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    Can the option period 1 use FY 2010 AF O&M funds for the entire option period or can the funds only be used in option period one for services rendered up to 30SEP10? Would this violate the 12 month rule for AF O&M is service were billed to the FY 10 funds in Option period one beyond 30 SEP10?


    Answer

    1. The FAR references quoted below in pertinent part are applicable to this response.

    FAR 32.703-3 -- Contracts Crossing Fiscal Years
    (a) A contract that is funded by annual appropriations may not cross fiscal years, except in accordance with statutory authorization …, and paragraph (b) of this subsection), … .

    (b) The head of an executive agency except NASA, may enter into a contract, exercise an option, or place an order under a contract for severable services for a period that begins in one fiscal year and ends in the next fiscal year if the period of the contract awarded, option exercised, or order placed does not exceed one year (10 U.S.C. 2410a and 41 U.S.C. 2531). Funds made available for a fiscal year may be obligated for the total amount of an action entered into under this authority.

    FAR 37.106 -- Funding and term of service contracts
    (a) When contracts for services are funded by annual appropriations, the term of contracts so funded shall not extend beyond the end of the fiscal year of the appropriation except when authorized by law (see paragraph (b) of this section for certain service contracts, … , and 32.703-3 for contracts crossing fiscal years).

    (b) The head of an executive agency, except NASA, may enter into a contract, exercise an option, or place an order under a contract for severable services for a period that begins in one fiscal year and ends in the next fiscal year if the period of the contract awarded, option exercised, or order placed does not exceed one year (10 U.S.C. 2410a). Funds made available for a fiscal year may be obligated for the total amount of an action entered into under this authority.

    2. The following reference quoted below in pertinent part is also applicable to this response:

    GAO-04-261SP, Principles of Federal Appropriations Law, Third Edition, Volume 1, Chapter 5 – Availability of Appropriations: Time

    Pages 5-24 & 5-25: [W]here the services are continuing and recurring in nature, the contract is severable. Service contracts that are “severable” may not cross fiscal year lines unless authorized by statute.  Most federal agencies have authority to enter into a 1-year severable service contract, beginning at any time during the fiscal year and extending into the next fiscal year, and to obligate the total amount of the contract to the appropriation current at the time the agency entered into the contract [10 U.S.C. 2410a (applicable to DoD)].

    Page 5-28: [T]here is a fairly simple test that is often helpful in determining whether a given service is severable. [For example], suppose that a service contract is to be performed half in one fiscal year and half in the next. Suppose further that the contract is terminated at the end of the first fiscal year and is not renewed. What do you have? In the case of a window-cleaning contract, you have half of your windows clean, a benefit that is not diminished by the fact that the other half is still dirty. What you paid for the first half has not been wasted. These services are clearly severable.

    3. Assuming that the option effort in question is for “severable services” as described under reference #2 above, then in accordance with FAR 32.703-3 and FAR 37.106, the Contracting Officer may exercise a 12-month option for severable services pursuant to the authority of 10 U.S.C. 2410a pertaining to the military Services, provided that the performance period of the option that begins in one fiscal year and ends in the next fiscal year does not exceed one year. Furthermore, funds made available for FY10 may be obligated for the total amount of the severable services option entered into under this authority.

    4. So in this case, based on the above, the Contracting Officer may exercise an option with a 12-month period of performance for severable services that will cross FY10 and FY11 beginning on 16 Jul 2010 and ending on 15 Jul 2011 using only FY10 funds.

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