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    If furniture is bought using FY12 funds for new building to be completed in NOV of FY13, would we be in violation of the bona fide need rule? Can you explain lead time?


    Answer

    The command comptroller and legal counsel should be consulted before obligating FY12 funds for the purchase of furniture.  Using FY12 appropriated funds for commercially available furniture that is not needed and can't be used until sometime after a new building is ready for occupation in FY13, may be considered a violation of the bona fide need rule. Asking the vendor to delay delivery to date TBD in FY13 is clear indication that the furniture is   not a bona fide need of FY12. The furniture would be a legitimate need of FY13 and properly funded with an FY 13 appropriation. The "money (funding) that just became available to buy furniture" should also be scrutinized for original purpose. Did congress appropriate these funds for the purchase of furniture?
     
    Lead-times Definitions:
    Administrative Lead-time (ALT). This is the amount of time required to complete the administrative actions leading to contract award. In most cases, ALT actions do not require funding and can therefore be accomplished prior to October 1, at which time the next fiscal year's funding is appropriated. The 
     ALT is used to forecast contract awards. Longer lead-times require that a larger quantity be purchased to support yearly requirements. Lead-times should therefore reflect an accurate assessment of the time required to process the   administrative actions. Production Lead-time (PLT). This is the amount of time required by a contractor to produce the first item after contract award until deliveries begin. Procurement Lead-time. This is the total of ALT and PLT. When used to determine quantity requirements, calculations should begin when   the first ALT action begins.
     
    Bona Fide Need Rule
     
    U.S. Code, Title 31, Section 1502(a) states that, "The balance of an appropriation or fund limited for obligation to a definite period is available only for payment of expenses properly incurred during the period of availability, or to complete contracts properly made within that period of availability and obligated consistent with section 1501 of this title."
     
    Simply stated, the Bona Fide Need rule (law) requires appropriated funds be used only for goods and services for which a need arises during the period of that appropriation's availability for obligation. Strict interpretation of the law - combined with appropriation act language - means that the need may arise anytime during the period the appropriation act states the funds are available (e.g., two years for RDT&E or three years for all procurement accounts except Ship Building and Conversion, Navy). A Service or Defense Agency may, however, at its discretion, limit the "period of the appropriation's availability" to the first year of the appropriations availability. When a Service has placed such a limitation on the use of an appropriation beyond the first year, experience has shown this is usually for RDT&E and specifically for that part of the appropriation intended for activity operations (e.g., TDY and office supplies) rather than for actual R&D efforts, which the Service would normally allow. While this might be considered more conservative than intended by Congress, it is within the Service or Agency prerogative to be more restrictive than what is allowed by the U.S. Code.
     
    Supply items: Generally, bona fide need is determined by when the government actually requires (i.e., will be able to use) the supplies being acquired.

    Supply needs of a future year are the bona fide need of the year in which they are
    required, unless an exception applies.
    - Lead-time exception: Agencies are permitted to consider normal production leadtime in determining bona fide need for a purchase. For example, if the normal lead-time for an item is 30 days, the government may obligate FY 11 funds for an item required on or before 30 Oct 11 (i.e., 30 days after the end of FY 11).
     
    Please see/review DOD Financial Management Regulation 7000.14-R, VOLUME 11A, CHAPTER 18 "NON-ECONOMY ACT ORDERS" for additional pertinent information. 
     

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