FAR 52.216-9—Fixed Fee-Construction.
Plain-English Summary
FAR 52.216-9, Fixed Fee-Construction, tells the parties how the fixed fee is paid on a construction contract that uses a fixed-fee arrangement. It covers the contractor’s entitlement to the stated fixed fee, installment payments tied to percentage of completion, the contracting officer’s authority and duty to withhold part of the fee as a reserve, and the conditions for releasing withheld fee. It also addresses the timing and documentation needed for release, including an adequate certified final indirect cost rate proposal for the year of physical completion, satisfaction of all other contract terms and conditions, submission of final patent and royalty reports, and the contractor’s status on final vouchers for prior years’ settlements. In practice, this clause protects the Government by tying fee payments to progress and by holding back a portion until closeout and indirect cost matters are resolved, while still allowing partial fee payments during performance. It is especially important for contractors because fee cash flow depends on accurate progress estimates, timely closeout submissions, and compliance with all contract reporting requirements. For contracting officers, it provides a structured mechanism to balance payment administration with risk control and performance incentives.
Key Rules
Fixed fee is contractually owed
The Government must pay the contractor the fixed fee stated in the Schedule. The amount is fixed by the contract, not adjusted based on actual cost performance, subject to the clause’s withholding and release provisions.
Fee paid in completion-based installments
The fixed fee is not paid all at once; it is paid in installments based on the percentage of completion of the work. Those percentages come from estimates submitted by the contractor and approved by the contracting officer.
Withholding reserve protects the Government
The contracting officer must withhold a reserve of up to 15 percent of the total fixed fee or $100,000, whichever is less. This reserve is intended to protect the Government’s interest during performance and closeout.
Release requires closeout compliance
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, provided the contractor has met all other contract terms and conditions, including final patent and royalty reports, and is not delinquent on final vouchers for prior years’ settlements.
Additional release may be based on past performance
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 discretionary and depends on the contractor’s demonstrated timeliness and cooperation.
Final indirect cost proposal is a trigger
The clause makes the certified final indirect cost rate proposal for the year of physical completion a key milestone for fee release. Without that submission, the contractor generally cannot expect the mandatory 75 percent release of withheld fee.
Responsibilities
Contracting Officer
Approve percentage-of-completion estimates used for installment fee payments; withhold the required reserve, not exceeding 15 percent of total fixed fee or $100,000, whichever is less; determine whether the contractor has submitted an adequate certified final indirect cost rate proposal and satisfied all other conditions; release 75 percent of fee withholds when the mandatory conditions are met; decide whether to release up to 90 percent based on the contractor’s past performance.
Contractor
Perform the construction work to earn the fixed fee; submit completion estimates for approval to support installment payments; provide an adequate certified final indirect cost rate proposal for the year of physical completion; satisfy all contract terms and conditions; submit final patent and royalty reports; remain current on final vouchers for prior years’ settlements to avoid delaying fee release.
Government
Pay the fixed fee in accordance with the contract and clause requirements; retain the authorized reserve to protect its interest; release withheld fee when the contractual conditions for release are met.
Practical Implications
This clause affects cash flow throughout performance because fee is paid incrementally and part of it is held back until closeout. Contractors should plan for the withheld reserve and not assume full fee will be available at substantial completion.
The quality and timeliness of completion estimates matter because they drive installment payments. Inaccurate or unsupported estimates can delay approval and slow fee payment.
Closeout discipline is critical. Late certified final indirect cost rate proposals, missing patent or royalty reports, or delinquent final vouchers on prior settlements can delay release of withheld fee even if the construction work is complete.
The contracting officer has some discretion to release up to 90 percent of withholds based on past performance, so contractors with a strong record of timely indirect cost submissions may recover fee faster.
A common pitfall is confusing physical completion with administrative completion. Even after the work is done, fee release may still depend on indirect cost proposal submission and other closeout requirements.
Official Regulatory Text
As prescribed in 16.307 (c) , insert the following clause: Fixed Fee-Construction (Jun 2011) (a) The Government shall pay to the Contractor for performing this contract the fixed fee specified in the Schedule. (b) Payment of the fixed fee shall be made in installments based upon the percentage of completion of the work as determined from estimates submitted to and approved by the Contracting Officer, but subject to the withholding provisions of paragraph (c) of this section. (c) The Contracting Officer shall withhold 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)