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    Is it possible to have PBPs without consideration?


    Answer

    The DoD Performance Based Payment Guidebook (found at https://www.acq.osd.mil/asda/dpc/pcf/docs/resources-training/Performance_Based_Payment_(PBP)_Guide.pdf) provides the answer to your question: "Changing Financing Methods -- Remember that when a contract financing method is changed to a method that is more favorable to the contractor, adequate new consideration to the Government is required under FAR Part 32.005."  Also, see DFARS 232.1004(b)(iii).  Arguably, performance based payments (PBPs) are the most favorable contract financing method permitted by the FAR.  The PBP events (including each event's exit criteria and dollar amount) as well as the event schedule are negotiable.  The dollar value of the event should reflect the importance and risk of the event in completing the contract.  In theory,  PBPs should provide the contractor the opportunity to earn more cash flow than they could get through progress payments primarily because PBP amounts are not limited to cost incurred (as are progress payments) but are based on each event's value. The only limitation being that the total PBPs on a contract cannot exceed 90% of the contract price.  From reading your question, I'm assuming that your contract originally included progress payments and the contractor now wants to change to performance based payments.  Therefore, I think in your case that the Government is required to get consideration for making this change to the contract's financing method.  Additional information about PBPs can be found on the Defense Price and Contracting website at https://www.acq.osd.mil/asda/dpc/pcf/pricing-topics.html#pdp

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