A contract requirement is a set of conditions that must be met in order for a contract to be valid. The term 'PEN' is an acronym for 'Performance, Evaluation, and Negotiation, ' which are three key components of a contract requirement. Performance refers to the ability of the parties involved to fulfill their obligations under the contract. Evaluation is the process of assessing the performance of the parties to ensure that they are meeting the requirements of the contract. Negotiation is the process of discussing and agreeing on the terms of the contract. Together, these three components form the basis of a contract requirement.