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Current as of October 02, 2022 | Updated by FindLaw Staff
When considering the use of a quality, performance, or schedule incentive, the following guidance applies:
(1) A positive incentive is generally not appropriate unless—
(i) Performance above the target (or minimum, if there are no negative incentives) level is of significant value to the Government;
(ii) The value of the higher level of performance is worth the additional cost/fee;
(iii) The attainment of the higher level of performance is clearly within the control of the contractor; and
(iv) An upper limit is identified, beyond which no further incentive is earned.
(2) A negative incentive is generally not appropriate unless—
(i) A target level of performance can be established, which the contractor can reasonably be expected to reach with a diligent effort, but a lower level of performance is also minimally acceptable;
(ii) The value of the negative incentive is commensurate with the lower level of performance and any additional administrative costs; and
(iii) Factors likely to prevent attainment of the target level of performance are clearly within the control of the contractor.
(3) When a negative incentive is used, the contract must indicate a level below which performance is not acceptable.
Cite this article: FindLaw.com - Code of Federal Regulations Title 48. Federal Acquisition Regulations System 48.1816.402 Application of predetermined, formula-type incentives. (NASA paragraphs 1, 2 and 3) - last updated October 02, 2022 | https://codes.findlaw.com/cfr/title-48-federal-acquisition-regulations-system/cfr-48-1816-402/
FindLaw Codes may not reflect the most recent version of the law in your jurisdiction. Please verify the status of the code you are researching with the state legislature or via Westlaw before relying on it for your legal needs.
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