I am afraid that I do not follow the logic. I am hung up on the language of the clause that states "(b)(i) At no time shall cumulative performance-based payments exceed cumulative contract cost incurred under this contract." The statute states that "Performance-based payments shall not be conditioned upon costs incurred in contract performance". Black's Law defines condition as "A clause in a contract or agreement which has for its object to suspend, rescind, or modify the principal obligation." The negotiated payment amount is modified when the amount paid is limited to incurred costs irrespective of the negotiated amounts. Thus, my concern that the DFARS clause is contrary to the plain language of the statute.
Additional review raises more issues. FAR 32.1001(e) prohibits the use of performance-based payments for cost-reimbursement line items and since the DFARS clauses do not expressly reject this, I assume that it is a restriction followed by DoD COs and is only applied to FFP type contracts. DFAR 252.232-7012 Performance-Based Payments–Whole-Contract Basis (a) states "Performance-based payments shall form the basis for the contract financing payments provided under this contract, and shall apply to the whole contract." A contract will identify a final achievement of acceptance or a similar performance based finishing point. Can a contractor rely on the definition of contract financing payment in FAR 32.001 that says such payments end before acceptance to get a final payment that is not limited to costs incurred despite the clause applying to the whole contract? If so, how does the -7012 clause adjust the final payment if the contractor has underan the FFP contract?