Since this is considered a supply procurement and not a service can the total time exceed one year for delivery and installation? This contract will be issued in FY12 and not completed until FY14. Does the bona fide need rule come into play in this "hypothetical" procurement?
The answer lies within the DoD FMR, specifically in Vol 3, Chapter 8; and The Contract Attorneys Deskbook, Vol 1, Chapter 4, IV, C.2.b(1) Delivery Exceptions.
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Based upon your "Supply" scenario, I understand that you want to make sure that the Bona Fide Need rule is not violated. Your concern is using FY12 funds for the purchase and installation of equipment that won't be complete until FY14.
In this case, I refer you to DFoD FMR, Vol 3, Chapter 8, 080303:
A. Contracts or Orders for Goods, Supplies, or Services to Meet Bona Fide Need. DoD Components shall determine that the goods, supplies, or services required under contracts entered into, or orders placed obligating an annual or multiple-year appropriation, are intended to meet a bona fide need of the period for which funds were appropriated. Such determinations shall consider estimated current consumption, the requirements that may be foreseen for future years based upon the procurement lead time, authorized stock levels, and authorized mobilization reserves. If, however, a provision of law makes such appropriations available for payments under contracts for specified services for periods beyond the period for which the appropriation otherwise is available, the contract for such services extending into the ensuing period (e.g., fiscal year) may be charged to the appropriation current at the time that the contract is signed.
B. Performance Under Contracts or Orders. Contracts entered into or orders placed for goods, supplies, or services shall be executed only with bona fide intent that the contractor (or other performing activity) shall commence work and perform the contract without unnecessarydelay.
The Contract Attorneys Deskbook, Vol 1, Chapter 4, IV, C.2, Exceptions, states the following:
2. Exceptions. Supply needs of a future fiscal year are the bona fide needs of the subsequent fiscal year, unless an exception applies. Two recognized exceptions are the lead-time exception and the stock-level exception. DOD Reg. 7000.14-R, vol. 3, para. 080303.
a. Stock-Level Exception. Supplies ordered to meet authorized stock levels are the bona fide need of the year of purchase, even if the agency does not use them until a subsequent fiscal year. A bona fide need for stock exists when there is a present requirement for items to meet authorized stock levels (replenishment of operating stock levels, safety levels, mobilization requirements, authorized backup stocks, etc.). To Betty F. Leatherman, Dep’t of Commerce, B-156161, 44 Comp. Gen. 695 (1965); DOD Financial Management Regulation 7000.14-R, vol. 3, chapter 8., para. 080303A.
b. Lead-Time Exception. This exception recognizes that agencies may need and contract for an item in a current FY, but cannot physically obtain the item in the current FY due to the lead time necessary to produce and/or deliver it. There are two variants that comprise the lead time exception.
(1) Delivery Time. If an agency cannot obtain materials in the same FY in which they are needed and contracted for, delivery in the next FY does not violate the Bona Fide Needs Rule as long as the time between contracting and delivery is not be excessive, and the procurement is not be for standard, commercial items readily available from other sources. Administrator, General Services Agency, B138574, 38 Comp. Gen. 628, 630 (1959).
(2) Production Lead-Time. An agency may contract in one FY for delivery and use in the subsequent FY if the item cannot be obtained on the open market at the time needed for use, so long as the intervening period is necessary for the production. Chairman, United States Atomic Energy Commission, B-130815, 37 Comp. Gen. 155 (1957).
In summarizing these two references and applying them to your scenario, you do have a Bona Fide need, and the delivery time variant of the lead time exceptions applies to this supply procurement as long as the procurement is not for standard, commercial items readily available from other sources.