In a new rule that amends the Defense Federal Acquisition Regulation Supplement defense contractors performing successfully under cost-plus-award-fee contracts may be able to receive a “provisional” payment of award fees with an evaluation period prior to final evaluation for that period.  The provisional payments are to be made no more than monthly and are based on successful evaluation for the prior evaluation period and the expectation that payment of provisional fee amounts will not reduce overall effectiveness of the award fee.  The rule limits the provisional award fee payments to no more than (1) 50 percent for the initial fee period and (2) 80 percent of the evaluation score for the prior evaluation times the award fee available for the current period.  Lower provisional award amounts may be established.  If overpayment does occur, the contractor must return the overpayment to the government.

The rule is intended to be purely discretionary where the DOD contracting officer has the option to make the provisional award fee and the discretion on where and how much it will be.  The new provisions apply to solicitations issued on or after January 13, 2004 but the CO has the discretion to apply the authority to existing contracts (Fed. Reg. 64,561).

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