For example, FAR 52.216-8(b) formerly read as follows:
(b) Payment of the fixed fee shall be made as specified in the Schedule; provided that after payment of 85 percent of the fixed fee, the Contracting Officer may withhold further payment of fee until a reserve is set aside in an amount that the Contracting Officer considers necessary to protect the Government’s interest. This reserve shall not exceed 15 percent of the total fixed fee or $100,000, whichever is less.
Effective June 30, 2011, FAR 52.216-8(b) now reads:
(b) Payment of the fixed fee shall be made as specified in the Schedule; provided that the Contracting Officer withholds a reserve not to exceed 15 percent of the total fixed fee or $100,000, whichever is less, to protect the Government's interest.
This change will likely have significant cash flow ramifications for many contractors.
The other significant change to this clause affects the timing for releasing a portion of the amount of fee withheld. Under the old clause, the contracting officer shall release 75 percent of the fee withholds after receipt of a certified final indirect cost rate proposal covering the year of physical completion of the contract. Under the new clause, the word "adequate" was added. We will discuss that change tomorrow.