52.232-32
Performance-Based Payments
Performance-based payments are only made upon successful completion of contractually defined milestones, requiring strict documentation, certification, and Government approval to protect both parties’ interests.
Overview
FAR 52.232-32 establishes the requirements and procedures for performance-based payments (PBPs) as a method of contract financing. This clause outlines how contractors may request PBPs, the conditions under which payments are made, the Government’s rights regarding property and risk, and the obligations for recordkeeping, reporting, and certification. The clause is designed to ensure that PBPs are only made upon successful completion of defined performance milestones or criteria, and that the Government’s interests are protected throughout the process.
Key Rules
- Payment Requests and Limitations
- Contractors may submit PBP requests no more than monthly, including all relevant information and certifications. Payments are only made after successful completion of specified events or criteria.
- Approval and Liquidation
- The Contracting Officer must approve requests, and payments are liquidated against delivery payments. Overpayments must be repaid or credited.
- Reduction or Suspension
- The Contracting Officer may reduce or suspend PBPs if the contractor fails to meet material requirements, is financially unstable, or is delinquent in paying subcontractors or suppliers.
- Title and Risk of Loss
- Title to property acquired with PBPs vests in the Government, and the contractor bears the risk of loss until delivery and acceptance.
- Records, Reports, and Certification
- Contractors must maintain adequate records, provide reports and certifications, and allow Government access for verification.
Responsibilities
- Contracting Officers: Approve PBP requests, verify milestone completion, and may require substantiation or reduce/suspend payments.
- Contractors: Submit timely, accurate, and certified PBP requests; maintain records; repay overpayments; and comply with all contract terms.
- Agencies: Oversee compliance, ensure proper administration, and protect Government interests in property and payments.
Practical Implications
- PBPs provide cash flow to contractors based on performance, not just delivery. Strict documentation, milestone achievement, and certification are required. Failure to comply can result in payment suspension, repayment obligations, or loss of contract rights. Contractors must carefully track performance, payments, and property to avoid compliance issues.