FAR 32.1002—Bases for performance-based payments.
Plain-English Summary
FAR 32.1002 explains the allowable bases the Government may use to make performance-based payments under a contract. It identifies three acceptable approaches: performance measured by objective, quantifiable methods; accomplishment of defined events; and other quantifiable measures of results. The section is important because it limits performance-based payments to measurable, verifiable progress rather than subjective judgments or simple passage of time. In practice, this means the contracting officer and contractor must structure payment milestones around clear evidence of performance that can be checked and documented. The rule supports better cash flow for contractors while protecting the Government from paying too early or without adequate proof of progress. It also sets the foundation for later contract terms that define how payment events, metrics, and acceptance criteria will be written and administered.
Key Rules
Objective, Quantifiable Performance
Performance-based payments may be tied to measurable progress that can be verified using objective data. The basis must be concrete enough to support a clear determination that the required performance has occurred.
Defined Event Completion
Payments may be made when the contractor accomplishes specific, pre-established events. These events should be clearly described in the contract so both parties know exactly what triggers payment.
Other Quantifiable Results
The regulation also allows payments based on other measurable results, so long as the results can be quantified. This gives flexibility to use different kinds of performance indicators, but they still must be objective and verifiable.
No Subjective Triggers
The section does not permit performance-based payments based on vague impressions, general effort, or subjective satisfaction alone. The trigger for payment must be tied to measurable performance or a defined event.
Responsibilities
Contracting Officer
Select an allowable basis for performance-based payments and ensure the contract language clearly defines the measurable standard, event, or result that will trigger payment.
Contractor
Perform to the specified milestones, events, or measurable results and maintain records or other evidence showing that the payment trigger has been met.
Agency
Use performance-based payment structures only when the payment basis can be objectively verified and administered consistently with the contract terms.
Practical Implications
This section matters because it requires payment triggers to be written in measurable terms, which reduces disputes over whether payment is due.
A common pitfall is using vague milestone language that does not clearly show what evidence is needed to prove completion.
Contractors should make sure the contract’s payment schedule matches actual project deliverables and internal tracking systems so they can document progress quickly.
Contracting officers should avoid basing payments on subjective assessments or loosely defined progress statements, because those can create audit and administration problems.
Both sides should confirm early that each payment basis can be verified with records, test results, acceptance documents, or other objective proof.
Official Regulatory Text
Performance-based payments may be made on any of the following bases: (a) Performance measured by objective, quantifiable methods. (b) Accomplishment of defined events. (c) Other quantifiable measures of results.