FAR and DFARS › FAR Part 32: Contract Financing › Subpart 32.10
FAR 32.1001 Policy.
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 section states that performance-based payments are the Government's preferred financing method when the contracting officer finds them practical and the contractor agrees. It also explains that these payments are contract financing, not payment for accepted items, are fully recoverable in the event of default, and are not subject to prompt payment interest penalties. The section lists situations where performance-based payments must not be used.
Applies to: Government contracting officers and contractors using performance-based payments as a financing method
What it requires
- Performance-based payments shall be made in accordance with agency policy.
Key terms: performance-based payments · contract financing payments · default · prompt payment · sealed bid procedures
Written by AI from this section's text. A guide, not legal advice: the text below rules.
The text
(a) Performance-based payments are the preferred Government financing method when the contracting officer finds them practical, and the contractor agrees to their use.
(b) Performance-based payments are contract financing payments that are not payment for accepted items.
(c) Performance-based payments are fully recoverable, in the same manner as progress payments, in the event of default.
(d) Performance-based payments are contract financing payments and, therefore, are not subject to the interest-penalty provisions of prompt payment (see Subpart 32.9). These payments shall be made in accordance with agency policy.
(e) Performance-based payments shall not be used for—
(1) Payments under cost-reimbursement line items;
(2) Contracts for architect-engineer services or construction, or for shipbuilding or ship conversion, alteration, or repair, when the contracts provide for progress payments based upon a percentage or stage of completion; or
(3) Contracts awarded through sealed bid procedures.
← 32.1000 Scope of subpart. · 32.1002 Bases for performance-based payments. →
Rule changes for FAR Part 32
- Federal Acquisition Regulation: Inflation Adjustment of Acquisition-Related Thresholds ↗ · final rule 2025-08-27 · effective 2025-10-01
- Federal Acquisition Regulation; Technical Amendments ↗ · final rule 2025-08-07 · effective 2025-08-07
- Federal Acquisition Regulation: Inflation Adjustment of Acquisition-Related Thresholds ↗ · proposed 2024-11-29 · comments due 2025-01-28
Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.