeror’s proposal of performance-based payment financing shall include the following:
(1) The proposed contractual language describing the performance-based payments (see FAR 32.1004 for appropriate criteria for establishing performance bases and performance-based finance payment amounts).
(2) A listing of-
(i) The projected performance-based payment dates and the projected payment amounts; and
(ii) The projected delivery date and the projected payment amount.
(3) Information addressing the Contractor’s investment in the contract.
(e) Evaluation of the offeror’s proposed prices and financing terms will include whether the offeror’s proposed performance-based payment events and payment amounts are reasonable and consistent with all other terms and conditions of the offeror’s proposal.
(End of Provision)
Alternate I (Mar 2000). As prescribed in FAR 32.1005 (b)(2), add the following paragraph (f) to the basic provision:
(f) The Government will adjust each proposed price to reflect the cost of providing the proposed performance-based payments to determine the total cost to the Government of that particular combination of price and performance-based financing. The Government will make the adjustment using the procedure described in FAR 32.205(c).