48 CFR §32.1001

1. (a)Performance-based payments are the preferred Government financing method when the contracting officer finds them practical, and the contractor agrees to their use.
2. (b)Performance-based payments are contract financing payments that are not payment for accepted items.
3. (c)Performance-based payments are fully recoverable, in the same manner as progress payments, in the event of default.
4. (d)Performance-based payments are contract financing payments and, therefore, are not subject to the interest-penalty provisions of prompt payment (see Subpart 32.9). These payments shall be made in accordance with agency policy.
5. (e)Performance-based payments shall not be used for—
   1. (1)Payments under cost-reimbursement line items;
   2. (2)Contracts for architect-engineer services or construction, or for shipbuilding or ship conversion, alteration, or repair, when the contracts provide for progress payments based upon a percentage or stage of completion; or
   3. (3)Contracts awarded through sealed bid procedures.