DOD Proposed Rule Would Eliminate Provisional Award Fee And Defer Substantial Award Fee Payments

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The Department of Defense recently proposed a rule that would revise guidance for award-fee evaluations to require:

*The incorporation of award-fee plans into all DOD award-fee contracts,

*The use of objective criteria to the maximum extent possible to measure contract performance including, where appropriate, use of formula-based incentives rather than or in addition to an award fee,

*The elimination of provisional award-fee payments, i.e., payments made prior to evaluation of contractor performance, which have been allowed since 2003 in accordance with DFARS 216.405-2,

*and Reservation of at least 40% of the available award fee pool for payment after the final evaluation period.

75 Fed. Reg. 22728-29 (April 30, 2010).

As we will discuss below, the proposed rule – which will impose significant financial burdens on contractors – represents yet another attempt by the Government to punish contractors for the Government’s inability to discipline itself. One can only hope – and it is likely a futile hope – that the Government will forward this proposed rule to the trash can of bad ideas.

Please see full article below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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