FAR 32.1005—Solicitation provision and contract clause.
Plain-English Summary
FAR 32.1005 tells contracting officers when to include the performance-based payments solicitation provision and contract clause. It covers two related but distinct items: the contract clause at 52.232-32, Performance-Based Payments, and the solicitation provision at 52.232-28, Invitation to Propose Performance-Based Payments, including Alternate I. In practice, this section ensures offerors are told when performance-based payments are being considered, and it ensures the final contract includes the correct clause when the Government will actually provide those payments. It also ties the solicitation language to evaluation procedures, especially where the Government may adjust proposed prices for evaluation purposes under FAR 32.1004(e). The purpose is to make the payment method transparent at the solicitation stage and to align the solicitation, evaluation, and contract terms so there is no mismatch after award. For contractors, this section matters because it affects pricing, cash flow, proposal strategy, and the risk allocation associated with performance-based payments.
Key Rules
Insert contract clause when PBPs apply
Use FAR 52.232-32, Performance-Based Payments, in solicitations that may result in contracts providing for performance-based payments and in fixed-price contracts where the Government will provide performance-based payments. This ensures the resulting contract contains the payment terms if PBPs are part of the award.
Use solicitation provision to invite proposals
Insert FAR 52.232-28, Invitation to Propose Performance-Based Payments, in negotiated solicitations when the Government wants offerors to propose performance-based payments. The provision is the solicitation-side mechanism for asking whether and how the offeror wants PBPs considered.
Use Alternate I for price evaluation adjustments
In competitive negotiated solicitations, use 52.232-28 with Alternate I if the Government intends to adjust proposed prices for evaluation purposes under FAR 32.1004(e). Alternate I alerts offerors that proposed prices may be evaluated differently because of the PBP structure.
Separate solicitation from contract terms
The provision belongs in the solicitation to gather offeror proposals and set expectations, while the clause belongs in the contract to govern performance-based payments after award. Contracting officers must use the correct instrument at the correct stage.
Tie language to evaluation method
If the Government plans to evaluate offers using adjusted prices, the solicitation must say so through the proper alternate. This avoids unfair surprise and supports a defensible source selection process.
Responsibilities
Contracting Officer
Determine whether the acquisition may result in performance-based payments and include FAR 52.232-32 when required. Insert FAR 52.232-28 in negotiated solicitations that invite PBP proposals, and use Alternate I when price evaluation adjustments will be made under FAR 32.1004(e).
Offerors/Contractors
Review the solicitation to determine whether performance-based payments are being invited or will be part of the contract. If invited, decide whether to propose PBPs and structure pricing, financing, and performance milestones accordingly.
Agency
Ensure acquisition planning and solicitation drafting align with the intended financing approach and evaluation method. Support consistent use of PBP clauses and provisions across the procurement process.
Practical Implications
This section affects both cash flow and competition strategy because performance-based payments can change how a contractor finances performance and how the Government evaluates price.
A common pitfall is using the solicitation provision without the correct alternate when price adjustments will be made, which can create evaluation and protest risk.
Another frequent error is failing to include the contract clause in the final fixed-price contract when PBPs will actually be provided.
Contractors should watch for the PBP language early in the solicitation because it may affect pricing, milestone planning, and whether to propose PBPs at all.
Contracting officers should make sure the solicitation, evaluation approach, and final contract all match; inconsistency between them can undermine award defensibility and contract administration.
Official Regulatory Text
(a) Insert the clause at 52.232-32 , Performance-Based Payments, in- (1) Solicitations that may result in contracts providing for performance-based payments; and (2) Fixed-price contracts under which the Government will provide performance-based payments. (b) (1) Insert the solicitation provision at 52.232-28 , invitation to Propose Performance-Based Payments, in negotiated solicitations that invite offerors to propose performance-based payments. (2) Use the provision with its Alternate I in competitive negotiated solicitations if the Government intends to adjust proposed prices for proposal evaluation purposes (see 32.1004 (e)).