Policy.

(a) Performance-based payments are the preferred Government financing method when the contracting officer finds them practical, and the contractor agrees to their use. (b) Performance-based payments are contract financing payments that are not payment for accepted items. (c) Performance-based payments are fully recoverable, in the same manner as progress payments, in the event of default. (d) Performance-based payments are contract financing payments and, therefore, are not subject to the interest-penalty provisions of prompt payment (see Subpart 32.9). These payments shall be made in accordance with agency policy. (e) Performance-based payments shall not be used for— (1) Payments under cost-reimbursement line items; (2) Contracts for architect-engineer services or construction, or for shipbuilding or ship conversion, alteration, or repair, when the contracts provide for progress payments based upon a percentage or stage of completion; or (3) Contracts awarded through sealed bid procedures. [72 FR 73220, Dec. 26, 2007]