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  • Question

    Is the switch from Progress Payment to Perfromance Base Payment allowed or permitted by FAR, DFAR? I have cited FAR 32.1003 line (d)


    Answer

    Yes, in some cases but caution should prevail.

    In accordance to the User’s Guide to Performance Based Payments, Revision 1, dated 30 November 2001, FAR Part 32.1003 does not allow for mixing of PBP with other types of contract financing except in those circumstances where advance payments or guaranteed loans are authorized in accordance with
    FAR subpart 32.4 or subpart 32.3 respectively.

    PBP can be used on either a contract-wide or line item specific basis.
    FAR Part 32.1004 provides the authority, “Performance-based payments may be made either on a whole contract or on a deliverable item basis, unless otherwise prescribed by agency
    regulation.”
     
    In no event, however, should PBP be used in conjunction with other financing techniques for the same contract.
     
    In some cases it may be appropriate to convert the contract financing method being used from one financing technique to another at a specific point during contract performance or under a single CLIN. Special care needs to be taken in such situations to ensure that the government’s interests are adequately protected when converting from traditional cost-based progress payments to PBP.  In particular, all previously made progress payments should be incorporated into the first PBP event payment when the conversion is being accomplished. Care should also be taken in adjusting liquidations when making such conversions.

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