FAR 52.216-8—Fixed Fee.
Plain-English Summary
FAR 52.216-8, Fixed Fee, tells the parties how the contractor’s fixed fee is to be paid under cost-reimbursement type contracting arrangements. It covers the basic entitlement to the fixed fee stated in the Schedule, the timing and method of fee payment, the Government’s authority to withhold a reserve to protect its interests, and the conditions for releasing withheld fee. It also addresses two different release thresholds tied to indirect cost rate administration: a mandatory release of 75 percent of withheld fee after the contractor submits an adequate certified final indirect cost rate proposal for the year of physical completion, and a discretionary release of up to 90 percent based on the contractor’s past performance in submitting and settling final indirect cost rate proposals. In practice, this clause is important because it links fee payment to the contractor’s compliance with closeout and indirect cost settlement requirements, not just to performance of the work. It gives contracting officers leverage to ensure timely final vouchers, patent and royalty reporting, and indirect cost rate submissions, while giving contractors a clear path to recover withheld fee once they meet those obligations.
Key Rules
Fixed fee is payable as scheduled
The Government must pay the contractor the fixed fee stated in the contract Schedule. The clause does not change the amount of fee; it governs how and when that fee is paid.
Contracting officer may withhold reserve
The contracting officer may withhold a reserve of up to 15 percent of the total fixed fee or $100,000, whichever is less, to protect the Government’s interest. This is a ceiling on the reserve, not a requirement to withhold the maximum amount.
Seventy-five percent release is mandatory
The contracting officer shall release 75 percent of all fee withholds after receiving an adequate certified final indirect cost rate proposal for the year of physical completion, if the contractor has otherwise satisfied contract terms and conditions. Required conditions include final patent and royalty reports and no delinquency in final vouchers on prior years’ settlements.
Additional release up to ninety percent is discretionary
The contracting officer may release up to 90 percent of the fee withholds based on the contractor’s past performance in submitting and settling final indirect cost rate proposals. This is permissive and depends on the contracting officer’s judgment.
Closeout compliance affects fee release
Fee release is tied to administrative closeout obligations, not just technical completion of the work. Failure to submit required reports, vouchers, or adequate indirect cost proposals can delay release of withheld fee.
Responsibilities
Contracting Officer
Insert the clause when prescribed, establish the fixed fee payment terms in the Schedule, decide whether to withhold a reserve and in what amount up to the clause limit, and release withheld fee when the required conditions are met. The contracting officer must also evaluate whether the contractor qualifies for up to 90 percent release based on past performance.
Contractor
Perform the contract for the agreed fixed fee, submit the certified final indirect cost rate proposal for the year of physical completion, provide final patent and royalty reports, and remain current on final vouchers for prior years’ settlements. The contractor must satisfy these conditions to obtain release of withheld fee.
Government
Pay the fixed fee in accordance with the Schedule and administer fee withholding and release consistent with the clause. The Government must use the reserve only to protect its interest and not exceed the stated withholding limits.
Practical Implications
This clause creates a strong incentive for contractors to close out indirect cost rates quickly and accurately, because fee can remain withheld until those submissions are made.
A common pitfall is assuming that completion of the technical work automatically triggers full fee payment; in reality, final administrative submissions can control release timing.
Contracting officers should track whether the contractor has submitted an adequate certified final indirect cost rate proposal for the year of physical completion, because that submission is the key trigger for the mandatory 75 percent release.
Contractors should also watch for patent and royalty reporting obligations and any delinquent final vouchers on prior settlements, since either issue can block release.
The discretionary path to 90 percent release rewards good historical performance, so contractors with strong rate proposal discipline may recover more fee earlier, but only if the contracting officer chooses to grant it.
Official Regulatory Text
As prescribed in 16.307 (b) , insert the following clause: Fixed Fee (Jun 2011) (a) The Government shall pay the Contractor for performing this contract the fixed fee specified in the Schedule. (b) Payment of the fixed fee shall be made as specified in the Schedule; provided that the Contracting Officer withholds a reserve not to exceed 15 percent of the total fixed fee or $100,000, whichever is less, to protect the Government’s interest. The Contracting Officer shall release 75 percent of all fee withholds under this contract after receipt of an adequate certified final indirect cost rate proposal covering the year of physical completion of this contract, provided the Contractor has satisfied all other contract terms and conditions, including the submission of the final patent and royalty reports, and is not delinquent in submitting final vouchers on prior years’ settlements. The Contracting Officer may release up to 90 percent of the fee withholds under this contract based on the Contractor’s past performance related to the submission and settlement of final indirect cost rate proposals. (End of clause)