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FAR and DFARS › DFARS Part 216: Types of Contracts › Subpart 216.4

DFARS 216.402-2 Performance incentives.

The codified text (eCFR, as of 2026-10-02). Under the Revolutionary FAR Overhaul ↗, agencies follow class deviations with new text for many parts while the formal rules go through the Federal Register: check the solicitation and your contract's clauses, which rule.

In plain English

This DFARS section tells contracting officers to include solicitation requirements about incentive fees or penalties when a weapon system program manager wants to reward or penalize the contractor for meeting design specification requirements for reliability and maintainability. It matters to contractors because it means the solicitation may contain payment incentives or penalties tied to those design requirements.

Applies to: Contracting officers handling solicitations for weapon system engineering and manufacturing development or production, including embedded software

What it requires

  • Ensure requirements about payment of incentive fees or imposition of penalties are included in the solicitation when the program manager includes provisions for incentive fees or penalties based on reliability and maintainability design specification requirements

Key terms: performance incentives · incentive fees · penalties · reliability and maintainability · design specification requirements

Written by AI from this section's text. A guide, not legal advice: the text below rules.

The text

(1) See PGI 216.402-2 for guidance on establishing performance incentives.

(2) Contracting officers shall ensure requirements about the payment of incentive fees or the imposition of penalties are included in the solicitation for a contract for the engineering and manufacturing development or production of a weapon system, including embedded software, if the program manager or comparable requiring activity official exercising program manager responsibilities includes—

(i) Provisions for the payment of incentive fees to the contractor, based on achievement of design specification requirements for reliability and maintainability of weapons systems under the contract; or

(ii) The imposition of penalties to be paid by the contractor to the Government for failure to achieve such design specification requirements (10 U.S.C. 4328).

← 216.402 Application of predetermined, formula-type incentives. · 216.403 Fixed-price incentive contracts. →

Rule changes for DFARS Part 216

Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.

DFARS 216.402-2 Performance incentives · SpendQuery