CLC057 PERFORMANCE BASED PAYMENTS QUESTIONS AND ANSWERS 100% PASS

CLC057 PERFORMANCE BASED PAYMENTS QUESTIONS AND ANSWERS 100% PASS Contract Financing? is covered in FAR Part 32 and is defined as the Government authorized payment of funds to the contractor prior to acceptance of supplies or services by the Government. Contract financing does not include invoice payments, payments for partial acceptance or lease or rental payments. Purpose and Scope of Contract Financing to assist the contractor in paying costs incurred during the performance of the contract. FAR 32.104(a)(1) states that when contract financing is provided it should be provided only to the extent actually needed for prompt and efficient performance. Performance Based Payments to assist the contractor in paying costs incurred during the performance of the contract. FAR 32.104(a)(1) states that when contract financing is provided it should be provided only to the extent actually needed for prompt and efficient performance. Production Contract The ideal candidate for a PBP where fabrication, assembly and test processes are well established. The Contractor would have already completed a one or more production lots. Contract for Services (Developmental Contracts) would be practical for PBP (fixed price contracts) Undefinitized Contracts Should be awarded using progress payments. Would provide the contractor with adequate financing Competitive Solicitation significant discussion between government and offeror is required, recommended that solicitation statement states that contract award is based on progress payments and after the contract if needed the government can modify the contract for contract financing. Advantanges of PBPs 1. Enhanced Technical and Schedule Focus focus attention on accomplishing meaningful and measurable technical progress and on meeting contract schedule commitment. 2. Broadened Contractor Participation the contractor's accounting system status is no longer a precondition of the financial relationship between the parties. 3. Potentially Improve Cash Flow Under current Federal Acquisition Regulation (FAR) Subpart 32.10, PBPs can be made for up to a specified portion of the contract or line item price (currently 90%), whereas traditional progress payments are limited to a fixed percentage of incurred costs (currently 80% for DoD). This can have a substantial positive cash-flow advantage for a contractor. 4. Reduce Costs of Oversight and Compliance Because the contractor's accounting and related systems are not integral or required when making PBPs, the contractor does not have to expend resources or make special accommodations to comply with many of the government's cost-based oversight and compliance programs (e.g., Cost Accounting Standards (CAS), Material Management and Accounting Systems (MMAS), Contractor Insurance and Pension Reviews (CIPRs)). This can free up administrative resources to provide better overall value and possibly reduced