FAR 32.1007—Administration and payment of performance-based payments.
Plain-English Summary
FAR 32.1007 explains how performance-based payments are administered and paid once a contract uses that financing method. It covers who is responsible for reviewing and approving payments, how the contracting officer handles payment requests and transmits them to the payment office, what information must be included in an approval, what reviews the contracting officer should arrange to protect the Government’s interests, when payment may not be approved because performance is incomplete, and how to handle Government-caused delay. In practice, this section makes clear that performance-based payments are not automatic advances; they are tied to successful completion of specified events or performance criteria. The rule also places significant discretion and oversight responsibility on the contracting officer, especially for risk-based review procedures and any schedule adjustments needed when the Government delays performance. For contractors, the section is important because it defines when payment rights arise, what documentation and milestones matter, and why partial or premature billing will not be approved unless the contract and the contracting officer’s actions support it.
Key Rules
CO approves all payments
The contracting officer responsible for administering performance-based payments must review and approve every performance-based payment for the contract. This centralizes control with the CO who oversees the contract’s financing administration.
CO handles payment requests
Unless agency regulations or an agreement with the payment official say otherwise, the contracting officer receives, approves, and transmits all performance-based payment requests to the payment office. Each approval must identify the amount, the necessary contract information, and the appropriation account(s) to be charged.
Risk-based review required
The contracting officer decides what reviews are needed to protect the Government’s interests. In making that decision, the CO should consider the contractor’s experience, performance record, reliability, financial strength, and the adequacy of the contractor’s internal controls for administering performance-based payments.
Post-payment reviews normally expected
Based on the level of risk to the Government, the contracting officer should normally arrange post-payment reviews and verifications as appropriate. If needed, the contracting officer may also require pre-payment reviews before approving payment.
No payment for incomplete performance
A performance-based payment may not be approved until the specified event or performance criterion has been successfully completed in accordance with the contract. If the event is cumulative, all earlier identified events or criteria must also be completed before payment can be approved.
Government delay may justify schedule change
Entitlement to payment depends solely on successful completion of the specified event or criterion. However, if the Government causes delay, the contracting officer may renegotiate the performance-based payment schedule so the contractor can bill for successfully completed portions of the delayed event or criterion.
Responsibilities
Contracting Officer
Review and approve all performance-based payments for the contract; receive, approve, and transmit payment requests unless another arrangement applies; ensure approvals include the amount, contract information, and appropriation accounts; determine what pre-payment and post-payment reviews are needed; assess contractor risk factors and internal controls; refuse approval until required events or criteria are fully completed; and renegotiate the payment schedule when Government-caused delay makes that appropriate.
Contractor
Complete the specified events or performance criteria before seeking payment; maintain adequate controls and records supporting performance-based payment administration; submit requests consistent with the contract’s milestones and any agency or CO requirements; and understand that payment is earned only by successful performance, not merely by incurring costs or partial progress unless the schedule is adjusted after Government-caused delay.
Payment Office / Payment Official
Receive transmitted, approved performance-based payment requests and process payment in accordance with the approval and applicable payment procedures. If agency regulations or an agreement assign different responsibilities, follow those alternate arrangements.
Agency
Issue regulations or establish agreements, where applicable, that may alter the default routing or handling of performance-based payment requests and approvals. Agencies also support the broader controls and procedures used to protect the Government’s interests.
Practical Implications
Contracting officers should treat performance-based payments as a controlled financing tool, not a routine invoice process; the milestone or criterion must be fully satisfied before approval.
Contractors need to align internal project tracking with the contract’s exact performance events, because partial completion of a cumulative milestone does not justify payment.
Risk matters: a contractor with weak financials, limited experience, or poor controls may face more intensive pre-payment or post-payment scrutiny.
If the Government delays performance, the contractor does not automatically get paid early, but the CO may adjust the schedule to allow billing for completed portions of the delayed work.
A common pitfall is approving payment without confirming that all prerequisite events in a cumulative sequence are complete; another is failing to document the appropriation account and contract details needed for proper payment processing.
Official Regulatory Text
(a) Responsibility . The contracting officer responsible for administering performance-based payments (see 42.302 (a)(13)) for the contract shall review and approve all performance-based payments for that contract. (b) Approval of financing requests . Unless otherwise provided in agency regulations, or by agreement with the appropriate payment official- (1) The contracting officer shall be responsible for receiving, approving, and transmitting all performance-based payment requests to the appropriate payment office; and (2) Each approval shall specify the amount to be paid, necessary contractual information, and the appropriation account(s) (see 32.1004 (c)) to be charged for the payment. (c) Reviews . The contracting officer is responsible for determining what reviews are required for protection of the Government’s interests. The contracting officer should consider the contractor’s experience, performance record, reliability, financial strength, and the adequacy of controls established by the contractor for the administration of performance-based payments. Based upon the risk to the Government, post-payment reviews and verifications should normally be arranged as considered appropriate by the contracting officer. If considered necessary by the contracting officer, pre-payment reviews may be required. (d) Incomplete performance . The contracting officer shall not approve a performance-based payment until the specified event or performance criterion has been successfully accomplished in accordance with the contract. If an event is cumulative, the contracting officer shall not approve the performance-based payment unless all identified preceding events or criteria are accomplished. (e) Government-caused delay . Entitlement to a performance-based payment is solely on the basis of successful performance of the specified events or performance criteria. However, if there is a Government-caused delay, the contracting officer may renegotiate the performance-based payment schedule to facilitate contractor billings for any successfully accomplished portions of the delayed event or criterion.