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Clauses · FAR · Payment and financing

FAR 52.216-10 Incentive Fee

Does the regulation require it to flow down?

No

No flow-down paragraph in the text (verified); the prime includes it when it wants to share cost risk with the sub — the incentive formula only works if it's on paper in the subcontract

A clause can reach your subcontract without a mandate. Once it is in your document, it is a contract term all the same. The missing mandate is a fact about the regulation. It is not a ruling on your order.

Checked against acquisition.gov on 2026-08-04 · edition JUN 2011 · base v0.9.3 Read the text ↗

What it makes you produce

One item for your checklist.

  1. Nothing to send now

    It does not hold the order. It decides what money moves later — what you can claim, what can be claimed from you, and what can be held back — and none of that changes after signature.

    • Nothing goes out now — under paragraph (e)(1) the fee moves off the target by the share ratio for every dollar the total allowable cost falls under or over the target cost, between the minimum and maximum in the Schedule, and paragraph (c)(2) holds back a reserve of up to 15 percent of the total incentive fee or $100,000, whichever is less

      FAR 52.216-10(c)(2) and (e)(1)

When it is used

Enters cost-plus-incentive-fee contracts (prescribed at 16.307(d)). At the sub level, it appears when the prime structures the subcontract as CPIF: a target fee adjusted by formula as final cost lands below or above target cost, within a negotiated minimum and maximum.

Read closely

The withheld amount moves on the final indirect cost rate proposal that FAR 52.216-7(d)(2)(i) asks for. Paragraph (d) puts any equitable adjustment to the target cost, target fee, minimum fee and maximum fee into a supplemental agreement, so the formula is worth reading before signature rather than after the first modification.

The 7 templates that name it, with the line
155CORPDOC 4A — FAR/DFARS Flowdown Provisions for Cost-Reimbursement/T&M Subcontracts under a DoD Prime ContractLockheed Martinline 169233RTX Flowdown of U.S. Government Contract Clauses Under U.S. Government ContractsRTXline 1165105Raytheon TC-002 — Supplement 1: Government Contract Provisions from the FARRTXline 24312Boeing GP4 — General Provisions, Cost Reimbursement Contract under U.S. Government Prime ContractBoeingline 197168Northrop Grumman CTM-P-ST-004 — U.S. Government Cost Reimbursement Order (Not for Commercial Products and Services)Northrop Grummanline 2275240L3Harris LGL-50.F1 — General T&C and Flowdown Clauses for Other Than Commercial Products/Services under a U.S. Government ContractL3Harrisline 1625273BAE Systems Inc. USGOVA — FAR/DFARS Flow Down Provisions for Subcontracts/Purchase Orders under a U.S. Government (DoD) Prime ContractBAE Systemsline 841

Source: acquisition.gov, FAR 52.216-10 and 16.307(d) (verified 2026-08-04)

This is research, not legal advice. It states what the regulation says about this clause and cites the paragraph behind it. It does not rule on your order, and it does not rule on whether a prime's markings are correct.