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    On a requirements contract, in order to exercise the option year and thus extend the ordering period, does funding need to be available? FAR part 17.207(c)(1) states that in order for a contracting officer to exercise an option funds must be available. Does this apply to requirements contracts?


    Answer

    FAR 16.503 Requirements contracts Funds are obligated by each order, not by the contract or option itself.  Under a requirements contract the only thing the contractor gets as consideration is that if the agency buys the product or service they will buy it from them.  Funding is required at the time that a Delivery/Task Order is issued.
     
    DoD  Financial Management Regulation 7000.14R Volume 3, Chapter 8 Paragraphs 080302-080303(A) Contracts or Orders for Goods, supplies, or Services to Meet Bona Fide Need
     
    “…Obligate funds for each option period after funds become available. Obligations must be consistent with all normal limitations on the obligation of appropriated funds, e.g., bona fide needs rule, period of availability and type of funds.”
     
    AAP 121465   Response
    Question Title: Exercising Requirements Contracts Option Year  
    Question: On a requirements contract, in order to exercise the option year and thus extend the ordering period, does funding need to be available?
     
    FAR part 17.207(c)(1) states that in order for a contracting officer to exercise an option funds must be available.
     
    Does this apply to requirements contracts?
     
     
     
        Response
    Question Background: We are exercising an option on a requirements contract.
    Funding is not available and won't be for another two weeks.
     
    (a)  Since no funding is applied to the parent contract in order to exercise the option, can we still do so?
    The argument is that in order to exercise an option, the contracting officer must ensure funds are available.
     
    (b)  Since funds are not currently certified, would we not be able to exercise the option?
    The other side of the argument is that since no funding is on the parent contract and funding is only applied once a delivery order is awarded, you can exercise the option (extending the ordering period) and later (two weeks later) award a delivery order to fund whatever requirement is needed.
     
     
    FAR 16.503(b)
     
    Funds are obligated by each order, not by the contract or option itself.
     
    Under a requirements contract the only thing the contractor gets as consideration is that if the agency buys the product or service they will buy it from them.
    Funding is required at the time that a Delivery/Task Order is issued.

     
    DoD  Financial Management Regulation 7000.14R Volume 3, Chapter 8  080302-080303(A) Contracts or Orders for Goods, supplies, or Services to Meet Bona Fide Need
     
    “…Obligate funds for each option period after funds become available. Obligations must be consistent with all normal limitations on the obligation of appropriated funds, e.g., bona fide needs rule, period of availability and type of funds.”
      Documentation! Documentation!!!

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