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    Is it legally sufficient to write a one year incrementally funded contract that specifies FY 13 funds through 30 September 2013 and FY 14 funds for the performance period that occurs on and after 1 October 2014?


    Since the service contract is funded with an Operations and Maintenance (O&M) appropriation (a "one year" appropriation) and accordingly the "Annual Funding Policy" applies.  That is you request budget authority to cover those expenses you expect in a given fiscal year (1 Oct to 30 Sep).  The provision you describe allowing "full funding" of a service contract (no more than twelve months in duration) that crosses two fiscal years is considered an "exception" to the annual funding policy.  This exception has its basis in law.  It is covered in Title 10 US Code, Sec 2410a.  I've provide a link to this section as well as provided the text below: (link:
    § 2410a. Contracts for periods crossing fiscal years: severable service contracts; leases of real or personal property
    (a) Authority.-
      (1) The Secretary of Defense, the Secretary of a military department, or the Secretary of Homeland Security with respect to the Coast Guard when it is not operating as a service in the Navy, may enter into a contract for a purpose described in paragraph (2) for a period that begins in one fiscal year and ends in the next fiscal year if (without regard to any option to extend the period of the contract) the contract period does not exceed one year.
      (2) The purpose of a contract described in this paragraph is as follows:
      (A) The procurement of severable services.
      (B) The lease of real or personal property, including the maintenance of such property when contracted for as part of the lease agreement.
    (b) Obligation of Funds.- Funds made available for a fiscal year may be obligated for the total amount of a contract entered into under the authority of subsection (a).
    Notice the wording of paragraph (b).  Because this statutory exception is permissive rather than directive a Defense Component may elect to budget for and execute service type contracts on a purely fiscal year bases.  It essentially says that under these circumstances severable service contracts MAY be "fully funded" in one fiscal year.  It does not require it. Therefore, although using this annual funding policy "exception" normally makes life easier from a funding and contractual perspective, it is not required.  From a DoD budget policy and appropriation law perspective there is no prohibition of funding such a contract in two fiscal year increments.

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