Can this contract use incremental funding crossing the end of FY16 to 1rst quarter FY17 and then fund the balance in the 2nd quarter with FY17 funds?
If this contract were changed to a Severable contract would this same scenario work.
Many of the engineers on this contract work overseas and the beginning of the FY/end of FY is challenged by being a day ahead in Japan or the middle east?
What needs to be done to chage the acquisition plan to make this work
You cannot incrementally fund a non-severable contract. If you want to make it a severable services contract, you will need the contractor's agreement and signature on a bi-lateral contract modification. I am also assuming you did not actually mean you have a multi-year contract, but a multiple year contract. Here's the FAR 17.103 definition:
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“Multi-year contract” means a contract for the purchase of supplies or services for more than 1, but not more than 5, program years. A multi-year contract may provide that performance under the contract during the second and subsequent years of the contract is contingent upon the appropriation of funds, and (if it does so provide) may provide for a cancellation payment to be made to the contractor if appropriations are not made. The key distinguishing difference between multi-year contracts and multiple year contracts is that multi-year contracts, defined in the statutes cited at 17.101 <https://www.acquisition.gov/far/html/Subpart%2017_1.html#wp1082924> , buy more than 1 year’s requirement (of a product or service) without establishing and having to exercise an option for each program year after the first."
To make a contract severable, you need to establish discrete phases or sections. Each phase has to have a separate deliverable covering the end of the phase. The deliverable must have some value to the Government, meaning a complete study report, or the completion of a project or other accomplishment (like performing maintenance and engineering services on one ship as a complete phase; starting maintenance and engineering on a different ship is a new phase and a new project, which can then be incrementally funded with O&M money)..
You will not need to write or modify any acquisition plan, since this is a post contract award action. You should create a memorandum for record for the contract file to explain why the Command needs to do this and that the contracting officer agrees with the action. I'd even have the contracting officer sign the memo.