(a) Performance-based payments are the preferred Government financing method when the contracting officer finds them practical, and the contractor agrees to their use.(b) Performance-based payments are contract financing payments that are not payment for accepted items.(c) Performance-based payments are fully recoverable, in the same manner as progress payments, in the event of default.(d) Performance-based payments are contract financing payments and, therefore, are not subject to the interest-penalty provisions of prompt payment (see Subpart 32.9). These payments shall be made in accordance with agency policy.(e) Performance-based payments shall not be used for-(1) Payments under cost-reimbursement line items;(2) Contracts for architect-engineer services or construction, or for shipbuilding or ship conversion, alteration, or repair, when the contracts provide for progress payments based upon a percentage or stage of completion; or(3) Contracts awarded through sealed bid procedures. 72 FR 73220 , Dec. 26, 2007