According to a report by the Federal News Network, the Department of Defense (“DoD”) is proposing a new rule which would change how it pays some defense contractors. DoD is looking to require, whenever practicable, that fixed price contracts be paid out through performance-based contractual payments. Performance-based payments are a method of contract financing where payments are made on the basis of the contractor’s achievement of objective, quantifiably measurable events, results, or accomplishments that are defined and valued in the contract prior to performance. Some within the government consider it a preferred method of contracting and claim that it reduces the government’s oversight and compliance costs. It also may have benefits for contractors, as it should help cash flow, reduce the cost of oversight and compliance, and allow the contractor to focus on technical and schedule progress. Comments on the proposed rule are due by July 1.
Read the new rule at the Federal Register.
