Progress Payments and Performance Based Payments

1. Progress Payments and Performance Based Payments Presenter: Phyllis Cokley Administrative Contracting Officer Defense Contract Management Agency (DCMA) (Harris Corporation, Palm Bay Florida

2. DISCLAIMER This presentation does not implicitly or explicitly represent official positions nor policies of DCMA nor Harris Corporation.

3. Scope of Work • $2,413B Face Value of Contracts • 18,768 Contractors • 325,148 Contracts • $220B Unliquidated Obligations • ACAT 1 and 2 programs: 182 • Flight Operations (1,150 Aircraft/yr) • $136B Gov’t property in plant • $9B Progress Payments • $27B Performance Based Payments DCMA Worldwide AcquisitionImpact 9,764 civilian professionals ACOs, PI, QA, Engr, IS, Prop 900+ locations 47 major field commands Span of Control $1.1B budget authority • $140M reimbursable w/FMS • Combat Support Agency

4. DoD Offers Various Types of Contract Financing • Advance Payments • Commercial Advance and Interim Payments • Progress Payments • Performance Based Payments

5. PROGRESS PAYMENTS: Progress payments are payments made based on the cost incurred by the contractor as work progresses under a contract. When authorized in the contract, DFAS can make payments of 80%* or more of the accumulated costs on certain items. *(In accordance with the terms of the contract.)

6. Common Errors • Funding mismatch between the amounts sited by the Contractor, vice DFAS payment records • Failure to numerically number progress payments • Missing incorrect entries • Misplaced Entries on the Progress Payment request • Typographical Errors

7. PERFORMANCE BASED PAYMENTS • Performance based payment is an alternative to progress payments for contract financing. The financing is based upon specified performance criteria being accomplished versus cost accumulation which is the basis for progress payments.

8. Performance Based Payments • Finance is based upon certain specified criterion, as stated in the contract. • Our office does conduct periodic physical reviews of progress payments. • Payment of a milestone is based upon 100% completion. If the entire event is not completed, there is no partial payment.

9. Performance Based Payments • Method of providing financing to contractors performing under fixed-price, non-commercial contracts, or fixed price items on a mixed type contract • Payments are based upon contractor performance of specified criteria uniquely established for each contract containing Performance Based Payment

10. Performance Based Payments • Performance-Based Payments are NOT Advance Payments • Performance-Based Payments are Not meant to induce contractors to achieve performance levels that exceed contract requirements • Performance Based Payment amounts should represent expenses that contractor can reasonably be expected to incur in order to achieve completion of each defined criteria or event

11. Performance Based Payments • Performance Based Payments Do Not Represent Government Acceptance of Contract Deliverables • Preferred Government financing method when the Contracting Officer finds them practical and the Contractor Agrees to their use.

12. PROGRESS PAYMENT FRAUD • Evans Steel Enterprises • Submitted False Invoices for Its Subcontractors • Indicted for Fraud • Pled Guilty to One count Fraud and Tax Evasion • Plus $100K settlement • Marsh Aviation Co. • Progress is inherent to the concept of progress payment • DCAA review revealed Company was paid for Materials that had not been ordered or received • DCMA Issued Demand for Payment • US Attorney pursued as a Civil Action

13. THANK YOU!