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  • Question

    Can we issue a de-obligation modification of excess funds at the ACRN level and "not" reduce the funds at the CLIN level of a CPFF type of clin?


    Answer

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

    FAR 52.232-20 -- Limitation of Cost
    (a) The parties estimate that performance of this contract, exclusive of any fee, will not cost the Government more than
      (1) the estimated cost specified in the Schedule

    (d) Except as required by other provisions of this contract, specifically citing and stated to be an exception to this clause --
      (1) The Government is not obligated to reimburse the Contractor for costs incurred in excess of – (i) the estimated cost specified in the Schedule.

      (2) The Contractor is not obligated to continue performance under this contract (including actions under the Termination clause of this contract) or otherwise incur costs in excess of the estimated cost specified in the Schedule … .

    FAR 52.232-22 -- Limitation of Funds
    (b) The Schedule specifies the amount presently available for payment by the Government and allotted to this contract, the items covered, … and the period of performance it is estimated the allotted amount will cover. The parties contemplate that the Government will allot additional funds incrementally to the contract up to the full estimated cost to the Government specified in the Schedule, exclusive of any fee. The Contractor agrees to perform, or have performed, work on the contract up to the point at which the total amount paid and payable by the Government under the contract approximates but does not exceed the total amount actually allotted by the Government to the contract.

    (f) Except as required by other provisions of this contract, specifically citing and stated to be an exception to this clause --
      (1) The Government is not obligated to reimburse the Contractor for costs incurred in excess of the total amount allotted by the Government to this contract; and
      (2) The Contractor is not obligated to continue performance under this contract (including actions under the Termination clause of this contract) or otherwise incur costs in excess of -- (i) The amount then allotted to the contract by the Government

    2. The following references quoted below in pertinent part are also applicable to this response.

    A. DoD 7000.14-R, Financial Management Regulation Volume 3, Chapter 8, “Standards for Recording and Reviewing Commitments and Obligations” (Sep 2012)
    0805 Recording Obligations for Commercial Procurement Contracts and Orders
    080503. Cost-Reimbursement and Time-and-Material Contracts
    Cost-reimbursement … contracts include … cost-plus-fixed-fee … contracts. When the contract is executed, an obligation shall be recorded. The amount of the obligation is the total estimated payment provided by the contract’s funded ceiling, including the fixed fee in the case of a cost-plus-fixed-fee contract … . [I]f the contract is incrementally funded, the amount obligated shall always be the funded increments.

    B. GAO-06-382SP, Principles of Federal Appropriations Law, Third Edition, February 2006, Volume II, Chapter 6 – Availability of Appropriations: Amount
    C. The Antideficiency Act (page 6-36)
    In its current form, the law prohibits:
      •  Making or authorizing an expenditure from, or creating or authorizing an obligation under, any appropriation or fund in excess of the amount available in the appropriation or fund unless authorized by law. 31 U.S.C. § 1341(a)(1)(A)
      •  Involving the Government in any contract or other obligation for the payment of money for any purpose in advance of appropriations made for such purpose, unless the contract or obligation is authorized by law. 31 U.S.C. § 1341(a)(1)(B).

    3. The answer to this inquiry depends upon whether clause FAR 52.232-20 or clause FAR 52.232-22 is used in this CPFF contract. In accordance with FAR 52.232-20, the “estimated cost” of the contract (i.e., the CLIN value specified in Section B of the contract) constitutes the contract funding ceiling that establishes the Government’s maximum liability to reimburse the contractor for allowable costs incurred under the contract. Therefore, pursuant to DoD 7000.14-R, the total estimated cost must be funded, such funding set forth in ACRNs normally specified in Section G of the contract. However, if the contract contains the clause FAR 52.232-22, then the amount of funds currently allotted to the contract as specified in the Section G ACRNs (i.e., the contract funding ceiling) establishes the Government’s maximum liability to reimburse the contractor for allowable costs incurred under the contract.

    4. Therefore, if the contract contains FAR 52.232-22, then the contract may be modified to de-obligate funds on the ACRN, while leaving the estimated cost of the CLIN set forth in Section B unchanged, because the Government’s maximum liability under this clause to reimburse the contractor’s allowable costs will be capped at the total amount of contract funding. However, the contractor should be reminded of this possible outcome in the event they overrun the total funding allocated to this CLIN.

    5. On the other hand, if the contract contains FAR 52.232-20, then consistent with DoD 7000.14-R, any modification that reduces the contract funding of the Section G ACRN must also reduce the CLIN estimated cost amount in Section B to equal the total revised contract funding amount for that CLIN. That is, the amount of contract funding must cover the Government’s obligation under this clause to pay the contractor’s allowable costs up to the estimated cost set forth in the contract. A contract modification as requested by the contractor in this case would result in a violation of the Antideficiency Act, and therefore cannot be executed, because such action would be tantamount to creating an obligation on the part of the Government for the payment of money in excess of, or in advance of, appropriations made for such purpose.


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