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    Does this scenario present any issues with the Bona Fide Needs rule?


    Answer

    Yes, the scenario you present may have an issue with respect to the Bona Fide Needs Rule – specifically, as it relates to the planned storage of the systems.  The Bona Fide Needs Rule (which is actually a law - Title 31, US Code, Sec 1502) requires that appropriated funds be used only for needs or services that arise in the year(s) of the appropriation’s obligation availability period.  In the scenario you presented, the Program Manager (PM) plans to place on contract FY14 Other Procurement Army (OPA) funds.  Since the PM plans to use FY14 OPA funds, which have an obligation availability period of 3 years, the Bona Fide Needs Rule requires these FY14 OPA funds be used for needs or services that arise in FY14, FY15, or FY16.  Since the funds were placed on contract in January 2016 and the systems being ordered have a production lead time of 180 days after the order is placed, the Government will begin acceptance of the systems starting in June 2016.  Up to this point, there seems to be no problem with the Bona Fide Needs Rule.  However, the fact that the systems will then be placed in storage for a full year until the Government can field the FY14-funded assets starting in the June 2017 timeframe, indicates that the true bona fide need of the systems is FY17 (not FY16, when the systems are being delivered to the Government).  This is a problem, because as previously stated above, FY14 OPA funds can be used to satisfy bona fide needs of FY14, FY15, and FY16 --- not FY17. 
     
    To further illustrate this point, if, for example, the production lead time of your systems was 1 year (as opposed to 180 days), then you would not be in violation of the Bona Fide Needs Rule, because production lead time can be taken into consideration.  In this revised scenario, the Bona Fide Need would have been in FY16 (since you would need to order the system 1 year in advance of the systems fielding date of June 2017) and the use of FY14 OPA funds would have been fine.  Similarly, had FY15 OPA funds been used in your scenario (as opposed to FY14 OPA), this too would have been fine, as FY15 OPA funds can be used for needs or services that arise in FY15, FY16, or FY17.
     
    However, because in the scenario you provided, the PM will be storing the system for a full year, this makes the actual bona fide need FY17, and as such, FY14 OPA funds cannot (given the information provided) be used. 
     
    As always, and particularly in the case of potential fiscal law issues, you should consult and work with your local comptroller and legal offices to ensure that the specific details of your particular situation are being legally addressed. 


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