Creative incentive?

[Guest Vern Edwards]

Darby:

Thanks.

Jacques:

If you don't want to continue I'll let it go at that.

Everyone:

Someone described this to me. I don't have more details. I just wanted reactions. I agree with Seeker and Darby that what has been described as an incentive is nothing more than a plain old FFP contract. I wanted to see if anyone else thought the same way.

[Guest Vern Edwards]

I was wondering about the default issue as well. Is it possible to be in default for failing to pass a pass/fail incentive?

Yes.

How can an incentive be a contract requirment that one can default on?

It depends on how the incentive is written.

The $0 dollar is for minimum performance - failed or no performance. I guess you get what you pay for. If I invoice you $0 am I in default?

Invoicing does not put someone in default.

The incentive is for maximum performance - passed or acceptable performance. Can an incentive even be pass/fail, all-or-none basis or must it be for surpassing a level/target of performance.

An incentive can be pass/fail or all or none. An incentive can be whatever the parties make it.

What kind of contract is this in FAR Part 16 - nothing really fits.

The contract is for the performance of a service. It is not a task order contract.

I'm not playing Q & A anymore. I posted a description for comment. If you want to make a comment, make it.

[bob7947]

RFP for tradeoff process source selection for firm-fixed-price services says offerors will be evaluated on relative merits of proposed performance incentive. Offeror X proposes price of $0.00 with proposed incentive that it be paid a stipulated amount upon 100 percent successful performance. Agency thinks its a great idea and assigns extra credit.

Thoughts?

I like the offer. I have a contract with a base price of $0.00 with the offeror to do 99.9999999% of the work. If the offeror does 100 percent of the work, he gets a 100 percent performance bonus.

[Guest carl r culham]

Following the comments, all that arise in my own mind, save one. Does this emmulate a "reqirements contract"? I understand no TO/DOs would be issued but just wondering about the "consideration" part. Left field no doubt but still just wondering?

[formerfed]

Everyone:

Someone described this to me. I don't have more details. I just wanted reactions. I agree with Seeker and Darby that what has been described as an incentive is nothing more than a plain old FFP contract. I wanted to see if anyone else thought the same way.

The somewhat different part is the lack of partial payments. It appears the contractor doesn't get anything until final acceptance. So the incentive is the contractor doesn't get paid a penny until the Government is completely satisfied.

[Guest Vern Edwards]

How is not getting paid a penny until the government is satisfied an incentive to the contractor? How is that any different than any FFP contract without contract financing?

[formerfed]

Vern,

I'm just thinking the standards for partial payments informally are less stringent. Things get accepted and paid for assuming/hoping improvments happen in the next period. Those also tend to get forgotten with time. But with everything riding on one payment at the end, the contractor is motivated to make everything right.