Sign In
  • Question

    Does the award fee need to be incrementally funded (contingent liability) for the schedule incentive on each contract award in the FY of that award, or can we plan for and budget the whole fee in FY18 which is when it will come due?


    Answer

    Does the award fee need to be incrementally funded (contingent liability) for the schedule incentive on each contract award in the FY of that award, or can we plan for and budget the whole fee in FY18 which is when it will come due?

    Please refer to FAR 32.703 Contract funding requirements and specifically FAR 32.703-1 General. FAR 32.703-1 describes two situations...the first at paragraph (a) is a fully funded contract and the second (b) is an incrementally funded contract. Essentially, for fully funded contracts funds are obligated to cover the estimated cost and any fee of a cost-reimbursement contract, and for incrementally funded contracts, funds are obligated to cover the amount allotted and any corresponding fee.  Also, as prescribed at FAR 32.706-2, clause 52.232-22 Limitation of Funds should be inserted in both the solicitation and subsequent contract.

    Regarding your question, I recommend that you talk with your agency's/command's comptroller office and legal counsel. The FAR only speaks to this situation in a very general and abbreviated way and each command will more than likely have their policy guidance. It appears by incrementally funding the work performed in 2016 and 2017, that termination liability is also established, and the 10% fee portion of the incremental amount should be placed in the contingency liability fund to pay for any fee's payable should termination of the contract be required. 

    Open full Question Details