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FAC Number: 2022-06
Effective Date: 05/26/2022

16.402-4 Structuring multiple-incentive contracts.

A properly structured multiple-incentive arrangement should-

      (a) Motivate the contractor to strive for outstanding results in all incentive areas; and

      (b) Compel trade-off decisions among the incentive areas, consistent with the Government’s overall objectives for the acquisition. Because of the interdependency of the Government’s cost, the technical performance, and the delivery goals, a contract that emphasizes only one of the goals may jeopardize control over the others. Because outstanding results may not be attainable for each of the incentive areas, all multiple-incentive contracts must include a cost incentive (or constraint) that operates to preclude rewarding a contractor for superior technical performance or delivery results when the cost of those results outweighs their value to the Government.

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