TITLE VIII--ACQUISITION POLICY, ACQUISITION MANAGEMENT, AND RELATED MATTERS 

Subtitle G--Other Matters

P. L. 118-31

SEC. 874. PILOT PROGRAM TO INCENTIVIZE PROGRESS PAYMENTS.

(a) Pilot Program.--The Under Secretary of Defense for Acquisition and Sustainment shall establish and implement a pilot program to incentivize contractor performance by paying covered contractors a progress payment rate that is up to 10 percent higher than the customary progress payment rate on a contract-by-contract basis.

(b) Incentive Criteria.--The Under Secretary shall develop and establish clear and measurable criteria for the payment to contractors of higher progress payments as described in subsection (a), including criteria for qualifying for such payments and the amount of such payments.

(c) Applicability.--The Under Secretary shall apply the criteria established under subsection (b) and any associated incentive on a contract-by-contract basis when determining whether to pay a contractor a higher progress payment under the pilot program established under subsection (a) and the amount of such payment.

(d) Participation Voluntary.--Participation in the pilot program established under subsection (a) shall be on a voluntary basis.

(e) Notice and Comment.--The Under Secretary shall issue the regulations implementing the pilot program established under subsection (a) and establishing the criteria required by subsection (b) after notice and an opportunity for public comment of not more than 30 days.

(f) Report.--Not later than September 30, 2024, and annually thereafter, the Under Secretary for Acquisition and Sustainment shall submit to the Committees on Armed Services of the Senate and House of Representatives a report on the implementation and activities of the pilot program established under subsection (a), including a comprehensive list of contractors that received increased progress payments under the pilot program and the contracts with respect to which such increased progress payments were made.

(g) Definitions.--In this section:

(1) Covered contractor.--The term ``covered contractor'' means a contractor of the Department of Defense that is eligible for progress payments under section 3804 of title 10, United States Code.

(2) Customary progress payment rate.--The term ``customary progress payment rate'' refers to the rate of progress payments provided for under section 3804 of title 10, United States Code, and payable in accordance with the applicable provisions of the Federal Acquisition Regulation and the Defense Federal Acquisition Regulation Supplement.

(3) Under secretary.--The term ``Under Secretary'' means the Under Secretary for Acquisition and Sustainment.

(h) Sunset.--

(1) In general.--Except as provided by paragraph (2), the authority to carry out the pilot program established under subsection (a) shall terminate on January 1, 2029.

(2) Existing contracts.--Notwithstanding paragraph (1), a contractor that the Under Secretary determines under the pilot    program established under subsection (a) shall be paid a higher progress payment under such pilot program with respect to a contract in effect as of the date described in paragraph (1) shall receive such higher progress payments until the earlier of--

(A) the termination or expiration of the contract; or

(B) the date on which the contractor becomes ineligible for progress payments or higher progress payments under such pilot program.

Sec. 874--Pilot program to incentivize progress payments

The Senate amendment contained a provision (sec. 817) that would establish a pilot program to incentivize the progress payment rate that large businesses are eligible for by up to 10 additional percentage points.

The House bill contained no similar provision.

The House recedes with an amendment that would establish this as an opt-in pilot program to provide flexibility for industry to choose to participate or not, and to have the Department of Defense establish clear and measurable criteria for incentivizing the higher progress payment rate.

S. Rept. 118-58

Pilot program to incentivize progress payments (sec. 817)

The committee recommends a provision that would establish a pilot program to incentivize the progress payment rate that large businesses are eligible for by up to 10 additional percentage points. The committee recognizes the importance of cash flow to businesses large and small participating in the defense industrial base. The committee believes an opportunity exists to provide additional cash flow to businesses contingent on favorable past performance on contracting goals.