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


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.

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