---
kind: "section"
citation: "48 C.F.R. § 1816.402"
title: "48"
number: "1816.402"
heading: "Application of predetermined, formula-type incentives. (NASA paragraphs 1, 2 and 3)."
url: "https://uscodex.org/cfr/48/1816.402"
---

# §1816.402. Application of predetermined, formula-type incentives. (NASA paragraphs 1, 2 and 3).


When considering the use of a quality, performance, or schedule incentive, the following guidance applies:

- (1) **A positive incentive is generally not appropriate unless—**
  - (i) Performance above the target (or minimum, if there are no negative incentives) level is of significant value to the Government;
  - (ii) The value of the higher level of performance is worth the additional cost/fee;
  - (iii) The attainment of the higher level of performance is clearly within the control of the contractor; and
  - (iv) **An upper limit is identified, beyond which no further incentive is earned.**
- (2) **A negative incentive is generally not appropriate unless—**
  - (i) A target level of performance can be established, which the contractor can reasonably be expected to reach with a diligent effort, but a lower level of performance is also minimally acceptable;
  - (ii) The value of the negative incentive is commensurate with the lower level of performance and any additional administrative costs; and
  - (iii) Factors likely to prevent attainment of the target level of performance are clearly within the control of the contractor.
- (3) When a negative incentive is used, the contract must indicate a level below which performance is not acceptable.

## Notes

### Amendments

[63 FR 12997, Mar. 17, 1998, as amended at 69 FR 21764, Apr. 22, 2004]

### Authority

Authority: 51 U.S.C. 20113(a) and 48 CFR chapter 1.

### Source

Source: 62 FR 3478, Jan. 23, 1997, unless otherwise noted.

### Amendments

[63 FR 12997, Mar. 17, 1998, as amended at 69 FR 21764, Apr. 22, 2004]