The language in the 2017 NDAA Sec 831, stating “Performance-based payments shall not be conditioned upon costs incurred in contract performance but on the achievement of performance outcomes …” has finally been incorporated into the DFARS (DFARS Case 2019-D002) with an effective date of April 8, 2020. The rule removes restrictions in DFARS 232.1001(a), DFARS 252.232-7012(b)(i), and DFARS 252.232-7013(b)(i) that limited performance-based payments to amounts not greater than costs incurred up to the time of payment. However, the rule does not alter the requirement for subcontractors/vendors to report costs incurred when requesting performance-based payments. The rule also removed the requirement of the subcontractor/vendor’s accounting system to comply with Generally Accepted Accounting Principles, as evidenced by audited financial statements.
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