Invitation to Propose Performance-Based Payments
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.