What is one key distinction between Performance Based Payments (PBP) and Progress Payments?

The distinction between Performance Based Payments (PBP) and Progress Payments primarily lies in the basis on which these payments are made. Performance Based Payments are designed to reimburse the contractor upon the completion of specific milestones or performance metrics as defined in the contract. This approach aligns payment with the achievement of tangible results, promoting accountability and ensuring that objectives are met before payment is disbursed.

On the other hand, Progress Payments are based on incurred costs. This means that payments are made based on the expenses the contractor has already incurred in relation to the contract. This approach does not necessarily tie payments to specific performance metrics or milestones but rather to the ongoing costs of the project.

Therefore, the focus on milestone completion for PBP versus cost incurred for Progress Payments makes option B the correct choice, as it highlights the fundamental difference in how these payment systems operate within contracting practices.