Contract Financing – Performance-Based Payments – Generally | PNWC’s Government Contracting Update

Performance-based payments (PBPs) for non-cost-reimbursable contracts are the Government’s preferred financing method when the contracting officer finds them practical and the contractor agrees to their use (see FAR 32.1001(a)). The 2017 NDAA, as we discussed yesterday, removes the qualification “when the contracting officer finds them practical and the contractor agrees to their use” making PBPs the unquestionable preferred financing method. There’s a lot to like with PBPs in lieu of Progress Payments based on costs. With PBPs, once contractors achieve a predetermined milestone, it gets paid. Progress payments on the other hand require considerable administrative effort including cost roll-ups, liquidation rates, subcontractor billings, loss ratio calculations and more.

Source: PNWC’s Government Contracting Update: Contract Financing – Performance-Based Payments – Generally