Overview
FAR 32.703 outlines the requirements for obligating funds to contracts, detailing the distinctions between full and incremental funding and the specific conditions under which contracts may be initiated or performed across fiscal years. It serves as a regulatory safeguard to ensure the government does not obligate funds it does not have, while providing flexibility for continuous services and operations.
Key Rules
- Funding Types:
- Fully Funded: Funds must cover the total price (fixed-price) or estimated cost plus fee (cost-reimbursement).
- Incrementally Funded: Funds are obligated only to cover the specific amount allotted and the corresponding increment of fee.
- Availability of Funds:
- The Contracting Officer (CO) may initiate actions before funds are available for the new fiscal year only for operations, maintenance, and continuing services, provided the contract includes clause 52.232-18.
- For IDIQ or requirements contracts, any specified minimum quantities must be certain to be ordered in the initial fiscal year.
- Performance Prohibition: The government cannot accept supplies or services under a "conditioned" contract until the CO provides written notice to the contractor that funds are officially available.
- Crossing Fiscal Years:
- Generally, contracts funded by annual appropriations cannot cross fiscal years unless for non-severable end products (e.g., a single report/study).
- The One-Year Rule: Agencies (except NASA) may award severable service contracts that cross fiscal years as long as the period of performance does not exceed 12 months.
Practical Implications
- Risk Mitigation: Contractors should never begin performance on a contract conditioned on the "availability of funds" until they receive formal written notification from the CO, or they risk non-payment and Anti-Deficiency Act issues.
- Operational Continuity: The "one-year rule" for severable services allows agencies to maintain seamless support for routine operations (like janitorial or IT services) even if the contract start date does not align with the October 1st start of the federal fiscal year.