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    Will we run afoul of the Bona Fide Need rule by using FY12 and FY13 dollars to support an effort extending from FY13-FY15 or does the Bona Fide Need nonseveral services exception apply?


    Answer

    1. The document referenced below and quoted in pertinent part is applicable to this response.

    2012 FISCAL LAW DESKBOOK
    Contract and Fiscal Law Department, The Judge Advocate General’s Legal Center and School, United States Army, Charlottesville, Virginia
    http://www.acq.osd.mil/dpap/ccap/cc/jcchb/Files/Topical/Funding_Docs/guides/2012_Fiscal_Law_Deskbook.pdf

    CHAPTER 1 – INTRODUCTION TO FISCAL LAW
    III. LIMITATIONS ON THE USE OF APPROPRIATED FUNDS
    C. Limitations -- Time.
    1. Appropriations are available for limited periods. An agency must incur a legal obligation to pay money within an appropriation’s period of availability. If an agency fails to obligate funds before they expire, they are no longer available for new obligations.
      a. Expired funds retain their “fiscal year identity” for five years after the end of the period of availability. During this time, the funds are available to adjust existing obligations or to liquidate prior valid obligations, but are not available for new obligations. [31 U.S.C. § 1553(a). See also DOD FMR, Vol. 3, Ch. 10, para. 100201.A.]

    CHAPTER 3 – AVAILABILITY OF APPROPRIATIONS AS TO TIME
    III. THE BONA FIDE NEEDS RULE
    B. The Bona Fide Needs Rule. Essentially, the bona fide needs rule is a timing rule that requires both the timing of the obligation and the bona fide need to be within the fund’s period of availability. DoD FMR, Vol. 3, Ch. 8, para. 080303.A; DFAS-IN Reg. 37-1, para. 070501.

    E. Services
    1. General Rule: The Bona Fide Need for services does not arise until the services are rendered. Theodor Arndt GmbH & Co., B-237180, Jan. 17, 1990, 90-1 CPD ¶ 64; EPA Level of Effort Contracts, B-214597, 65 Comp. Gen. 154 (1985). Thus, in general, services must be funded with funds current as of the date the service is performed.

    3. Non-severable Services:
      b. The Government must fund non-severable services contracts with dollars available for obligation at the time the contract is executed. Contract performance may cross fiscal years. DFAS-IN 37-1, tbl. 8-1; Incremental Funding of U.S. Fish and Wildlife Service Research Work Orders, B-240264, 73 Comp. Gen. 77 (1994) (fish and wildlife research projects) … .

    IV. MULTIPLE YEAR APPROPRIATIONS
    A. Introduction
    2. Multiple year appropriations are those appropriations that expressly provide that they remain available for obligation for a definite period in excess of one fiscal year. Office of Management and Budget Circular A-11, Instructions on Budget Execution, § 20.4 (June 2006). See also DOD FMR, Vol. 3, Ch. 13, para. 130202.A.1.b.

    3. The multiple year appropriations usually provided to DOD include:
      (2) Research, Development, Test, and Evaluation (RDT&E).
      Period of Availability: 2 years

    5. The Bona Fide Needs Rule and most of its exceptions apply to multiple year appropriations.
      a. A multiple year appropriation may only be expended for obligations properly incurred during the period of availability. Therefore, the FY 2012 RDT&E Army Appropriation (Pub. L. 112-74), which is available for obligation until 30 September 2013, may be obligated for the needs of FY 2012 and FY 2013; it is not available for the needs of FY 2014.

    END OF REFERENCE

    2. As described in the reference above, multiple year appropriations are those appropriations that expressly provide that they remain available for obligation for a definite period in excess of one fiscal year.  As such, a multiple year appropriation may be expended for obligations properly incurred during the period of availability. Research, Development, Test, and Evaluation (RDT&E) funds are multiple year appropriations that remain available for obligation for a period of two years. Therefore, as illustrated in the reference above, an FY 2012 RDT&E appropriation, which is available for obligation until 30 September 2013, may be obligated for the needs of both FY 2012 and FY 2013.

    3. Pursuant to FAR 17.207 -- Exercise of Options, paragraph (c), the Contracting Officer may exercise options only after determining that -- (1) Funds are available; and (2) The requirement covered by the option fulfills an existing Government need (among other requirements). Because the stated period of performance of this CPFF, non-severable service contract option is “FY13 – FY15”, the exercise of this option appears to represent a bona fide need in FY13.  As such, pursuant to the bona fide need rule for funding non-severable service contracts as described in the reference above, the exercise of this option must be funded in its entirety with the current appropriations available for obligation at the time this option is exercised, which in this case consists of both the FY12 and the FY13 RDT&E funds.

    4. Based on the explanation of current fiscal law as described in the reference above, we believe that the CPFF, non-severable service contract option in question may be exercised using both FY12 and FY13 RDT&E funds provided that, pursuant to the Bona Fide Needs Rule applicable to non-severable services, the contract modification exercising this option also uses these funds to obligate the full amount of funding required for the performance of the effort (i.e., this CPFF option must be fully funded). Also, we believe that the fact that the period of performance of the option is “FY13 – FY15” does not present an issue because the applicable Bona Fide Needs Rule also permits contract performance to cross fiscal years, and because the FY12 and FY13 funds will be available as expired funds to liquidate these prior valid obligations during the FY14 and FY15 contract option performance periods.

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