1 / 20

Lesson 6: Risk Management of Performance-Based Payments

Lesson 6: Risk Management of Performance-Based Payments. What We Will Learn. Quick review of risk management and how it applies to PBPs Potential increased risk situations . Risk Management . The art of maintaining a balance.

nailah
Download Presentation

Lesson 6: Risk Management of Performance-Based Payments

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Lesson 6:Risk Managementof Performance-Based Payments

  2. What We Will Learn • Quick review of risk management and how it applies to PBPs • Potential increased risk situations DCMA Contract Financing – PBPs

  3. Risk Management • The art of maintaining a balance Facilitating contractor performance to ensure quality, timely product to customers Limiting risk DCMA Contract Financing – PBPs

  4. Risk Management • Review of contractor key processes, such as: • Management of PBP request preparation and submittal • Management of supplier financial condition • Successful completion of performance events DCMA Contract Financing – PBPs

  5. Risk Management: Considerations • Pre-Award Survey • Development of PBP terms • Postaward Orientation Conference • Type of technical evaluations/ validations that must occur DCMA Contract Financing – PBPs

  6. Risk Management (cont’d) • Identify and analyze key areas within the contractor’s PBP process • Are they adequate to calculate, prepare, and substantiate PBPs? DCMA Contract Financing – PBPs

  7. Risk Management (cont’d) • ACO must consider: • Past and current performance and reliability • Experience • Quality of management • Other attributes identified by the CMO PBP Team • Any special circumstances (i.e., Conversion from Progress Payment to PBPs, contract with reduced or suspended PBPs) DCMA Contract Financing – PBPs

  8. Risk Management (cont’d) • See FAR 32.1007(c) for review criteria • Periodic Reviews • Financial condition review is performed in manner similar to Progress Payments • Ensure no encumbrances to property described in paragraph (f) of FAR 52.232-32 DCMA Contract Financing – PBPs

  9. Risk Management Tools • Process proofing • Systems evaluations • Data analysis • Audits DCMA Contract Financing – PBPs

  10. Risk Management Resources • MOCAS • Technical reviews and event completion validations • Review and approval of PBP Request • Liquidation application and adjustment, if appropriate • Payment Verification/Validation DCMA Contract Financing – PBPs

  11. Risk Management (cont’d) • Monitoring of risk includes • Financial Capability Reviews • Subcontractor Payment Consistency • Production Reviews • CMO ongoing analysis and recommendations DCMA Contract Financing – PBPs

  12. Risk Management (cont’d) • ACO should retain the following documentation: • PBP transactions and correspondence • Reports and information (i.e., from DCAA, DACO, other ACOs, and officials, etc.) • Risk analysis • Risk monitoring results • Updates as applicable DCMA Contract Financing – PBPs

  13. Potential Increased Risk Situations • Liquidation errors • Delegation of PBP negotiations • Reduction or suspension of PBPs • Conversions from Progress Payments to PBPs DCMA Contract Financing – PBPs

  14. Conversion: PP to PBP • Contracts cannot contain both Progress Payment (PP) and PBP provisions; however, contracts can be modified to convert from PPs to PBPs • Liquidation schedules and related matters are of primary concern when converting from PP to PBPs DCMA Contract Financing – PBPs

  15. Conversion: PP to PBP (cont’d) • Conversion modification must provide instructions on how to liquidate all unliquidated PPs • Liquidation Options: • Instruct contractor to repay unliquidated PPs • Re-allocate previous PPs via adjustments • Instruct paying office to take offset against first PBP invoice DCMA Contract Financing – PBPs

  16. Conversion: PP to PBP (cont’d) • Liquidation options (continued) • Incorporate previous PPs into the first PBP event DCMA Contract Financing – PBPs

  17. ACO Negotiation of PBPs • PCO may delegate negotiation of: • Performance criteria • Successful event completion • Event value DCMA Contract Financing – PBPs

  18. PBP Reduction-Suspension • ACO may reduce or suspend PBPs when contractor: • Fails to comply with material requirement of the contract • Fails to progress • Becomes financially unsound • Is delinquent in paying subcontractors • Reduction/suspension taken on PBP request DCMA Contract Financing – PBPs

  19. Communicate • ACO should notify the customer if contractors: • Fail to meet scheduled performance event • Jeopardize contract completion due to financial deterioration • Enter into a financial agreement encumbering property title DCMA Contract Financing – PBPs

  20. What We Learned • Risk management techniques • Some situations have increased risk potential • Liquidation errors • Delegation of PBP negotiations • Reduction or suspension of PBPs • Conversions from Progress Payments to PBPs DCMA Contract Financing – PBPs

More Related