D.C. Mun. Regs. r. 27-2406
The contracting officer may use an incentive contract when a firm- fixed-price contract is not appropriate and the required goods or services can be procured at lower costs and, in certain instances, with improved delivery or technical performance, by relating the amount of profit or fee payable under the contract to the contractor's performance.
The contracting officer may use an incentive contract when it is necessary to establish reasonable and attainable targets that are clearly understandable by the contractor, and to provide appropriate incentive arrangements designed to motivate contractor efforts and discourage contractor inefficiency and waste.
When predetermined formula-type incentives on technical performance or delivery are included, increases in profit or fee shall be provided only for achievement that surpasses the targets, and decreases shall be provided for to the extent that targets are not met.
The contracting officer shall apply incentive increases or decreases to performance targets rather than minimum performance requirements.
Incentive contracts may be fixed-price incentive contracts or cost-reimbursement incentive contracts.
Cost-reimbursement incentive contracts shall be subject to the provisions of § 2405 of this chapter. Fixed-price incentive contracts shall be subject to the provisions of § 2408 of this chapter.
D.C. Mun. Regs. r. 27-2406